Commercial Insights

Tax planning in 2026: Key considerations for businesses

Provisions implemented in the One Big Beautiful Bill Act can help businesses optimize their tax positions in 2026 and beyond.

Tax planning is about more than tax compliance. It’s a strategy that can help businesses reduce tax liabilities, boost cash flow, mitigate risk and inform decision-making.

In 2026, businesses may be able to realize even greater benefits from careful tax planning, due to sweeping tax changes that were introduced in 2025 through the One Big Beautiful Bill Act (OBBB). These new provisions have the potential to allow businesses to accelerate deductions and enhance financing strategies.

“For businesses, factoring in last year’s legislative tax changes into fiscal planning could lead to substantial tax savings in 2026, not just in terms of taxes payable in 2027, but also in potential long-term gains,” said John Eaves, Commercial relationship manager with Regions Bank. “Tax planning is going to take on extra importance this year, and businesses will want to think about starting to implement a plan sooner rather than later.”

Key changes: What businesses need to consider

Here are some of the key provisions from the OBBB that may have an impact on businesses:

Qualified Business Income (QBI) deduction

The OBBB makes the Qualified Business Income deduction permanent and increases the deduction rate from 20% to 23% beginning in 2026. The OBBB also introduces a minimum deduction of $400 for taxpayers with at least $1,000 of QBI.

As a result, businesses now enjoy greater clarity, making long-term entity and tax structure planning easier.

Planning considerations:

• Phase thresholds: Taxpayers near phase-out should strategize income timing (e.g., accelerating/delaying revenue, retirement contributions, or bonuses) to stay within beneficial ranges.
• Wages & property basis: Review W-2 wages and capital basis to maximize deduction where applicable.
• SSTBs: With expanded phase-in limits, owners of specified service trades may retain part of deduction instead of losing it entirely.
• Recordkeeping: Track QBI, REIT dividends, and pass-through PTPs separately to prepare for the 23% rate in 2026.

100% bonus depreciation

The OBBB reinstated 100% bonus depreciation for qualifying tangible property placed in service after January 19, 2025, but only through 2027. Certain components of buildings could qualify for 100% bonus depreciation, assuming a cost segregation study has been performed.

This immediate expensing accelerates tax deductions and provides near-term cash flow benefits.

Planning considerations:

• Timing is critical: For property with contracts or placed in service before January 19, 2025, qualification may be lower (40%–60%), so align acquisition or construction accordingly.
• Eligible assets: Includes new and used tangible property with ≤ 20-year life plus eligible building components.
• Strategic balance: Evaluate whether full year-one expensing is optimal or if spreading deductions makes sense, especially for asset-heavy companies.

Section 179 expensing

When it comes to the purchase of any machinery and equipment purchased for use in business, this section of the federal tax code allows costs of certain property to be deducted as an expense when first placed in service.

Eligible purchases include qualified property and even certain property used to furnish lodging. Qualified real property includes improvements to roofs, HVAC, fire alarm systems and security systems to nonresidential real property.

Unlike bonus depreciation, which is not capped, Section 179 phase out occurs once purchases exceed the acquisition threshold. The deduction cap has increased to $2.5 million, with phase-out beginning at $4 million, indexed for inflation. However, it’s important to note that for any purchase to be deducted, it must be acquitted and placed into operation by the end of the calendar year it is claimed.

Planning considerations:

• Asset-heavy strategies: Companies planning large acquisitions such as machinery or business vehicles can now expense more upfront—up to $2.5M.
• Combine with bonus depreciation: Consider applying Section 179 first, up to its allowable limit, and then use bonus depreciation for any remaining qualifying costs—especially for large capital investments.
• Income limitation: Section 179 is limited to taxable income—excess can be carried forward, so it’s key to coordinate with expected earnings.

Business interest deduction (section 163(j))

Another facet of the OBBB is that it modifies the calculation of Adjusted Taxable Income (ATI) to exclude depreciation, depletion, and amortization. This change effectively restores the EBITDA-based limit and allows larger interest deductions.

Planning considerations:

• Reevaluate debt structures: With increased deduction capacity, financing previously constrained by interest limits may now be more favorable.
• Floor-plan financing: Expansion to include trailers and campers could benefit dealers or manufacturers of such items.
• Small-business exceptions: Businesses under the gross-receipts threshold remain exempt; larger firms gain more interest deduction flexibility.

New Markets Tax Credit (NMTC) & Low-Income Housing Tax Credit (LIHTC)

Both types of tax credits were extended. With LIHTC, businesses will see a 12% increase in 9% allocations and a permanent reduction in the 4% bond financing threshold to 25%, benefiting affordable housing developments.

Meanwhile, NMTC is permanently extended with $5 billion in annual authority. This is expected to generate wide-ranging private investment and impact on communities.

Planning considerations:

• Developers & investors: More tax credit availability and bond flexibility makes affordable housing projects and community investments more attractive.
• NMTC-backed deals: With NMTC as a permanent fixture, financiers and community development partners can potentially build longer-term investment pipelines.

Research & development (R&D) tax credit

The OBBB allows immediate expensing for eligible research and development costs, allowing businesses to fully deduct eligible R&D expenditures in the year they are incurred. This change eliminates the previous requirement to amortize R&D expenses over five years, improving cash flow and simplifying compliance by reducing the need for long-term capitalization schedules.

The OBBB also provides retroactive relief for R&D costs incurred from 2022 through 2024. Businesses that were required to capitalize and amortize expenses during those years may now choose to:

• Accelerate remaining amortization, or
• Apply retroactive deductions, either by expensing all remaining capitalized costs in a single year or by amending prior-year filings.

These options may create refund opportunities for companies that previously capitalized R&D costs and now qualify for larger deductions under the restored expensing rules.

Tax planning: When to start

It’s important to consider tax planning as an ongoing strategic initiative, not just a box to check as the end of the year draws near.

“With tax planning, it’s important to be proactive, not reactive, and it can be very beneficial to engage with professionals who really understand the ramifications of the OBBB on a strategic level and take the time to educate clients on how those changes affect the business picture,” said Adam Osborne, CPA and managing partner at HHM, an accounting firm in Cleveland, Tennessee. “In terms of tax-planning process, we typically begin the process in July, with efforts intensifying into October. That deliberate approach positions the client better by year’s end.”

Involving the right team

Given its broad-reaching effects, it’s important for a business to include all relevant stakeholders throughout the tax planning process. “In addition to the company’s executive leadership," Eaves said, "a business should create a team that, at the very least, consists of its CPA, banker, a qualified attorney and its insurance agency. Further, if a business transition is in the company’s near future, estate attorneys may also need to be involved.”

The importance of financial reporting

Accurate and thorough financial reporting is fundamental when tax planning, which makes having ready access to data essential. “The tax planning process can become complicated if a business is not able to provide comprehensive financial records, or if they have bank statements, credit cards or debt that isn’t reconciled. The more accurate the financial information is at the beginning of the process, the smoother it will prove for everyone involved,” said Osborne. Leveraging an enterprise resource planning (ERP) system, particularly one that integrates seamlessly with banking and financial data, can be very beneficial.

While considering all the ramifications of the new tax legislation may be a daunting prospect for some businesses, it’s important to remember that they don’t have to tackle it alone, according to Eaves. “There’s a lot of opportunity for businesses right now to strengthen their financial position by making some changes to their approach to tax planning,” said Eaves. “It starts with making sure you have all the right people at the table to provide guidance along the way, and connecting with your banker can be an important first step.”

Ready to help

Regions’ Commercial relationship managers take the time to understand you and your company's objectives and offer tailored solutions to help you achieve those goals. Connect with us to learn more.