Changes for 2026

Every year there are updates to tax laws. This year is no different, and “The One Big Beautiful Bill” (OBBB) includes some new ones we’d like to highlight.

1099 Threshold

Per IRS Publication 15 of the Employer’s Tax Guide (Circular E), the new required reporting threshold for 1099-MISC (miscellaneous information) and 1099-NEC (non-employee compensation) increases from $600 to $2,000 for certain payments to persons engaged in a trade or business and payments for services. The threshold also increases to $2,000 for wage reporting if no federal income, social security, or Medicare tax was withheld. This threshold will be adjusted for inflation for each calendar year after 2026.

Mileage Reimbursement Rate 

According to IRS Publication 15-B, the business mileage rate for 2026 is 72.5 cents per mile. You may use this rate to reimburse an employee for business use of a personal vehicle, and under certain conditions, you may use the rate under the cents-per-mile rule to value the personal use of a vehicle you provide to an employee. 

Client Gift Deductible Limit 

Nothing has actually changed here, but we feel it is important to understand the deductible limits for client gifts. Per IRS Publication 463, in general, you can deduct no more than $25 for business gifts you give directly or indirectly to each person during your tax year. A gift to a company that is intended for the eventual personal use or benefit of a particular person, or a limited class of people will be considered an indirect gift to that particular person or to the individuals within that class of people who receive the gift. Gifts to a business, for the sake of the business’ use, can fully be deducted, but one must take care to properly understand the rules. Please be sure to consult with your CPA if you have any questions about this limit. 

Qualified Business Income Deduction 

The Qualified Business Income deduction is applicable to many owners of sole proprietorships, partnerships, S corporations and some trusts and estates, subject to overall income level. This deduction was originally set to sunset in 2025, but has been made permanent, and threshold limits will continue to adjust for inflation annually. There is also a new minimum $400 deduction for taxpayers who materially participate in an active trade or business and have at least $1,000 of QBI. Please consult with your CPA now to make determinations on how best to take advantage of this tax deduction for 2026. 

Section 179 Expensing and Bonus Depreciation 

There have been changes to the limits and rules for 179 Expensing and Bonus Depreciation through OBBB which allow you to take large deductions in the year in which a purchase was made. It is important to discuss with your CPA how you wish to have your tangible (i.e. fixtures and equipment) and intangible (i.e. loan fees, business purchase valuation) assets deducted in the current year and in future years. This is a big decision and can affect your tax basis in the current year as well as future years and may impact your ability to borrow money. Also, remember that if you deduct 100% of your purchase now, your business will be subject to taxes on 100% of the proceeds of any sale of that item later as part of your overall business profit.

TPSO 1099-K Threshold Increased

Third Party Settlement Organizations, also known as TPSOs, include Venmo, PayPal, CashApp (Square Cash), Apple Pay, eBay, Etsy, Uber, Lyft, StubHub, TaskRabbit and more. What distinguishes these organizations is that they hold funds that you or your business collects until you transfer it to your bank account. These organizations are required to provide 1099-Ks to report income that is received into those platforms on your behalf.

In 2025, the threshold for TPSO 1099-K reporting went up. According to IRS Fact Sheet FS-2025-08, “The One, Big, Beautiful Bill (OBBB) retroactively reinstated the reporting threshold in effect prior to the passage of the American Rescue Plan Act of 2021 (ARPA) so that a third party settlement organization (TPSO) is not required to file a Form 1099-K unless the gross amount of reportable payment transactions to a payee exceeds $20,000 and the number of transactions exceeds 200”.

However, the IRS does not solely consider only 1099-K reported income as taxable. Therefore, even if you did not meet the threshold and did not receive a 1099-K from any of these TPSO platforms, you still must report all income for goods and services that you received while using them. Please consult with your CPA for further information about what income you receive is considered taxable.


Disclaimer Lakesite Accounting is giving information not financial advice. The content provided here is for informational purposes only. It is not intended as legal, tax, investment, financial, or other advice. You should consult your own financial, legal, or tax advisors before engaging in any transaction or implementing any financial strategy.