What the New Tax Law Means for Texas Small Business Owners

The One Big Beautiful Bill Act (OBBBA), signed in 2025, introduced important tax changes for small business owners, freelancers, contractors, gig workers, and self-employed professionals.

What does that mean for you?

Some deductions are now more predictable. Certain equipment purchases may qualify for faster write-offs. Reporting thresholds have changed. Texas businesses also need to understand updated franchise tax filing requirements.

The key to benefiting from these changes is simple: keep organized books and maintain complete records throughout the year. Waiting until tax season can make it harder to confirm eligibility, locate receipts, and claim every deduction correctly.

This overview is for general education only. Tax rules include eligibility requirements, income limits, and exceptions. Confirm your situation with your tax professional.

The 20% Qualified Business Income Deduction Is Now Permanent

The Qualified Business Income (QBI) deduction allows eligible business owners to deduct up to 20% of qualified business income from a sole proprietorship, partnership, S corporation, or other qualifying business.

Before the OBBBA, this deduction was scheduled to expire. It is now permanent under current law.

The law also provides:

A new $400 minimum deduction for taxpayers with at least $1,000 of active qualified business income.
Expanded phase-in ranges beginning at $75,000 for single filers.
Expanded phase-in ranges beginning at $150,000 for married couples filing jointly.

The deduction is not automatic for every business owner. Specified service businesses, such as certain consultants, financial professionals, and health professionals, may face additional limitations. The deduction can also be limited by taxable income, wages, and qualifying property.

What Records Should You Keep?

To make the QBI calculation easier, maintain:

Monthly income reports.
Business expense records.
Owner draws and personal transfers.
Payroll and contractor payment records.
Year-end profit and loss reports.
Asset and equipment purchase documentation.

Organized bookkeeping records supporting the Qualified Business Income deduction

Clean monthly bookkeeping helps separate business activity from personal transactions. It also gives your tax professional reliable information when calculating your deduction.

100% Bonus Depreciation Is Permanent

The OBBBA makes 100% bonus depreciation permanent for qualifying property acquired and placed in service after January 19, 2025, subject to eligibility rules.

Bonus depreciation may allow a business to deduct the full qualifying cost of certain property in the year it is placed in service instead of spreading the deduction over several years.

This may matter if you purchase items such as:

Computers and technology.
Business equipment.
Furniture.
Machinery.
Certain vehicles.
Other qualifying depreciable property.

The purchase must meet the applicable rules. Not every business asset qualifies, and the timing of acquisition and placement in service matters.

What Should You Track?

For every major business purchase, keep:

The receipt or invoice.
The purchase date.
The date the item was placed in service.
The business-use percentage.
Financing documents, if applicable.
Serial numbers or asset identification.
Information about whether the property is new or used.

Do not rely on a bank statement alone. A bank statement may prove that money was spent, but it may not explain what was purchased or how the item is used in your business.

Section 179 Limits Increase for 2026

Section 179 may allow a business to expense qualifying property rather than depreciate it over time.

For 2026:

The maximum Section 179 deduction is $2,560,000.
The phase-out begins when qualifying property placed in service exceeds $4,090,000.
Taxable income limits still apply.

The deduction generally cannot exceed the taxpayer’s taxable income from the active conduct of a trade or business. Any amount limited by the taxable income rule may need to be carried forward.

This makes accurate profit reporting especially important. Your bookkeeping should clearly show business income, expenses, and asset purchases before your tax return is prepared.

1099 Reporting Thresholds Change in 2026

For payments made on or after January 1, 2026, the reporting threshold for certain Forms 1099-NEC and 1099-MISC increases to $2,000.

This means a business may not need to issue one of these forms for certain service payments below $2,000 to the same recipient during the year.

However, the income is still taxable.

If you are a freelancer, contractor, or gig worker, you must report your business income even if you do not receive a 1099 form. If you own a business, you should still maintain contractor records even when a payment does not meet the reporting threshold.

Keep Your W-9 and Contractor Records

For each contractor, try to maintain:

A completed Form W-9.
The contractor’s legal name and taxpayer identification information.
Invoices or payment documentation.
Total payments made during the year.
Copies of Forms 1099 issued.
Proof of payment.
A description of services provided.

The higher threshold does not eliminate the need for organized contractor files. It simply changes when certain information reporting may be required.

