On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) became law. Most of the headlines were about individual rates and the SALT cap, but buried in the bill are three changes that matter a lot if you run a business through an LLC: the 20% qualified business income deduction is now permanent, 100% bonus depreciation is back and no longer phasing out, and Section 179 expensing doubled.

The practical upshot for 2026: the biggest small-business tax break of the last decade is no longer on a countdown clock, and the incentive to buy equipment and expense it in year one is as strong as it's ever been. But if you're a Wisconsin business, one of these three doesn't apply at the state level, and knowing which one is the difference between a clean return and a surprise add-back. This guide walks through all three, plus the R&D change most owners missed.

This isn't tax advice.

This is a plain-English summary of federal and Wisconsin rules as we understand them in 2026. Tax law is fact-specific and guidance is still being issued. Confirm anything here with a CPA before you file or make a purchase decision based on it.

1. The 20% QBI Deduction Is Now Permanent

The Section 199A qualified business income (QBI) deduction lets owners of pass-through businesses, which includes the vast majority of LLCs, deduct up to 20% of their qualified business income before calculating federal income tax. On $100,000 of qualifying profit, that's a $20,000 deduction, which at a 24% marginal rate is roughly $4,800 in real federal tax savings.

QBI was created by the 2017 Tax Cuts and Jobs Act, and it was scheduled to expire at the end of 2025. That sunset drove a lot of "should I do this now?" anxiety. OBBBA eliminated the sunset. The 20% deduction is now a permanent feature of the code, and it comes with a few upgrades:

  • Wider phase-in ranges. The income band over which the wage-and-property limits phase in was widened to $75,000 (single) and $150,000 (married filing jointly), up from $50,000 / $100,000. That gives more owners of "specified service" businesses (consulting, law, health, finance and similar) room to claim a fuller deduction before the limits bite.
  • A new minimum deduction. Starting in 2026, a taxpayer with at least $1,000 of QBI from an active trade or business can claim a minimum $400 deduction even if the percentage math would otherwise produce less.

Why this matters beyond the dollars: permanence changes planning. You no longer have to weigh entity decisions against a 2025 cliff. The QBI deduction is a core reason the LLC/pass-through structure remains attractive versus a C-corp for most owner-operators, and now it's a stable input instead of a moving target.

2. 100% Bonus Depreciation Is Back, and Permanent

Bonus depreciation lets you deduct the full cost of qualifying business assets in the year you place them in service, instead of spreading the deduction over years. It had been phasing down, 80% in 2023, 60% in 2024, on its way to zero.

OBBBA reversed that. Per IRS guidance, qualified property acquired and placed in service after January 19, 2025 is eligible for a 100% first-year deduction again, and the phase-down schedule was eliminated entirely, so it's permanent, not a temporary bump.

What typically qualifies: equipment, machinery, computers, office furniture, vehicles (subject to the usual luxury-auto caps), and other tangible property with a recovery period of 20 years or less. So if your LLC buys a $30,000 piece of equipment in 2026 and places it in service that year, you can generally deduct the whole $30,000 federally that year rather than depreciating it over five or seven.

"Placed in service" is the date that counts.

Bonus depreciation keys off when the asset is placed in service (ready and available for use), not when you ordered or paid for it. Buying in December but not putting the asset to work until January pushes the deduction into the next year.

3. Section 179 Expensing Doubled to $2.5 Million

Section 179 is the other way to expense assets in year one. It overlaps with bonus depreciation but works differently: it's an election, it has a dollar cap, and it can't create or increase a business loss. OBBBA raised the annual Section 179 cap to $2.5 million, with the deduction phasing out dollar-for-dollar once total qualifying purchases exceed $4 million in a year (up from roughly $1.25 million / $3.13 million).

For most small LLCs the dollar amounts are academic, you're not buying $2.5 million of equipment. But the choice between Section 179 and bonus depreciation is not academic, and in Wisconsin it's the whole ballgame. More on that next.

4. Bonus Round: R&D Expensing Came Back

One change that got far less attention: OBBBA restored immediate expensing of domestic research and experimental (R&E) costs starting in 2025, ending the unpopular rule that forced businesses to amortize those costs over five years. Software development, engineering, and product-development labor done in the U.S. can again be deducted in the year incurred.

There's a small-business sweetener too: businesses with average annual gross receipts of $31 million or less can apply the change retroactively to 2022–2024 returns, which can mean amended returns and refunds for prior R&D spending. If your LLC did any real product or software development in those years, it's worth a conversation with your CPA.

The Wisconsin Catch: Two of These Don't Help Your State Return

Here's where a Wisconsin LLC needs to be careful. Wisconsin is a selective-conformity state, it doesn't automatically adopt every federal change. Two of the four items above behave differently on your Wisconsin return:

Wisconsin does not allow bonus depreciation.

