2027 Tax Changes Every Texas Small Business Needs to Plan For Now

Last updated: July 23, 2026

The Tax Cuts and Jobs Act of 2017 was written to expire. Most of its individual and pass-through provisions were scheduled to sunset after December 31, 2025 - which would have made 2027 the first full year under the old, pre-2018 tax rules. For small business owners operating as LLCs, S-Corps, or sole proprietors in Texas, that would have mattered enormously.

It didn't happen. The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, made nearly all of those scheduled sunsets permanent instead of letting them expire. The individual tax brackets, the QBI deduction, the larger standard deduction, and 100% bonus depreciation are all locked in going forward. A few things did change - most notably the SALT deduction cap - just not in the way the original sunset would have.

This article originally described the changes as scheduled to take effect in 2027. It has been updated to reflect what actually happened under OBBBA, and what Texas business owners should be doing now that the picture is settled.

Why 2027 Was Supposed to Change Everything - and What Happened Instead

When Congress passed the TCJA in 2017, it used a budget reconciliation process that required most individual and pass-through provisions to expire after ten years (Tax Cuts and Jobs Act, H.R.1). The corporate tax rate cut to 21% was made permanent from the start - but the individual and pass-through provisions were written with a 2025 expiration date.

That debate is no longer open. Congress passed the One Big Beautiful Bill Act, and it was signed into law on July 4, 2025, making nearly all of the scheduled sunsets permanent before they took effect. The sections below reflect the law as it actually stands now, not the sunset that was originally scheduled.

Individual Tax Rates: The 39.6% Reversion That Didn't Happen

Under the TCJA, the top individual rate dropped from 39.6% to 37%. That cut was scheduled to expire after 2025, which would have pushed the top rate back to 39.6% starting in 2027, along with adjustments to the brackets below it.

The One Big Beautiful Bill Act canceled that reversion. It made the TCJA's seven-bracket structure - 10%, 12%, 22%, 24%, 32%, 35%, and 37% - permanent, with no scheduled increase in 2027 or any other year.

This still matters to small business owners, because most small businesses are pass-through entities - LLCs, S-Corps, sole proprietorships, and partnerships. Business income flows through to the owner's individual return and is taxed at these individual rates. Because the top rate stayed at 37% instead of climbing to 39.6%, pass-through owners avoid the additional tax exposure this section originally described.

Texas has no state income tax, so your federal liability is your total income tax exposure - and that liability didn't increase the way it was originally scheduled to.

The QBI Deduction (§199A): Made Permanent, Not Repealed

The Section 199A qualified business income deduction was one of the most significant benefits the TCJA created for pass-through owners (IRS §199A FAQ). It allows qualifying business owners to deduct up to 20% of their qualified business income on their personal return - effectively reducing their marginal rate on business income by roughly 20%. Under the original TCJA sunset, this deduction was scheduled to disappear entirely after 2025.

The One Big Beautiful Bill Act made the QBI deduction permanent instead, at the same 20% rate. It also expanded the income phase-in thresholds that determine whether wage and qualified-property limitations apply: the phase-in range rises from $50,000 to $75,000 of taxable income for single filers, and from $100,000 to $150,000 for joint filers (both indexed for inflation; for 2026 that's $201,750 single / $403,500 joint). OBBBA also added a minimum deduction - taxpayers with at least $1,000 of active QBI can claim a floor deduction of $400, adjusted for inflation.

For a business owner in the 37% bracket, the QBI deduction still brings the effective rate on qualifying business income down to roughly 29.6% - permanently, not just through 2025.

"The QBI deduction surviving as permanent law is one of the best outcomes of the OBBBA for our small business clients. The planning conversation now isn't about losing the deduction before a deadline - it's about structuring income to make the most of it long-term." - Darshi Kasotia, CPA

With QBI now permanent, the planning conversation shifts from beating a deadline to optimizing around the rules over the long run: managing income relative to the (now wider) phase-in thresholds, structuring W-2 wages and qualified property for businesses that need to clear the wage/property limitation, and reviewing whether your entity structure still makes sense now that the deduction is permanent rather than temporary.

Bonus Depreciation: Restored to 100%, Not Phased to Zero

Bonus depreciation allows businesses to deduct a percentage of the cost of qualifying assets in the year they're placed in service - rather than depreciating them over their useful lives. The TCJA set this at 100% in 2018, then phased it down on a fixed schedule that was on track to hit zero in 2027.

Here's what changed:

• Scheduled before OBBBA: 60% in 2024, 40% in 2025, 20% in 2026, 0% in 2027 and beyond (a return to pre-TCJA rules).
• Current law after OBBBA: 100% bonus depreciation, permanently, for most qualified property acquired after January 19, 2025.

The One Big Beautiful Bill Act reversed the phasedown entirely. It permanently restored 100% bonus depreciation for tangible property with a recovery period of 20 years or less - including used property that meets the acquisition and use requirements. OBBBA also created a new, temporary 100% bonus depreciation category for qualified production property (certain nonresidential real property used in manufacturing).