The 1099-K Threshold Returns to $20,000 and 200 Transactions

The Form 1099-K threshold is permanently set at:

More than $20,000 in gross payments, and
More than 200 transactions during the calendar year.

Both conditions must generally be met for the payment platform to issue a Form 1099-K under the federal threshold.

Even if you do not receive a 1099-K, all business income remains taxable. This is especially important for online sellers, food delivery workers, rideshare drivers, freelancers, and e-commerce businesses.

Reconcile payment platforms with your bookkeeping each month. Track gross sales separately from platform fees, refunds, sales tax, shipping, and chargebacks.

New Deductions for Qualified Tips and Overtime

The OBBBA created temporary above-the-line deductions for qualified tips and qualified overtime for tax years 2025 through 2028.

Qualified Tips

Eligible employees and self-employed individuals may be able to deduct qualified tips up to $25,000 annually, subject to income phase-outs and other requirements.

This may be relevant to restaurant workers, salon professionals, service providers, and certain other tipped occupations.

Businesses should maintain:

Point-of-sale tip reports.
Payroll records.
Tip-sharing records.
Cash tip logs.
Credit card tip summaries.
Employee occupation information.

Qualified Overtime

Eligible taxpayers may be able to deduct qualified overtime pay up to:

$12,500 for single filers.
$25,000 for married couples filing jointly.

The deduction generally applies to the overtime premium portion, not all overtime wages. For example, with time-and-a-half pay, the qualifying amount may be the additional “half” portion above the regular rate.

Employers should keep detailed payroll reports showing regular wages, overtime wages, and the overtime premium separately.

Texas Franchise Tax Filing Requirements for 2026

For 2026 Texas franchise tax reports, the no-tax-due threshold is $2,650,000 in annualized total revenue.

The Texas Comptroller has discontinued the old No Tax Due Report. Businesses at or below the threshold generally must file one of the following instead:

A Public Information Report (PIR).
An Ownership Information Report (OIR).

The PIR or OIR may still be required even when no franchise tax is due. The Texas Comptroller’s 2026 franchise tax guidance explains the filing requirements.

Qualifying new veteran-owned businesses may be exempt from certain filing requirements during their first five years, as long as they continue to qualify.

Keep organized records of:

Annualized total revenue.
Texas gross receipts.
Ownership information.
Officer and director information.
Business formation documents.
Prior franchise tax filings.

The Texas Comptroller’s PIR and OIR guidance provides additional details.

Track the 2026 Business Mileage Rates Carefully

For 2026, the business mileage rates are:

72.5 cents per mile from January 1 through June 30.
76 cents per mile from July 1 through December 31.

If you use your vehicle for business, maintain a mileage log that includes:

Date of each trip.
Starting location.
Destination.
Business purpose.
Number of business miles.
Total miles, when required.
Parking and toll receipts.

A calendar entry or mileage-tracking app can make this easier. Add mileage to your monthly bookkeeping routine instead of trying to reconstruct an entire year from memory.

Why Monthly Bookkeeping Matters More Than Ever

These tax changes create more planning opportunities, but they also make accurate records essential.

At MJ Bookkeeping, we help Texas business owners keep their finances organized and tax-ready with:

Monthly bookkeeping and reconciliations.
QuickBooks cleanup and catch-up services.
Schedule C and 1099 tax help.
Small business tax preparation.
Profit and loss statements.
Balance sheets and financial reports.
Contractor and expense tracking support.

Would you know today how much you paid contractors, how many business miles you drove, or which equipment was placed in service this year?

If not, your books may need attention before tax season arrives.

Get Organized With Support You Can Trust

The OBBBA may create valuable deductions for eligible Texas small business owners, but the outcome depends on your specific business structure, income, records, and tax situation.

We help you turn scattered receipts and unclear transactions into organized financial information you can review with confidence.

Schedule a free initial consultation with MJ Bookkeeping. We provide personalized support, a 24-hour response time, and accurate, transparent service with pricing starting at $299.

Review our tax checklist, use our expense tracker, or contact MJ Bookkeeping to discuss your needs with no obligation.

This article is for general informational purposes and does not constitute personalized tax, legal, or accounting advice. Tax laws and IRS guidance may change. Confirm your eligibility and filing responsibilities with a qualified tax professional.