2026 Tax Refresher for Solo Business Owners: What's Permanent Now, What's Still on a Timer, and What You Can Actually Deduct

By Tom Aylmer, Cedarmill Financial

If you run your own show — freelancing, consulting, coaching, a trade, an online shop — and you bring in roughly $50,000 to $150,000 a year, this one's for you.

2026 is the first full tax year under the One Big Beautiful Bill Act, the big tax law signed in July 2025. A lot of the rules you may have heard about have changed. Some things are now permanent. A few are still on a timer. Here's the refresher, in plain English, with the numbers that actually touch a business your size.

1. Buying equipment? You can write off the whole thing in year one

This is the biggest deal in the new law for a solo owner.

Bonus depreciation is back at 100% — permanently. Buy a laptop, a camera, tools, a used work van, office furniture — if it's equipment for your business, you can generally deduct the full cost in the year you start using it, instead of spreading it over several years. The old phase-down (40% in 2025, 20% in 2026, gone after that) is repealed.

Two dates that matter:

• January 19, 2025. The 100% rate applies to equipment acquired after that date. If you signed a binding contract for something on or before that date, the old phase-down still applies to it — 20% if you put it in service in 2026.

• Placed in service. The deduction lands in the year you actually start using the equipment. Buy a $3,000 laptop in December but don't set it up until February, and the deduction moves to next year.

A few fine points:

• The equipment has to be used more than 50% for business. A laptop that's 80% business, 20% personal? Deduct 80%.

• Cars have dollar caps. For a passenger car placed in service in 2026, the first-year depreciation limit is $20,300 with bonus depreciation ($12,300 without it). So the 100% rule doesn't mean an unlimited car write-off.

• Section 179 is the companion tool. It lets you expense equipment too, with a limit around $2.56 million for 2026 — far above anything a solo business spends — and unlike bonus depreciation, it can't create a loss. For most solo owners, bonus and Section 179 get you to the same place; your CPA picks whichever fits your year.

What you can mostly ignore: the law also created a new break for manufacturers building factories. Unless you're building a plant, skip it. And the R&D expensing fix and the friendlier business-interest limit in the same law mostly matter to bigger companies — good to know they exist, not something that changes your return.

2. The 20% pass-through deduction is permanent

If your business is a sole proprietorship, single-member LLC, partnership, or S corp, your profits flow to your personal return — and the 20% qualified business income (QBI) deduction is now permanent. It was scheduled to expire at the end of 2025.

For most solo owners in the $50k–$150k range, this one is simple: if your taxable income is under $75,000 (single) or $150,000 (married filing jointly), you generally get the full 20% deduction on your business profit without running into the complicated limits. Those income thresholds are the ones that went up in 2026 — they used to be $50,000 and $100,000.

There's also a new $400 minimum deduction for owners with at least $1,000 of business income. Small, but it's there.

Two more permanent items that touch you personally, since your business income lands on your personal return: the lower individual tax rates and the larger standard deduction are permanent now, and the $2,200 child tax credit is permanent too. And the rule that stops W-2 employees from deducting unreimbursed work expenses is permanent — so if you ever hire someone, reimburse their work costs through an accountable plan instead of leaving them to deduct it themselves. They can't.

3. What's still on a timer

Not everything in the new law lasts forever:

• No tax on tips, overtime, and car-loan interest — 2025 through 2028. The deductions for qualified tips (up to $25,000), overtime pay (up to $12,500 single / $25,000 joint), and interest on a loan for a new U.S.-assembled vehicle (up to $10,000) all end after 2028. If you pay yourself through a side job with tips or overtime, or you're financing a new vehicle, use these while they exist — don't build permanent plans on them.

• The $6,000 senior deduction — 2025 through 2028. Also temporary.

• The state-and-local-tax (SALT) cap increase reverts in 2030. The cap went up to $40,000 for 2025 and phases down; it goes back to $10,000 in 2030. Most solo owners take the standard deduction and never hit the cap, but if you itemize, it's on your radar.

• Already gone: on-site meals for employees. If you feed staff at your workplace because the job requires it, that deduction was 50% through 2025 and is 0% starting January 1, 2026. Most solo owners without employees won't feel this one — but if you run a small shop with staff on-site, budget for it.

4. Meals and entertainment: the 50% / 0% split

• Business meals: 50% deductible. Lunch with a client, coffee with a vendor, dinner with a collaborator — deductible at 50% if it's not lavish, you're actually there, and there's a business reason. The 50% covers the whole bill: food, drinks, tax, tip.

• Entertainment: 0% deductible. Game tickets, concert tickets, a round of golf — none of it, no matter how much business you talked about. This has been the rule since 2018.

• Food at an entertainment event is still 50% — but only if the food is broken out separately on the receipt. Dinner at the ballpark with its own line item: deductible at 50%. One bundled price with no food breakdown: the whole thing is nondeductible entertainment.

• A couple of 100% exceptions: a holiday party or picnic for your team, and food you give away to the public (samples, open-house refreshments).

• The pandemic-era 100% restaurant-meal deduction is long gone. Every qualifying meal in 2026 is back to 50% unless an exception applies.

