Federal and South Carolina tax laws are changing in ways that may affect how business owners purchase equipment, report payments, structure their businesses, and plan major transactions in 2026. Many of the federal changes come from the One Big Beautiful Bill Act. South Carolina has also enacted tax changes that take effect in 2026 and 2027, including changes to individual income tax rates and business personal property.
Having a thorough understanding of these specific changes can help business owners identify questions to discuss with their accountants and tax professionals. When those tax decisions involve contracts, ownership, financing, or other legal matters, seeking legal guidance can help businesses address the legal aspect of the transaction.
At Nelson Law Firm, we help business owners throughout the South Carolina Lowcountry with business formations, contracts, transactions, ownership matters, and other legal needs. Contact us to learn how our attorney in Bluffton, South Carolina, can assist with your business's legal needs now and in the future.
Federal Tax Changes Affecting Businesses
Federal tax changes can affect businesses differently based on their structure, income, expenses, and transactions. Pass-through businesses, including sole proprietorships, partnerships, and S corporations, should review changes involving qualified business income deductions. Several important federal provisions apply to businesses beginning in 2026.
100% Bonus Depreciation
The federal tax law restored 100% bonus depreciation for qualifying property acquired after January 19, 2025. This allows eligible businesses to deduct the full cost of qualifying property in the year it's placed in service rather than depreciating the cost over multiple years. This change may be relevant to businesses purchasing equipment, machinery, and other qualifying assets in 2026.
The tax treatment of an equipment purchase is only one part of the transaction, however. A significant purchase may also involve financing agreements, purchase contracts, warranties, security interests, and ownership records. We can review those documents while your business's tax professional determines the applicable tax treatment.
Higher Section 179 Limits
The Section 179 deduction limit also increased for 2026. Businesses can generally expense up to $2.56 million of qualifying property, with the deduction beginning to phase out when qualifying property placed in service exceeds $4.09 million.
If you're planning major equipment purchases, you should discuss these limits with your tax professionals before completing a transaction. We can help when the purchase involves substantial financing or contractual obligations.
Qualified Business Income Deduction
The Section 199A qualified business income deduction is now permanent rather than expiring after 2025. The provision generally allows eligible owners of pass-through businesses, including partnerships and S corporations, to claim a deduction of up to 20% of qualified business income, subject to applicable limitations. The law also creates a new minimum deduction beginning in 2026 for certain taxpayers with active qualified business income.
These rules may be relevant when business owners evaluate ownership structures, compensation, distributions, or potential changes to their businesses. Tax professionals can determine whether a particular owner qualifies for the deduction, while we can review the related ownership and operating documents.
South Carolina Tax Changes for 2026 and 2027
Federal tax rules are only part of the picture for South Carolina business owners. Several state tax changes take effect in 2026 and may affect business owners' individual tax returns, deductions, estimated payments, and business property planning. Key changes include:
New individual income tax rates for 2026: South Carolina now has two individual income tax brackets. Taxable income below $30,000 is subject to a 1.99% rate, while income of $30,000 or more is subject to a 5.21% rate, minus $966.
Potential rate reductions beginning in 2027: South Carolina's new law provides for additional reductions to the top individual income tax rate when state revenue collections meet specified growth requirements. The South Carolina Board of Economic Advisors will determine whether the conditions for a reduction have been met each year.
New South Carolina deduction: Beginning with tax year 2026, South Carolina no longer follows certain federal standard and itemized deduction provisions. Instead, taxpayers use a new South Carolina Income Adjusted Deduction (SCIAD), with amounts based on filing status and subject to income limitations.
Business personal property: South Carolina's business personal property rules require businesses to report qualifying furniture, fixtures, and equipment. Businesses should maintain accurate records of their assets, including costs, depreciation, and acquisition or disposition dates.
These changes can be particularly important for owners of pass-through businesses because business income may ultimately be reported on the owner's individual South Carolina tax return. Business owners should work with their tax professionals to determine how the new state rules affect their particular circumstances.
We can assist when these tax considerations are connected to a legal decision, such as restructuring a business, purchasing significant equipment, changing ownership, or entering into a major transaction.
Get Support From a Business Law Attorney
Tax changes can affect more than tax returns. They can influence business transactions, ownership decisions, contracts, asset purchases, and future planning. Our attorney at Nelson Law Firm, J. Aaron Nelson, Jr., can help you address the legal considerations connected to these decisions while working alongside your tax professionals.
We help clients throughout the South Carolina Lowcountry review business transactions and legal documents when changes in tax rules raise questions about their business plans. Reach out to us today to learn how our business law attorney in Bluffton, South Carolina, can help you address the legal considerations affecting your business in 2026 and beyond.
