Summary: The One Big Beautiful Bill (OBBB) creates significant year-end tax planning opportunities for businesses and individuals in 2026. From maximizing deductions and managing tax liabilities to evaluating capital investments, charitable giving, and international tax changes, proactive planning can help taxpayers capture available benefits and avoid costly surprises. Learn which tax provisions require attention before Dec. 31 and how to prepare for additional changes taking effect in 2027.

The One Big Beautiful Bill (OBBB) brought sweeping changes to the U.S. tax landscape in 2025, but understanding the legislation was only the first step. As 2026 draws to a close, businesses and individuals must determine how to put these changes to work and which decisions require attention before year-end.

From capital investments and charitable giving to payroll reporting, international tax planning, and new provisions taking effect in 2027, proactive planning can help taxpayers identify opportunities, manage risks, and avoid costly surprises.

Business Planning: Where To Focus Before Year-End

For businesses, the OBBB creates several opportunities, but the provisions should be modeled together rather than treated as stand-alone tax benefits.

• Capital expenditures and real estate

The OBBB restores 100% bonus depreciation for qualified property acquired and placed in service after Jan. 19, 2025, and increases the Section 179 limit to $2.56 million for 2026, with phaseout beginning at $4.09 million of qualifying property placed in service. Taxpayers should revisit equipment purchases, cost segregation studies, qualified improvement property, depreciation elections, and placed-in-service timing. For real estate and construction businesses, the expanded completed-contract method for certain residential construction contracts and state conformity can also affect taxable income and cash flow.

• Qualified production property

Manufacturers, producers, and refiners should review the new 100% deduction for qualified production property. In broad terms, the rule can apply to certain real property used as an integral part of manufacturing, production, or refining if construction begins after Jan. 19, 2025, and before 2029, and the property is placed in service before 2031. Eligibility depends on the property’s use, construction timeline, placed-in-service date, and whether any portion of the facility is excluded.

• Research and experimental (R&E) expenditures

Section 174A restored immediate expensing for domestic research and experimental (R&E) expenditures for tax years beginning after 2024. Taxpayers should evaluate the benefit of deduction versus capitalization of R&E and review applicable state conformity rules, as some states continue to treat these expenditures differently than the federal government. Foreign R&E expenditures, however, remain subject to capitalization and amortization.

• Qualified Small Business Stock (Section 1202)

The OBBB expands the benefits available for certain qualified small business stock (QSBS) issued after enactment, including earlier partial gain exclusions and higher eligibility thresholds. Founders, investors, and growing businesses should review whether these changes create new planning opportunities.

• Corporate charitable giving

Beginning in 2026, C corporations may deduct charitable contributions only to the extent total contributions exceed 1% of taxable income, subject to the existing 10% limitation. This means some planned gifts may produce less immediate tax benefit than in prior years. C Corporations with recurring or significant charitable giving should review the timing and amount of planned contributions before year-end.

• Paid family and medical leave

Employers should evaluate the expanded paid family and medical leave credit. The OBBB made the credit permanent and provides additional flexibility in how employers may qualify, including through certain wages paid during qualifying leave or premiums paid to provide paid leave benefits. Employers that offer, or are considering offering, paid leave should review whether their policies qualify and whether updates are needed before year-end.

Employers may qualify for a federal tax credit on premiums paid for eligible family and medical leave insurance, even if no employees take leave during the year. Employers should review their existing leave policies and insurance arrangements to determine whether they qualify for this expanded benefit.

• Information reporting

Businesses should also prepare for updated reporting requirements. For payments made in 2026, the reporting threshold increases to $2,000 for nonemployee compensation and certain other 1099 payments.  Separately, OBBB retroactively restored the Form 1099-K threshold for third-party settlement organizations to more than $20,000 and more than 200 transactions. Additionally, employers should coordinate with payroll providers to prepare for new tip and overtime reporting requirements.

• State conformity

With the sweeping federal tax changes introduced by the OBBB, understanding state conformity is more important than ever. States vary in whether and how they adopt federal tax provisions, creating significant differences between federal and state taxable income and adding complexity to multistate tax planning. Key provisions, including bonus depreciation, research and experimental expensing, and other business deductions, may receive different treatment across states as legislatures respond to federal changes and associated budget pressures. Importantly, state legislatures may enact conformity changes retroactively, potentially affecting tax positions and planning decisions made in prior years. As a result, taxpayers should consider both federal and state tax consequences when making 2026 year-end planning decisions and continue to monitor state legislative activity during the 2027 sessions for potential conformity changes, including those that may apply retroactively.

View KSM’s state-specific insights for more information on OBBB implications for Indiana, New York, and Illinois taxpayers.

Individuals and Families: What Changes on 2026 Returns

For individuals, one of the most important effects of the OBBB is certainty. Lower individual rates, a larger standard deduction, the child tax credit framework, the mortgage interest limitation, and the AMT exemption structure are no longer scheduled to sunset after 2025. That certainty should be incorporated into Roth conversion timing, charitable giving, itemized deduction planning, estate planning, and decisions about whether income or deductions should be accelerated or deferred.