5. Travel: is the trip business or personal? Yes, it's mostly about the days

This is the question I get most, so here's the full answer.

The test is the trip's primary purpose — and for a trip inside the U.S., that comes down to counting days. If the majority of the days are business days, the trip is primarily business. If the majority are personal, it's primarily personal. And the stakes are all-or-nothing on transportation: on a primarily-business domestic trip, your full round-trip airfare or driving cost is deductible. On a primarily-personal trip, none of the transportation is deductible — though you can still deduct the expenses tied to the business days themselves.

So what counts as a business day? More than you'd think:

• Travel days count. The day you fly out and the day you fly home are business days, even if you do no work on those days.

• Days where business is your main activity during working hours count. You don't need eight hours of meetings — a day counts if business was genuinely the principal thing you did during working hours.

• Weekends and holidays sandwiched between business days count. Meetings Friday and Monday in another city? Saturday and Sunday count as business days, even if you spend them sightseeing. The logic is simple: flying home Friday and back Sunday would cost more than staying put.

• Days you're required to be somewhere count, even if the task itself is short.

Days that don't count: days with no real business activity — the extra days you tack on purely for fun after the work is done.

A worked example. Say you fly to Denver Thursday for a client meeting Friday and a workshop Monday, then fly home Tuesday:

• Thursday — travel day: business.

• Friday — client meeting: business.

• Saturday and Sunday — sandwiched between business days: business.

• Monday — workshop: business.

• Tuesday — travel day: business.

That's six business days. You could add up to five personal days to the same trip and the trip would still be primarily business, with the full airfare deductible. Lodging and meals on the personal days still aren't deductible — only the business days — but the flight is.

A few more travel rules that matter:

• The trip has to be away from your tax home (generally, where your business is based) and longer than an ordinary workday — in practice, an overnight stay. A day trip doesn't count.

• International trips have an extra wrinkle. Seven days or fewer outside the U.S., and the same majority-of-days test applies. Longer than seven days, and once personal time passes 25% of the trip, you have to split the transportation cost proportionally.

• Temporary work locations count. Travel to a job site you expect to last less than a year is deductible. Your daily commute to your regular office is not.

• Per diem is an option. Instead of saving every meal receipt, you can use the IRS per diem rates — $319 a day in high-cost cities, $225 a day everywhere else, through September 30, 2026 (that covers lodging and meals together).

• Write it down as you go. The IRS requires contemporaneous records: amount, date, place, and business purpose. A calendar entry plus a receipt beats a reconstructed memory every time — and it's the difference between a deduction that holds up and one that doesn't.

6. Mileage: 2026 has two rates, not one

The IRS changed the standard mileage rate mid-year — the first mid-year change since 2022 — so 2026 is a split year:

The rate follows the date you drove, not the date you file or get reimbursed. So a June 30 drive is 72.5¢ and a July 1 drive is 76¢. Medical and moving miles are 20.5¢ through June 30 and 23.5¢ after July 1; charitable driving stays at 14¢ all year. The rate is the same for gas, hybrid, and electric vehicles. Parking fees and tolls are deductible on top of the per-mile rate.

A quick example: 8,000 business miles in the first half of the year is a $5,800 deduction. The same 8,000 miles in the second half is $6,080.

The basics that still trip people up:

• Keep a log. Date, miles, destination, business purpose. An app that tracks it automatically is fine; reconstructing a year from memory is not.

• Commuting isn't deductible. Home to your regular office is personal. But if you have a qualifying home office, the drive from home to your first business stop of the day generally is.

• Standard mileage vs. actual expenses: you choose. To use the standard rate on a car you own, you generally have to choose it in the first year you put the car in service for business. And 35¢ of every 2026 business mile is treated as depreciation, which reduces the car's tax basis — that matters when you eventually sell it.

• If you hire help, reimburse their driving under an accountable plan and the reimbursement stays tax-free to them. They can't deduct unreimbursed mileage on their own returns anymore.

Your 2026 checklist

• Buying equipment? Confirm you acquired it after January 19, 2025, and get it in service before year-end — the full cost is deductible in year one.

• Solo owner under the income thresholds? You're likely getting the full 20% QBI deduction — make sure it's on your return.

• Taking a work trip? Count the days before you book: travel days count, sandwiched weekends count, and a majority of business days makes the whole flight deductible.

• Driving for the business? Split your 2026 log at July 1 — 72.5¢ before, 76¢ after.

• Planning around tips, overtime, or car-loan interest? Those deductions end after 2028 — use them while they exist.

The 2026 rules above are the law as it stands today. If any of these touch a decision you're about to make — a big equipment purchase, a trip you're planning, a change to how you pay yourself — talk it through with your CPA before you sign.

This post is general information for solo business owners, not tax advice for your specific situation. Rules, limits, and phase-outs depend on your facts — and the IRS is still writing guidance on several of the new law's provisions. Check with your CPA before acting.

Sources: IRS Notice 2026-11 (bonus depreciation interim guidance); IRS Notice 2026-10 and Announcement 2026-11 (2026 standard mileage rates); IRS News Release IR-2025-128; IRS Publication 463, Travel, Gift, and Car Expenses; P.L. 119-21, the One Big Beautiful Bill Act.