The 1099 threshold is now $2,000 and bonus depreciation is back at 100%. A year-end checklist for owners

Most tax changes reach small businesses as a line in a software update. Two provisions of the federal tax law enacted in July 2025, commonly called the One Big Beautiful Bill Act, deserve more attention than that before December 31. One reduces paperwork. The other can change how much tax a business owes for 2026, depending on decisions made in the next 80 days.

This explainer summarizes what has changed and the questions owners should take to their accountant. It is general information, not tax advice, and the details of any business’s situation matter.

Change one: the $2,000 1099 threshold

For years, a business that paid an independent contractor $600 or more in a calendar year for services generally had to file Form 1099-NEC and send a copy to the contractor. Similar rules applied on Form 1099-MISC for payments such as rent.

Section 70433 of the new law raises that threshold to $2,000 for payments made in 2026, according to summaries by payroll providers and accounting firms. Starting with payments made in 2027, the $2,000 figure will be adjusted each year for inflation, using 2025 as the base year and rounding to the nearest $100. The threshold for backup withholding, which can apply when a payee does not provide a taxpayer identification number, rises to $2,000 as well.

Separately, the law restored the original reporting threshold for Form 1099-K, which payment platforms and card processors issue: $20,000 in payments and more than 200 transactions. That reverses the much lower thresholds that had been scheduled to phase in.

Three cautions apply.

• The change is for 2026 payments. Forms filed in early 2026 for 2025 payments still used $600. The new threshold matters for the forms due in early 2027.
• Software defaults may lag. If your accounting system flags vendors for 1099s automatically, confirm it is using the 2026 threshold, or you may file forms you no longer need to.
• States may differ. State 1099 reporting rules do not always follow federal law. One accounting firm’s review found that California and Colorado have adopted the $2,000 threshold for 2026, while some other states remained at $600 pending legislative action. Check your state’s rule.

The threshold does not change what income is taxable. A contractor paid $1,500 who no longer receives a 1099 still owes tax on that income. It also does not remove the value of collecting a Form W-9 from every vendor at the start of the relationship, which avoids a scramble if payments cross the threshold later in the year.

The deadline does not move. Forms 1099-NEC for 2026 payments are due to recipients and to the IRS by January 31, 2027. Businesses that pay contractors through a payment app or card network should also check whether those payments are reported on Form 1099-K by the platform instead, since the same payment should not be reported twice.

Change two: 100% bonus depreciation, permanently

Bonus depreciation lets a business deduct a large share of the cost of qualifying property, such as machinery, equipment, computers and certain improvements, in the year the property is placed in service, rather than spreading the deduction over years. Under the 2017 tax law, the bonus rate was 100% for several years and then began stepping down.

The new law restored 100% bonus depreciation and made it permanent for qualifying property acquired after January 19, 2025. Property acquired under a binding written contract signed on or before that date remains subject to the older, lower phase-down rates. The Treasury Department and IRS issued Notice 2026-11 on January 14, 2026, with interim guidance on how the acquisition and placed-in-service tests work.

The practical trigger is placed in service. Equipment ordered in December but not delivered, installed and ready for use until January generally counts for the following tax year. Owners who are planning purchases should confirm delivery dates, not just order dates.

Section 179, the other write-off

Section 179 is a separate provision that also allows immediate expensing of qualifying property, up to an annual limit. According to accounting-firm summaries citing the IRS’s inflation adjustments, the limit for 2026 is $2.56 million, and it begins to phase out once a business places more than $4.09 million of qualifying property in service during the year. Both figures are indexed for inflation.

The two provisions behave differently. Section 179 deductions are limited to taxable business income and cannot create a loss. Bonus depreciation has no dollar cap and can create a loss, which may be carried forward. Where both are used, Section 179 is generally applied first. Which mix is better depends on the business’s income, its state’s rules and its plans, which is precisely why the decision belongs in a conversation with a tax professional.

A year-end checklist

• Update 1099 settings in your accounting or payroll software to the 2026 threshold, and confirm your state’s rule.
• Collect missing W-9s now from vendors you paid this year, regardless of amount.
• List planned equipment purchases and confirm whether each can realistically be placed in service by December 31.
• Check for older contracts signed on or before January 19, 2025, which follow the old bonus rates.
• Ask about state conformity. Some states do not follow federal bonus depreciation, which can create a difference between federal and state taxable income.
• Do not buy just for the deduction. A deduction reduces tax on money spent. It does not make an unnecessary purchase free.

The IRS maintains a page summarizing the new law’s provisions and links to guidance as it is issued. That is the place to check for updates before filing season.