The year-end acceleration strategy this section originally described - moving 2027-or-later purchases into 2025 or 2026 to capture a shrinking bonus depreciation percentage - is no longer necessary. This applies to machinery, equipment, vehicles, computer hardware, furniture, and certain qualified improvement property. Section 179 remains a separate provision that provides first-year expensing up to its own annual limit, and still pairs well with bonus depreciation for larger purchases.

Standard Deduction and SALT Cap: What Actually Changed

The TCJA roughly doubled the standard deduction, which caused millions of taxpayers who previously itemized to switch to the standard deduction. That larger deduction was scheduled to revert to pre-TCJA levels (roughly half the TCJA amount, adjusted for inflation) after 2025.

The One Big Beautiful Bill Act made the larger standard deduction permanent, and increased it slightly for 2025: $15,750 for single filers, $31,500 for married filing jointly, and $23,625 for heads of household, with inflation adjustments continuing in future years. Most business owners who currently take the standard deduction have no new reason to start itemizing.

The SALT deduction cap did change - just not the way the original sunset described. Instead of the $10,000 cap simply expiring, OBBBA raised it to $40,000 ($20,000 for married filing separately) for tax years 2025 through 2029. The higher cap phases down for taxpayers with modified adjusted gross income above $500,000, but never drops below the original $10,000 floor. Starting in 2030, the cap is currently scheduled to revert to $10,000 unless Congress acts again. For Texas business owners without a state income tax, this mainly affects property tax deductions - and depending on income level, the higher cap may allow more of that property tax to be deducted than before.

Estate and Gift Tax: The Exemption Cliff That Didn't Happen

Update: the exemption cliff described in earlier versions of this article did not occur. The One Big Beautiful Bill Act, signed into law in July 2025, permanently set the federal estate and gift tax exemption at $15 million per person ($30 million for married couples) starting in 2026, indexed for inflation going forward. The scheduled reversion to roughly $7 million per person under the original TCJA sunset was repealed before it took effect.

For most small business owners, this was never an immediate problem, and it's even less of one now. If you completed gifting strategies, family limited partnerships, or irrevocable trusts in 2025 anticipating the old cliff, that planning wasn't wasted - it just wasn't as urgent as it seemed at the time.

What Doesn't Change: Texas State Taxes

The TCJA sunset is a federal law change. Texas state tax obligations are not affected. Specifically:

• Texas franchise tax (margin tax): Still due annually for most Texas businesses, regardless of federal changes. The no-tax-due threshold remains at $2.47 million in gross revenue. Report filing is still required below that threshold.
• Sales tax compliance: Texas sales tax filing obligations, rates, and deadlines are entirely separate from federal tax law and are unchanged.
• Use tax: Still owed on taxable out-of-state purchases where the vendor didn't collect Texas tax.
• No Texas income tax: Texas remains one of nine states with no personal income tax. The rate increases above are entirely federal - there's no state layer to compound them.

The silver lining for Texas-based business owners: the federal increases are painful, but you're absorbing them from a lower combined rate than owners in California, New York, or other high-income-tax states. A top-bracket owner in Texas will still pay considerably less combined tax than an equivalent owner in those states - even after 2027.

What to Do Now: A Post-OBBBA Planning Checklist

Most of the changes this article originally described as taking effect in 2027 didn't happen, so the urgency around them has changed. That doesn't mean there's nothing to do - here's a prioritized list of conversations worth having with your CPA now that the picture is settled:

• Run a multi-year projection under current law. With brackets, the QBI deduction, and bonus depreciation all made permanent, your 2026-and-beyond tax picture is far more predictable than it used to be. Use that certainty to plan cash flow and distributions with confidence rather than hedging against a cliff.
• Revisit income timing on its own merits. There's no longer a rate increase or QBI cliff to plan around in 2027, so decisions about invoice timing, S-Corp distributions, or deferred income recognition can be made for normal business reasons rather than to beat a sunset.
• Review retirement plan contributions. Maximizing contributions to SEP-IRAs, Solo 401(k)s, or defined benefit plans still reduces taxable income and remains one of the most tax-efficient moves available, sunset or no sunset.
• Time equipment purchases to business need, not a depreciation deadline. With 100% bonus depreciation restored on a permanent basis, there's no need to rush a 2027-or-later purchase into 2025 or 2026 just to capture a shrinking deduction.
• Review your entity structure on its own merits. The QBI deduction did not expire, so there's no forced re-evaluation of your S-Corp election or C-Corp conversion - but the expanded phase-in thresholds are a good reason to revisit the analysis with your CPA.
• Estate planning review. If you have a closely held business with significant value, engage your estate attorney and CPA together - the exemption cliff was repealed and the exemption is now a permanent $15 million per person, but succession planning for a growing business is still worth doing on its own merits.
• Keep a tax reserve for what wasn't repealed. The SALT cap phase-down for high earners, self-employment tax, and normal estimated tax obligations are all still real. A reserve remains good practice even without the 2027 cliff.