Small business owners: a clearer 2026 tax and retirement plan
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Where small business owners typically get paid
W-2 or 1099?
Owners of sole proprietorships and single-member LLCs file Schedule C and pay self-employment tax; S-corp owners take W-2 wages plus distributions. Any staff you hire are either W-2 employees on payroll or 1099 contractors, which changes what you withhold and file.
QBI deduction up to 20%
The qualified business income deduction is permanent. For 2026 the wage and property limits begin at $201,750 of taxable income ($403,500 joint), with a wider $75,000 ($150,000 joint) phase-in range.
New 1099-NEC threshold
For payments made in 2026, you only have to issue a 1099-NEC to a contractor paid $2,000 or more (up from $600). Contractors must still report all income.
Pick a retirement plan that fits
A SIMPLE IRA allows $17,000 of employee deferrals in 2026; a Solo 401(k) allows $24,500 plus employer contributions up to $72,000 total if you have no employees other than a spouse; a SEP IRA uses employer contributions only.
Expense equipment and vehicles
Section 179 allows up to $2,560,000 for 2026 (SUV cap $32,000), and 100% bonus depreciation is permanent. Business mileage is 72.5 cents per mile Jan-Jun and 76 cents Jul-Dec 2026.
Small business owner questions, answered
Do I have to send 1099s to my contractors in 2026?+
Only for nonemployee pay of $2,000 or more made in 2026, up from $600. Payments you make by card or through a payment app are generally reported by the payment company on Form 1099-K, not by you on a 1099-NEC.
Can I deduct my health insurance?+
Self-employed owners can generally deduct medical, dental, vision and qualified long-term care premiums for themselves, a spouse and dependents, limited to the business's net profit. It is not allowed for months you were eligible for a subsidized employer plan through your own or your spouse's job.
Which retirement plan is best for a small business with employees?+
It depends on headcount and budget. SEP IRAs and SIMPLE IRAs are common for small teams, while a Solo 401(k) is only for owners with no employees other than a spouse. This is educational; a tax professional can help you choose.
When are 2026 estimated taxes due?+
April 15, June 15 and Sept. 15, 2026, and Jan. 15, 2027. You generally must pay if you expect to owe at least $1,000 after withholding and credits.
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