5 Year-End Tax Moves Businesses Can Still Make Before 2026 Ends

The One Big Beautiful Bill Act (OBBBA), signed in July 2025, made several business tax breaks larger, permanent, or newly available. With 2026 closing, five areas deserve a look before December 31: depreciation, qualified production property, research costs, the qualified business income (QBI) deduction, and the excess business loss limit.

The OBBBA made 100% bonus depreciation permanent for eligible property acquired after January 19, 2025. Property you acquire and place in service in 2026 qualifies, including new and used machinery, equipment, certain vehicles, off-the-shelf computer software, and qualified improvement property (QIP). Used property qualifies if you have not used it before and did not acquire it from a related party. Real estate owners should also consider a cost segregation study, since reclassified components of a building acquired after January 19, 2025 may qualify as well.

Ordering an asset by year-end is not enough. It must be placed in service, meaning delivered, installed, and ready for its intended use, by December 31.

Bonus depreciation applies automatically. You can elect out, which is sometimes beneficial, but only for an entire asset class, such as all five-year or all seven-year property. Bonus can create a net operating loss, though basis, at-risk, passive, and excess business loss rules (see item 5) may limit how much you can use now.

The Section 179 election is the other lever. For 2026, you can expense up to $2.56 million of eligible new or used property, including equipment, furniture, off-the-shelf software, QIP, and certain nonresidential building improvements such as roofs, HVAC, fire protection, and security systems. The deduction phases out dollar-for-dollar once qualifying purchases exceed $4.09 million and is gone at $6.65 million. It cannot exceed your taxable income from active business, so it cannot create a loss, but unused amounts carry forward. Unlike bonus, Sec. 179 is elective, can be applied asset by asset, and can cover just part of an asset's cost. That flexibility is a real planning advantage.

Before buying, weigh cash flow, financing terms, projected income, and whether the deduction would be worth more in a later year. Many states do not conform to federal bonus depreciation, so the state result can differ from the federal one.

New Sec. 168(n) lets you elect to deduct 100% of the cost of qualified production property (QPP) in the year it is placed in service. If a manufacturing, refining, or agricultural or chemical production facility is nearing completion, a placed-in-service date on or before December 31 moves that deduction into 2026.

QPP is the portion of nonresidential real property used as an integral part of a qualified production activity. That means manufacturing, refining, or production limited to agricultural and chemical production, and the activity must substantially transform the product. Construction must begin after January 19, 2025 and before January 1, 2029, and the property must be placed in service after July 4, 2025 and before January 1, 2031. Unlike bonus depreciation, QPP requires an election, made property by property on the return for the year the property is placed in service.

Space used for offices, administrative services, lodging, parking, sales, research, software development, engineering, or storage of finished products is not eligible, so expect to allocate cost between eligible and ineligible areas. Original use must begin with you, though purchased facilities not used in a qualified production activity between January 1, 2021 and May 12, 2025 can qualify. Lessors generally cannot claim the deduction, with limited exceptions for commonly controlled entities. If the property stops being used in a qualified production activity within 10 years, the deduction is subject to recapture. IRS Notice 2026-16 provides interim guidance on these rules.

The Sec. 174A deduction for domestic research and experimental (R&E) expenses and the Sec. 41 research credit are not limited to businesses traditionally associated with cutting-edge innovation. Manufacturers, contractors, engineers, and software developers often have qualifying costs they have never identified. The definition of qualified expenses is generally broader for the deduction than for the credit.

For tax years beginning after 2024, Sec. 174A allows you to deduct domestic R&E in the year it is incurred or paid, or to elect to capitalize it and amortize it over at least 60 months. The deduction covers costs of activities intended to discover information that would eliminate uncertainty about developing or improving a product, whether or not the project is completed. Foreign R&E must still be amortized over 15 years under Sec. 174.

You cannot get a double benefit on the same expense. Under Sec. 280C, claiming the credit generally requires reducing your deduction by the credit amount. Alternatively, you can elect a reduced credit, which cuts the credit by 21% (a $100,000 credit becomes $79,000) and preserves the full deduction. The election must be made on a timely filed original return, including extensions, so model both outcomes before you file.

The Sec. 199A QBI deduction, now permanent, lets owners of sole proprietorships and pass-through entities (including partnerships, S corporations, and most LLCs) deduct up to 20% of qualified business income. QBI is generally the net amount of qualified income, gain, deduction, and loss effectively connected with a U.S. business.

At higher incomes, the deduction is capped by wage and investment limits. Beginning in 2026, the OBBBA widened the phase-in ranges, so more taxpayers will keep a larger deduction. For 2026, the limits begin at taxable income of $201,750 ($403,500 for married couples filing jointly) and are fully phased in at $276,750 ($553,500 for joint filers). Once fully phased in, the deduction cannot exceed the greater of:

Within the range, the cap phases in gradually. The deduction for a "specified service trade or business" phases out over the same range and is unavailable above it. Examples include investment-type services and most professional practices, but not engineering or architecture.

If your projected taxable income is inside or just above the range, consider measures that reduce it, such as maximizing retirement plan contributions, or, for cash-basis businesses, deferring income into 2027 and accelerating expenses into 2026. If the limits are unavoidable, you may increase the cap by raising W-2 wages or by placing qualified property in service before year-end. Property placed in service this year adds to UBIA even if you fully expense it. Keep in mind that more wages mean more payroll taxes, S corporation owner wages must be reasonable, and deductions such as bonus depreciation also reduce QBI itself. Model the net result before acting.

Noncorporate taxpayers can generally use business losses to offset other income, such as wages, interest, dividends, and capital gains, but only up to an inflation-adjusted limit. The limit applies at the owner level, after the basis, at-risk, and passive activity loss rules. Losses above the limit are not deductible currently. They become net operating loss (NOL) carryforwards, which are generally limited to 80% of taxable income in later years.

The OBBBA made the limit permanent. For 2026, it is $256,000 ($512,000 for joint filers), down from $313,000 ($626,000) in 2025. Taxpayers with large losses from bonus depreciation, currently deductible R&E, or the QPP deduction may not be able to use the full benefit in 2026.

If your projected 2026 business losses are approaching the limit, you have several levers: accelerating income, deferring deductions, electing out of bonus for an asset class, applying Sec. 179 only to the extent of income, electing to amortize R&E rather than deduct it, or designating only part of a facility as QPP. Evaluate these carefully, because shifting deductions between years changes future NOL usage and overall tax.

Which of these strategies fits depends on your income, your cash flow, and where you expect your business to be in the next few years. Several pull in different directions. The same deductions that reduce this year's tax can shrink your QBI deduction or push you into the excess business loss limit, which is why projecting your numbers before year-end matters.

Clark Schaefer Hackett's tax professionals can evaluate how these and other strategies apply to your business, from projecting taxable income to modeling the options. To find out which ones fit your situation, reach out to your CSH advisor before the year closes.