Every year brings a new set of inflation adjustments, phased-in changes, and legislative modifications that affect how small businesses plan, file, and pay taxes. For the 2026 tax year, several federal and Utah-specific changes are especially significant for Utah small business owners — including the permanent restoration of 100% bonus depreciation. Here is what you need to know to plan ahead.
Federal Tax Changes for 2026
Inflation-Adjusted Tax Brackets
Federal income tax brackets adjust annually for inflation. For 2026, the bracket thresholds shifted upward again, meaning more income is taxed at lower rates before crossing into higher brackets.
Planning note for S-Corp owners: The 22%/24% bracket jump is the threshold most commonly straddled by successful small business owner-operators. S-Corp salary and distribution planning should take bracket thresholds into account to avoid pushing ordinary income into the next bracket unnecessarily.
Standard Deduction
The standard deduction continues to rise with annual inflation adjustments for 2026. With the standard deduction at current levels, most Utah small business owners who do not have mortgage interest, significant charitable contributions, or other large itemized deductions will continue to take the standard deduction. This makes the SALT cap less impactful for most individual filers — the standard deduction is already higher than most Utah residents’ itemized total.
Bonus Depreciation: 100% Restored Permanently
This is one of the most important changes for capital-intensive businesses. 100% bonus depreciation has been restored on a permanent basis. Qualifying property placed in service after January 19, 2025 is eligible for full first-year expensing — reversing the TCJA phase-down that had stepped the deduction down toward zero.
| Year | Bonus % |
|---|---|
| 2022 | 100% |
| 2023 | 80% |
| 2024 | 60% |
| Property placed in service after Jan 19, 2025 | 100% (permanent) |
| 2026 | 100% |
What this means: A business that purchases $100,000 of qualifying equipment in 2026 can deduct the full $100,000 in year one through bonus depreciation. Unlike Section 179, bonus depreciation can create or increase a net operating loss, giving businesses additional flexibility when planning large capital purchases.
Section 179 limit for 2026: $2,560,000, with the phase-out beginning at $4,090,000 of property placed in service. Section 179 remains a useful tool alongside bonus depreciation, particularly for businesses that want to target which specific assets are expensed — but note that Section 179 cannot create or increase a net operating loss.
Retirement Plan Contribution Limits
Retirement plan contribution limits continue to receive annual inflation adjustments for 2026 across 401(k)/403(b) elective deferrals, SEP-IRAs, SIMPLE IRAs, Solo 401(k)s, and traditional and Roth IRAs, with catch-up contributions available for those age 50 and over.
If your income exceeds the Roth IRA phase-out thresholds, a backdoor Roth IRA contribution may be available — discuss with your CPA.
Health Savings Account (HSA) Limits
HSA contribution limits for self-only and family high-deductible health plan (HDHP) coverage continue to rise with inflation in 2026, with an additional catch-up contribution available at age 55 and over. HSA contributions are deductible above-the-line, grow tax-free, and distributions for qualified medical expenses are tax-free. If you have a qualifying HDHP, contributing the maximum to your HSA each year is among the most tax-efficient strategies available.
Social Security Wage Base
The Social Security tax wage base is adjusted upward again for 2026.
Self-employment tax impact: Self-employed individuals pay 15.3% on net earnings up to the wage base (12.4% Social Security + 2.9% Medicare), then 2.9% (Medicare only) on earnings above the wage base. The increase in the wage base means more earnings are subject to the Social Security portion of SE tax for high-earning self-employed individuals.
S-Corp salary planning: The Social Security wage base matters for S-Corp reasonable salary determinations. Paying a W-2 salary at or above the wage base maximizes Social Security benefit accrual (relevant for retirement planning) while also subjecting all salary to full FICA. Balance this against the goal of minimizing FICA through S-Corp distribution treatment.
Net Investment Income Tax (NIIT) Threshold
The 3.8% NIIT on net investment income continues to apply at $200,000 for single filers and $250,000 for married filing jointly — thresholds that are not indexed for inflation.
Note: The QBI deduction does not affect NIIT calculations. Capital gains from business sales, rental income, and dividend income above these thresholds remain subject to NIIT.
Research and Development Costs
The treatment of domestic research and development costs has been a moving target in recent years under Section 174. If your business incurs R&D costs — including software development — work with your CPA to confirm the current rules, identify which costs qualify as Section 174 expenditures, and plan for the tax impact on your 2026 return.
Utah State Tax Changes for 2026
Utah Income Tax Rate
Utah continues to apply a flat income tax rate that has been reduced in recent legislative sessions. The flat rate applies to individuals, C-Corporations, and pass-through entity owners on Utah-source income. Confirm the current rate with your CPA when modeling your 2026 liability.
Utah Taxpayer Tax Credit
Utah provides a nonrefundable taxpayer tax credit that partially offsets the flat income tax rate for lower-to-middle income taxpayers. The credit phases out at higher income levels. Consult your CPA for the current credit amount applicable to your income level.
Utah Pass-Through Entity Tax (PTET)
The Utah PTET election remains available for 2026. Entities that elect PTET pay Utah income tax at the entity level and deduct it as a business expense on the federal return, bypassing the $10,000 SALT cap.
The election must be made annually — it does not carry over from a prior year. For entities that elected in the prior year, the election must be remade on the current TC-20S, TC-65, or applicable return. Estimated PTET payments should be made during 2026 to avoid Utah underpayment penalties. See our Utah PTET guide for full analysis.
Utah Sales Tax
Utah’s base state sales tax rate continues to apply, with combined county and municipal rates varying by jurisdiction. Check the Utah State Tax Commission’s rate lookup tool (tax.utah.gov) for the current rate at your business location.
Looking Ahead: Planning for 2026 and Beyond
With 100% bonus depreciation now permanent and Section 179 limits at historic highs, 2026 presents meaningful opportunities for businesses planning capital investments. At the same time, annual inflation adjustments to brackets, deductions, and contribution limits mean your plan should be reviewed every year rather than set and forgotten. Key strategies to discuss with your CPA include:
- Timing capital purchases to take full advantage of permanent 100% bonus depreciation and the higher Section 179 limits.
- S-Corp salary and distribution planning around the Social Security wage base and federal bracket thresholds.
- Maximizing tax-advantaged accounts — retirement plans and HSAs — at the current contribution limits.
- Electing the Utah PTET annually to work around the federal SALT cap.
Call (801) 927-1337 or schedule a 2026 tax planning review. We model the impact of these changes on your specific tax position and identify the planning strategies that make the most sense before your return is filed. You can also reach us by email at admin@cpaone.net.
About the Author
Missy Dennis, CPA | Partner | FJ & Associates, PLLC | Kaysville, Utah
Missy holds a Master of Accounting degree from the University of Utah and is a licensed Certified Public Accountant. She is committed to providing clear, accurate, and actionable guidance so clients can navigate complex financial decisions with confidence. With more than twenty years of public accounting experience, Missy Dennis specializes in: tax preparation and tax advisory; bookkeeping strategy alignment; estate and trust taxation; audit and consulting services; low-income housing tax credits; non-profit accounting; and small- and mid-sized business advisory.
