Tax Planning Strategies Under the One Big Beautiful Bill Act

The One Big Beautiful Bill Act (OBBBA) represents the most significant overhaul of the U.S. tax code in nearly a decade. Now that the law is enacted and its rules are in force, startup founders and small business owners planning for the 2026 tax year face a mix of permanent deductions, widened thresholds, and a few windows that have already closed.

This is not a theoretical overview. Below are the practical strategies that founders and their financial advisors should be evaluating now, with a mid-2026 lens on what still matters and what has expired.

Understanding the Landscape

The OBBBA modifies provisions across individual income tax, business taxation, retirement savings, and energy credits. Most of these changes are already in effect for the 2026 tax year, several are permanent, and a few carried short windows that have already closed.

For startups and their founders, the most impactful changes fall into six categories: pass-through deductions, equipment expensing, R&D treatment, state and local tax (SALT) relief, information reporting simplification, and energy incentives.

Strategy 1: Maximize the Now-Permanent Pass-Through Deduction

The OBBBA makes the qualified business income (QBI) deduction under Section 199A permanent at 20% for qualifying pass-through entities. This applies to sole proprietors, partnerships, S corporations, and LLCs taxed as pass-throughs. An earlier House draft would have raised the rate to 23%, but the enacted law kept 20% and removed the scheduled expiration instead.

What this means in practice:

The deduction had been set to expire after 2025. Permanence means founders can build the 20% deduction into long-term entity and compensation planning with confidence. The law also widens the phase-in ranges for the income-based limitations, so more owners near the thresholds keep some or all of the deduction, and starting in 2026 active owners with at least $1,000 of QBI are guaranteed a minimum deduction of $400, indexed for inflation.

Action items:

• Review your entity structure. If you are operating as a C corporation but qualify for pass-through treatment, model the after-tax impact of converting.
• Ensure your business qualifies for the full deduction. The QBI deduction has income thresholds and specified service trade or business (SSTB) limitations that may cap the benefit.
• Coordinate with your fractional CFO to model the interaction between the QBI deduction and other provisions, including SALT changes.

Strategy 2: Take Full Expensing on Equipment and Software Purchases

The OBBBA permanently restores 100% bonus depreciation for property acquired and placed in service after January 19, 2025, reversing the phase-down that began under the Tax Cuts and Jobs Act. Additionally, the Section 179 expensing limit increases to $2.5 million with an expanded phase-out threshold.

What this means in practice:

Startups that purchase servers, computers, office equipment, or qualifying software can deduct the full cost in the year of purchase rather than depreciating over multiple years. For a startup spending $500,000 on infrastructure buildout, this creates an immediate $500,000 deduction.

Action items:

• Audit your planned capital expenditures for the next 12 months. With full expensing now permanent, there is no sunset to beat, but purchases placed in service in 2026 still generate a full deduction against 2026 income.
• Document all qualifying property carefully. The IRS has specific rules about what qualifies for bonus depreciation versus Section 179 treatment.
• Consider the cash flow trade-off. Accelerating purchases requires upfront cash but reduces tax liability. Model both scenarios.

Strategy 3: Protect R&D Deductions

One of the most impactful provisions for technology startups is the treatment of research and development expenditures. The OBBBA restores the ability to fully deduct domestic R&D costs in the year incurred, reversing the Section 174 amortization requirement that forced companies to spread deductions over five years.

What this means in practice:

A startup spending $1 million annually on domestic R&D can now deduct the full $1 million in the current year rather than $200,000 per year over five years. This dramatically improves cash flow and reduces effective tax rates for R&D-intensive companies.

Action items:

• Conduct a Section 174 study to identify all qualifying R&D expenditures. Many startups undercount their R&D by excluding qualifying activities such as prototype development, testing, and certain engineering work.
• Review the interaction between the R&D deduction and the R&D tax credit (Section 41). These are separate provisions that can be used together, but coordination is required. Estimate your current-year Section 41 credit with our R&D tax credit calculator.
• Ensure foreign R&D is tracked separately. The OBBBA restores immediate deduction only for domestic R&D; foreign research costs are still amortized over 15 years.
• Delaware-incorporated C-Corps: check your franchise tax under both Delaware calculation methods, because most startups overpay using the default Authorized Shares method. Our Delaware franchise tax calculator compares both side by side.

Strategy 4: Leverage SALT Deduction Increases

The OBBBA raises the state and local tax (SALT) deduction cap for qualifying households. Under the new rules, the SALT cap increases to $40,000 for joint filers meeting certain income thresholds, up from the previous $10,000 cap.

