Part 2: What’s New Under the OBBBA? Tax Law Changes for 2026

Part 2: Business Tax Provisions

2025 may have been the year that the “One Big Beautiful Bill Act” (OBBBA) was made law, but 2026 is the year that many of its tax provisions actually kick in. From charitable contributions to child care credits, the bill eliminates a number of tax benefits and introduces new ones. Before you craft your clients’ tax plans for 2026, make sure you understand the changes taking place. Read on for an overview of the tax provisions most likely to impact business owners. 

Business Meals

This provision was originally introduced by the Tax Cuts and Jobs Act of 2017 (TCJA), but the OBBBA kept some 2026 updates in place and added a few exceptions to the rule. As of this year, certain food and beverage costs are no longer deductible as business expenses. This applies to:

1. Expenses for operating an employer-operated eating facility
2. The food and beverages associated with that employer-operated eating facility

So if an employer owns and operates a cafeteria or dining space to provide free meals or even tax-free meals to employees, the costs of providing that service are no longer tax deductible for the employer. This applies to eating facilities that are leased by the employer and run by a third party who is contracted by the employer. 

Additionally, the provision makes meals provided on the business premises non-deductible if:

• Meals are furnished to an employee for the employer’s convenience
• Meals are excluded from the employee’s income

Does this apply to employer-provided coffee and snacks? According to an IRS TAM (technical advice memorandum) issued in 2019, coffee and snack stations are not eating facilities, and coffee and snacks are not considered meals. Further guidance on the newly-enacted provision has not been provided yet. 

Now the OBBBA did introduce two exceptions to these rules:

1. Expenses for goods or services that the taxpayer sells for adequate and full consideration of money or money’s worth—this means that meals provided to restaurant employees during their shifts are still deductible. 
2. Meals provided on certain commercial vessels and oil-and-gas rigs

These exceptions seem to be a way of correcting an oversight for employees in those environments. 

Charitable Contribution Deductions

For C corporations, there is a new 1% taxable income floor on charitable contributions. These businesses can only deduct the amount that exceeds 1% of their taxable income. However, other rules also apply, such as the limit that says businesses can only deduct charitable contributions up to 10% of their taxable income. Fortunately, businesses are still allowed to carry forward charitable contributions that exceed that limit. 

Luckily, the new rules leave room for a variety of tax strategies. For one, U.S. Treasury regulations allow taxpayers to deduct payments to a charitable organization as a business expense in certain circumstances. To do so, there needs to be a direct business relationship and an expectation of return commensurate with the donation made. One way to bypass these limits is for business owners to legitimately structure a corporate contribution plan and use it as marketing. So if a business commits to a cause and advertises that 1% of their sales will be donated to a certain charity, that charitable contribution would count as a business deduction.

Another strategy is bunching. If a business is barely exceeding that 1% threshold every year, they can “bunch” their contributions and donate a larger amount every two or three years to maximize the tax deduction available. 

Employer Provided Child Care Credit

As of 2026, the employer-provided child care credit code has been enhanced. This credit is specifically intended for business owners who want to establish a childcare facility in their business. The credit rate has been increased to 40% of eligible child care costs, up from 25%. The maximum credit has also been increased to $500,000, up from $150,000. Again, this only applies to amounts paid after 2025. 

The credit has also been expanded so that multiple employers can come together, pool their costs, and use jointly-owned facilities in order to claim the credit. 

Excess Business Loss limitation

Typically, business owners can deduct business losses as much as they want as long as they do not exceed their business income. However, the excess business loss limitation puts a cap on deductions against non-business income. The 2025 limitation amounts are $626,000 for married couples filing jointly and $313,000 for other filing statuses. Anything above these thresholds is suspended and carried forward as a net operating loss. As of 2026, the excess business loss limitation is permanent. The limitation amounts have been reset to $512,000 for married couples filing jointly and $256,000 for other filing statuses. 

Keep in mind that wages are not considered business income under this rule. So, for example, if you do cost segregation on a rental property, this limits that amount of loss you could use against someone’s wages. 

Qualified Opportunity Zones

Created under TCJA, qualified opportunity zones (QOZs) are economically distressed areas that are given a special tax benefit—new investments in these communities are eligible for deferred capital gains taxes. This is the only provision we’ve discussed that begins on January 1st, 2027—but planning ahead this year could be a wise next step. Under OBBBA, qualified opportunity zones are a permanent fixture, and new QOZs will be eligible for designation once every 10 years. This does not change the prior program or QOZs that qualified before 2027. 

The main benefit is that taxpayers who invest in a QOZ can defer capital gains within 180 days of a gain recognition event. A gain recognition event will occur on the earlier of these two dates:

1. When the fund is sold or exchanged, or 
2. The date five years after the investment was made

Benefits are also available the longer the QOZ investor holds onto their investment:

• After five years, the basis is increased by 10% of the deferred gain or 30% if it’s a qualified rural opportunity fund
• After 10 years, the investor can elect to increase the basis to fair market value on the date the investment is sold
• After 30 years, the basis is increased to the fair market value of the investment 30 years after the date of the investment. 

These benefits are meant to incentivize investors to hold onto their investments for the long-term. 

Summary

In this ever-shifting economic climate, business owners need reliable ways to lower their bills and keep more of their revenue. Though tax law changes frequently, our expertise as tax professionals is something our clients can count on. No matter the new provisions and IRS guidance that come our way, seasoned experts know how to interpret and apply new tax provisions for each client. The 2026 OBBBA changes may include limitations, but they also provide savings opportunities in the eyes of a seasoned tax professional who knows where to look.

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