With the new year right around the corner, now is a great time for small business owners to get familiar with several tax and regulatory changes taking effect in 2026. A few updates could be big wins, while others may require some planning to stay compliant.

Here’s a breakdown of what’s changing and what it could mean for your business and your employees.

Federal Tax Updates Under the One Big Beautiful Bill

The One Big Beautiful Bill signed into law by President Trump on July 4, 2025, introduces several updates to federal taxes, credits, and deductions beginning in tax year 2026.

New Standard Deduction Amounts

For the 2026 tax year, the standard deduction increases slightly:

• $32,200 for married couples filing jointly
• $16,100 for single filers and married individuals filing separately
• $24,150 for heads of household

For comparison, here are the standard deductions for tax year 2025:

• $31.500 for married couples filing jointly
• $15,750 for single filers and married individuals filing separately
• $23,625 for heads of household

2026 Federal Income Tax Brackets

Marginal rates for tax year 2026 are as follows:

• 37%for income over $640,600 (single) or $768,700 (married filing jointly)
• 35%for income over $256,225 (single) or $512,450 (married filing jointly)
• 32%for income over $201,775 (single) or $403,550 (married filing jointly)
• 24%for income over $105,700 (single) or $211,400 (married filing jointly)
• 22%for income over $50,400 (single) or $100,800 (married filing jointly)
• 12%for income over $12,400 (single) or $24,800 (married filing jointly)
• 10%for income up to $12,400 (single) or $24,800 (married filing jointly)

Alternate Minimum Tax (AMT) Exemption Updates

For 2026, the Alternative Minimum Tax Exemption amounts are:

• $90,100 for single filers (phases out at $500,000)
• $140,200 for married couples filing jointly (phases out at $1,000,000)

Expanded Employer-Provided Childcare Credit

Good news for employers offering childcare benefits. The employer-provided childcare credit gets a significant boost in 2026:

• Maximum amount increases from $150,000 to $500,000
• Maximum increase to $600,000 if employer is an eligible small business

Qualified Business Income (QBI) Deduction Is Here to Stay

Another big win for small businesses: the 20% Qualified Business Income (QBI) deduction is permanent starting in 2026.

This deduction applies to eligible pass-through entities, including:

• Sole proprietorships
• Partnerships
• S-corporations

It reduces taxable income and includes a minimum $400 deduction for anyone earning at least $1,000 in qualified business income.

New Payroll Deductions for Tips and Overtime

New payroll and employee tax deductions for tips and overtime apply through 2028. This means tax relief for some if your payroll system is set up correctly. Be sure to take steps now to ensure your systems are ready. Or, if you work with a third-party payroll service, request confirmation that they’re ready for the new rules.

California Minimum Wage Increase in 2026

For California employers, a regulatory change to keep on your radar is the statewide minimum wage increase.

Effective January 1, 2026:

• Minimum wage rises from $16.50 to $16.90 per hour
• Minimum salary for exempt employees increases to $70,304 annually

Keep in mind that many cities, counties, and certain industries (like fast food) have higher local minimum wage requirements, so it’s important to check the rules that apply to your specific location.

As always, it’s best to discuss your company’s tax strategy, withholding, and reporting obligations with a qualified tax professional. For wage and payroll-related questions, your legal counsel or payroll provider can help ensure you’re compliant and prepared for the year ahead.