What this means in practice:

Founders in high-tax states like California, New York, and Massachusetts have been disproportionately impacted by the SALT cap. A founder paying $50,000 in state income tax and $25,000 in property tax was previously limited to a $10,000 federal deduction. Under the new rules, qualifying filers can deduct up to $40,000.

Action items:

• Calculate your total SALT burden across state income tax, local income tax, and property tax.
• Determine whether you meet the income thresholds for the enhanced cap. The $40,000 cap phases down for higher-income taxpayers.
• If you are using a pass-through entity tax (PTET) election to work around the SALT cap, reassess whether the direct deduction is now more favorable. Several states enacted PTET provisions specifically to mitigate the SALT cap, and the math may now favor the standard deduction approach.

Strategy 5: Simplify Information Reporting

The OBBBA restores the Form 1099-K reporting threshold for third-party settlement organizations to more than $20,000 in payments and more than 200 transactions, undoing the $600 threshold. Separately, it raises the Form 1099-NEC and 1099-MISC threshold from $600 to $2,000 for payments made after December 31, 2025, indexed for inflation after 2026. While the 1099-K change primarily affects platforms and marketplaces, both changes have administrative implications for startups that use multiple payment processors or pay contractors.

What this means in practice:

Startups receiving payments through platforms like Stripe, PayPal, or Square will receive far fewer 1099-K forms under the restored threshold, reducing reconciliation complexity. And startups that pay contractors will issue fewer 1099-NEC forms starting with payments made in 2026, reducing the compliance burden for companies that also operate as platforms and issue 1099s to their own users or contractors.

Action items:

• Update your accounts payable processes to reflect the new thresholds.
• Review your 1099 issuance procedures if you operate a marketplace or platform.
• Maintain documentation for all transactions regardless of reporting thresholds. The change affects reporting requirements, not taxability. Income is still taxable even if no 1099 is issued.

Strategy 6: Know Which Energy Credits Survived

The OBBBA modified and in several cases accelerated the expiration of clean energy tax credits. Several credits that were extended under the Inflation Reduction Act were terminated or given earlier sunset dates under the OBBBA.

Key changes:

• The clean vehicle credits (Sections 30D, 25E, and 45W, covering new, used, and commercial clean vehicles) were terminated for vehicles acquired after September 30, 2025. That window has closed: vehicles purchased in 2026 do not qualify.
• Energy-efficient commercial building deductions (Section 179D) remain available but with adjusted qualifying standards.
• The investment tax credit (ITC) and production tax credit (PTC) for renewable energy retain their current phase-down schedules but with narrowed eligibility for certain project types.

Action items:

• If you are planning facility improvements or energy-efficient building modifications, evaluate the credit schedule and consider accelerating projects.
• Review your fleet strategy. Clean vehicle credits ended for vehicles acquired after September 30, 2025, so build 2026 vehicle budgets without them.
• For startups in the cleantech space, model the impact of credit changes on your customers' purchase decisions. This may affect your revenue projections.

Strategy 7: Plan Estate and Succession Transfers

For founders with significant equity holdings, the OBBBA sets the estate and gift tax exemption at $15 million per individual ($30 million for married couples) beginning in 2026. The increase is permanent and indexed for inflation going forward.

What this means in practice:

Founders can transfer larger amounts of wealth, including startup equity, to heirs or trusts without triggering estate or gift tax. For a founder holding $20 million in startup equity, the increased exemption could eliminate estate tax liability entirely.

Action items:

• Review your estate plan with a qualified estate planning attorney. If you established trusts or gifting strategies under the prior exemption, the higher threshold may allow you to simplify your approach.
• Consider gifting appreciated startup equity while exemption levels are elevated. The $15 million exemption is permanent under the OBBBA and indexed for inflation, though future legislation could always change it.
• Coordinate with your fractional CFO to model the tax impact of various equity transfer scenarios, including the interaction with capital gains treatment.

Building a Coordinated Tax Strategy

The most important takeaway from the OBBBA is that these provisions do not operate in isolation. The interaction between the permanent QBI deduction, restored R&D expensing, SALT cap changes, and depreciation rules creates a complex optimization problem.

A startup founder who is also a pass-through entity owner, R&D spender, and high-SALT-state resident could see dramatically different outcomes depending on how these provisions are layered.

This is precisely why having a fractional CFO with tax planning expertise is critical. At StartupCFO, we work with founders to model the full picture, not just individual provisions, and build tax strategies that account for the interactions between business and personal tax positions. Learn more about our startup tax services.

The OBBBA creates real opportunities for startups and their founders. Most of the core provisions are now permanent, but planning for the 2026 tax year works best when it starts mid-year rather than in December. Start the conversation with your financial advisor now.