Per the Wisconsin Department of Revenue, if you claim federal bonus depreciation you must add it back when calculating Wisconsin taxable income, then you may elect a Section 179 deduction instead. So a big federal bonus write-off doesn't lower your Wisconsin bill by itself.

The practical translation:

  • Bonus depreciation (item 2): Federal only. Wisconsin makes you add it back. It accelerates your federal deduction but not your state one.
  • Section 179 (item 3): Wisconsin conforms. Because Wisconsin follows Section 179, this is the expensing tool that actually reduces both your federal and Wisconsin taxable income. For a Wisconsin LLC buying equipment, electing Section 179 (rather than relying on bonus) is often what keeps the state deduction intact.
  • QBI deduction (item 1): Effectively federal only. Wisconsin's individual income tax starts from your federal adjusted gross income, and the 199A deduction is subtracted after AGI on the federal return. So it lowers your federal taxable income but generally doesn't flow through to reduce your Wisconsin tax.
  • R&D expensing (item 4): Follow your CPA on the Wisconsin treatment; conformity for R&E costs can lag and may require its own adjustment.

None of this makes the federal changes less valuable, federal tax is usually the bigger number. But it does mean a Wisconsin owner shouldn't assume a federal deduction automatically shrinks the state bill. If equipment purchases are part of your plan, the Section 179 election is the lever that works in both places.

What This Means for Your Entity Choice

The permanence of QBI is the quiet headline for anyone deciding how to structure a business. The 20% pass-through deduction was one of the strongest arguments for running a profitable business as an LLC (or S-corp) rather than a C-corp, and the biggest knock against it was "but it expires in 2025." That objection is gone.

A few planning threads to pull with your advisor:

  • LLC vs. S-corp still turns on self-employment tax. QBI permanence doesn't change the core S-corp math, but it interacts with it: your QBI deduction is based on business income after a reasonable salary, so the salary you set still moves the number. We break the full calculation down in our LLC vs. S-Corp taxes guide.
  • Timing equipment purchases. With 100% bonus and a $2.5M Section 179 cap both permanent, the pressure to "buy before the rules change" is off, so you can time purchases around cash flow and profit rather than a sunset.
  • Formation is still the foundation. None of these deductions exist until there's an entity and an EIN behind them. If you're operating as a sole proprietor, forming an LLC is step one.

A Short 2026 Checklist

  1. Confirm you're claiming QBI. If your LLC is profitable and you're not taking the 20% deduction, that's the first thing to ask your preparer about.
  2. Plan equipment purchases with "placed in service" in mind, and in Wisconsin, ask about electing Section 179 rather than leaning on bonus depreciation for the state side.
  3. Expect a Wisconsin add-back if you take federal bonus depreciation, and don't be surprised when your state taxable income is higher than your federal.
  4. Revisit prior R&D spending (2022–2024) if you're under the $31M gross-receipts threshold and did domestic development work.
  5. Don't let a federal deduction set your state expectations. Model federal and Wisconsin separately.

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Frequently Asked Questions

Yes. The One Big Beautiful Bill Act, signed July 4, 2025, removed the sunset that would have ended the Section 199A qualified business income deduction after 2025. The 20% deduction is now a permanent part of the tax code, so LLC and S-corp owners no longer have to plan around it expiring.

For federal taxes, qualified property acquired and placed in service after January 19, 2025 is eligible for 100% first-year bonus depreciation, and the OBBBA made that permanent by eliminating the phase-down schedule. Whether a specific purchase qualifies depends on the asset type and when it was placed in service, confirm with your CPA.

No. Wisconsin does not allow bonus depreciation. If you claim federal bonus depreciation, you must add it back when calculating Wisconsin taxable income, and you may elect a Section 179 deduction instead. Wisconsin does conform to Section 179, so that's the tool that actually lowers your Wisconsin bill.

Generally no. Wisconsin's individual income tax starts from your federal adjusted gross income, and the QBI deduction is subtracted after AGI on your federal return. So the 199A deduction reduces your federal taxable income but doesn't flow through to lower your Wisconsin tax. Plan for the benefit as a federal-only one.

The One Big Beautiful Bill Act raised the Section 179 expensing cap to $2.5 million, with the deduction phasing out dollar-for-dollar once total qualifying purchases exceed $4 million in a year. Because Wisconsin conforms to Section 179, this deduction works for both federal and Wisconsin purposes.

Yes. The OBBBA restored immediate expensing of domestic research and experimental costs starting in 2025, ending the five-year amortization requirement for U.S.-based R&D. Small businesses with average annual gross receipts of $31 million or less may also apply the change retroactively to 2022–2024 returns.