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2026 Tax Planning Guide
Tax Rates and Business Structures
On the business front, OBBBA provides the most significant benefit to corporations in the manufacturing sector, and less so to those in the service industries. It continues the lower corporate tax rates, which are scheduled to expire at the end of 2025. Large businesses—those with more than $1 billion in reported income—can continue to pay taxes at a minimum corporate rate of 15%. For other C corporations, the tax rate remains a flat 21%. Pass-through companies, including S corporations and limited liability companies (LLCs), also receive more favorable treatment. Regardless of your company's structure, now may be a good time to review your corporate structure with your tax and legal professionals.
Pass-Through Entities
Pass-through entities—S corporations, partnerships, and sole proprietorships— benefit primarily by making the 23% Qualified Business Income (QBI) deduction permanent, expanding the State and Local Tax (SALT) deduction cap, preserving Pass-Through Entity Tax (PTET) deductibility, and implementing favorable changes to bonus depreciation and Qualified Small Business Stock (QSBS) rules. These provisions offer increased tax certainty and potential benefits for a wide range of business owners and investors.No federal corporate income tax is levied on business income for pass-through entities. Instead, profits flow through to owners' individual tax returns, so they pay income tax only once at the personal tax rate. Review any passthrough entities you use with your tax provider.
Sole proprietorships and partnerships also avoid double taxation and receive flow-through treatment. However, these business structures don't provide the limited liability of S corporations and LLCs. Sole proprietors and partners may be personally liable for claims against their businesses.
Inflation Adjustments
As with personal taxes, numerous business deductions and credits have limitations that are adjusted annually for inflation. Some may also have new or continuing phaseouts that you should be aware of. Your employer-sponsored retirement plan, ESOPs, and other employee benefits may also be affected.CONTACT US
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