Several 2026 planning items deserve specific attention:

• Charitable giving

Beginning in 2026, nonitemizers may claim a deduction of up to $1,000 for certain cash gifts to qualifying charities or $2,000 for joint filers. Itemizers face a new 0.5% AGI floor on charitable deductions, while the 60% AGI ceiling for cash gifts to public charities is made permanent. The SALT cap is temporarily higher through 2029. It is $40,400 for 2026, but it phases down once modified AGI exceeds $505,000 (both amounts increase by 1% annually and halved for married-filing-separate taxpayers), and it is scheduled to return to $10,000 after 2029. These rules may affect bunching, donor-advised funds, qualified charitable distributions, and gifts of appreciated assets.

• Overall limitation on itemized deductions

Higher-income taxpayers should also account for a new overall limitation that generally caps the benefit of itemized deductions against income in the 37% bracket to 35%.

• Temporary individual deductions

Certain deductions for tips, overtime, qualifying auto loan interest, and seniors remain available through 2028. Because these provisions are subject to dollar caps, income phaseouts, and documentation rules, they will not apply to every taxpayer but should be considered where relevant.

• Trump accounts

Families with young children should consider whether the new Trump accounts provide planning opportunities. Beginning in 2026, eligible children may receive tax-advantaged contributions that can help build long-term savings. Section 529 accounts remain available and should be part of year-end planning. State conformity considerations are particularly important with respect to state treatment of Trump Accounts.

• Estate planning

The federal estate, gift, and GST exemption is set at $15 million beginning in 2026 and will be indexed for inflation. That reduces the urgency many taxpayers felt before the prior sunset date, but it does not eliminate the need to revisit existing plans, income tax basis planning, family governance, asset protection, state estate tax exposure, and charitable goals.

International Tax: 2026 Is a Modeling Reset

The OBBB makes broad international tax changes effective for tax years beginning after 2025. Global Intangible Low-Taxed Income (GILTI) is renamed Net CFC Tested Income, or NCTI, and the calculation changes including removal of the tangible asset return concept, a revised Section 250 deduction, and new foreign tax credit mechanics. Foreign derived intangible income (FDII) becomes foreign-derived deduction eligible income (FDDEI), with new calculation rules. The general base erosion and anti‑abuse tax (BEAT) tax rate is set at a permanent 10.5% starting in 2026.

Multinational taxpayers should refresh their models rather than relying on prior-year calculations. For NCTI, taxpayers should model the increased deemed-paid foreign tax credit allowance, revised expense allocation rules, and the new limitation on certain taxes associated with distributions of previously taxed NCTI. Taxpayers should also review pro rata share rules, Section 951B, the restored downward attribution limitation, the permanent CFC look-through rule, and new foreign tax credit sourcing and expense allocation rules.

OBBB Provisions That Become More Important in 2027

Several provisions may not drive 2026 returns but should still be part of year-end planning conversations:

• Qualified Opportunity Zones

A redesigned Opportunity Zone program begins in 2027. New designations and stricter eligibility rules will apply. New investments after 2026 generally move to a rolling five-year deferral model, unless the investment is sold or another inclusion event occurs earlier. Rural qualified opportunity funds may receive enhanced benefits, but the redesigned program also includes new reporting requirements and penalties. New IRS transition guidance further clarifies. Investors in the original Opportunity Zone program should also plan for mandatory inclusion of remaining deferred gains on Dec. 31, 2026.

• Scholarship credits

Beginning Jan. 1, 2027, individual taxpayers may claim a new nonrefundable federal credit of up to $1,700 for certain cash contributions to qualifying scholarship-granting organizations in participating states. Married couples filing jointly can each claim a credit if both spouses make sufficient qualifying contributions for a total credit of $3,400.

• Energy credits

Energy credit deadlines continue to arrive. The OBBB accelerated the phaseout or termination of many Inflation Reduction Act-era energy incentives and added restrictions for credits that remain. Effective dates may turn on acquisition, construction start, production, placed-in-service dates, transferability, domestic content, and foreign entity restrictions. Individuals should know many residential energy credits ended after 2025 and clean vehicle credits ended earlier, while businesses with energy projects should confirm project-specific facts before assuming a credit remains available.

Year-End Planning Actions To Consider Now

Not every OBBB provision will affect every taxpayer. The most effective year-end planning starts with identifying which changes apply to your facts and which decisions should be made before Dec. 31. As year-end approaches, consider taking the following steps:

• Update federal and state tax projections to reflect OBBB changes that may affect taxable income, deductions, credits, cash flow, and estimated tax payments.
• Review the timing of major business decisions, including capital expenditures, R&E expenditures, charitable contributions, asset sales, and qualified small business stock planning.
• Confirm whether payroll, benefits, and information reporting systems are prepared for 2026 changes, including tip and overtime reporting, Form 1099 thresholds, and employee benefit updates.
• Evaluate whether state tax treatment differs from federal treatment, especially for businesses with multistate operations or owners in multiple states.
• Refresh international tax models if the business has foreign subsidiaries, cross-border operations, or foreign tax credit considerations.
• Consider whether 2027 changes, including Opportunity Zones, scholarship-credit contributions, and energy credit deadlines, should affect current planning decisions.

Contact your KSM advisor to discuss how these changes may affect your specific situation or fill out the form below.