The IRS Just Doubled a Write-Off to $2.5 Million — Is Your Business Using It?

Most small business owners have never heard of Section 179 — and that gap is costing them real money. The IRS confirmed this year that the One Big Beautiful Bill Act permanently doubled the Section 179 expensing limit to $2.5 million, made the 20% small business deduction permanent, and pushed the employer childcare credit up to 40%, or even 50% for smaller businesses. If you bought equipment, vehicles, or software this year, or you cover any part of employee childcare, these changes could shrink your 2026 tax bill by thousands of dollars.

The Headline Change: Section 179 Doubles to $2.5 Million

Section 179 lets a business deduct the full cost of qualifying equipment and property in the year it's purchased, instead of depreciating it slowly over several years. The One Big Beautiful Bill Act made this deduction permanent and doubled the cap from $1.25 million to $2.5 million, with the phase-out threshold rising to $4 million in total equipment purchases for the year.

In plain terms: a business that buys a $150,000 delivery van, a new point-of-sale system, or a set of commercial kitchen equipment can now write off the entire purchase price immediately, rather than spreading the deduction across five or seven years. For a business in the 24% federal tax bracket, that's an immediate $36,000 reduction in taxable income on a $150,000 purchase — money that shows up on this year's return instead of trickling in over time.

This matters most for businesses that had been holding off on equipment purchases. If you were planning a 2027 upgrade anyway, moving it into 2026 lets you capture the deduction now while the higher cap and permanent status are both locked in.

The Childcare Credit Just Got Much More Generous

The 45F employer-provided childcare credit — a niche benefit few small businesses claimed — was significantly expanded starting in 2026. The credit rate jumped from 25% of qualifying childcare expenditures to 40%, and eligible small businesses (generally those with gross receipts under $31 million) can claim an even higher 50% rate. The maximum credit also rose from $150,000 to $500,000, with eligible small businesses able to claim up to $600,000.

For a business that contracts with a local daycare to reserve spots for employees' children, or that helps subsidize employee childcare costs directly, this credit can now cover a meaningfully larger share of that expense — and it's a credit, not a deduction, meaning it reduces your tax bill dollar-for-dollar rather than just reducing taxable income.

A Quiet Floor for the Smallest Businesses

The law also created a new minimum Qualified Business Income (QBI) deduction. Starting this year, any business owner with at least $1,000 of qualified business income receives a guaranteed minimum deduction of $400 — even in years where the standard QBI calculation would otherwise phase the deduction down to nothing. It's a small provision, but it specifically protects very small or newer businesses that previously got squeezed out of the QBI benefit entirely.

What This Means for Your 2026 Return

• If you're planning equipment purchases: Buying before year-end lets you claim the full $2.5 million Section 179 deduction against 2026 income rather than waiting.
• If you offer or are considering childcare benefits: Model out whether setting up a qualifying childcare arrangement now makes sense — the credit rate increase alone can change the math on offering this as an employee benefit.
• If your QBI deduction has phased out in past years: Check whether the new $400 minimum applies to you this year, even if your business had a lean year.
• Review your entity structure: How these deductions and credits flow through to your personal return depends heavily on whether you're set up as an LLC, S corp, or another structure — this is a good year to revisit the LLC vs. S corp decision with a tax professional.

Don't Wait Until Filing Season

The biggest mistake business owners make with provisions like these is discovering them in March or April, after the purchases and decisions that would have qualified are already behind them. Section 179 only applies to equipment placed in service during the tax year — so a delivery van or espresso machine bought in January of next year does nothing for this year's return. If a major purchase is already on your radar for early 2027, there may be a real tax argument for moving it up.

It's also worth updating your profit and loss statement now to reflect planned purchases and their tax treatment, so you and your accountant aren't reconstructing the year from memory in April.

Talk to a Tax Professional Before You Act

Every business's situation is different, and Section 179 has rules around business-use percentage, income limits, and what property actually qualifies. This article is not tax advice — it's a heads-up that the rules changed significantly for 2026, and a signal to bring these specific provisions to your accountant or tax preparer before year-end planning conversations wrap up.

Photo by Kelly Sikkema on Unsplash