Part Two — “Strategic Flexibility: Tax Planning for the Self-Employed and Working Retirees”
At First National Bank and Trust Company, we’re committed to helping you navigate change with confidence. Our latest series, “Preparing for 2026 & Beyond: Tax Code Updates,” is designed to turn complex tax changes into actionable opportunities. With fiduciary-focused insights, we aim to help you do more for your financial future.
This installment explores how the One Big Beautiful Bill Act (OBBBA) introduces expanded deductions and reduced self-employment taxes, empowering entrepreneurs, small business owners, and retirees with part-time income to align earnings with retirement benefits.
Why This Matters
Whether you’re running a business full-time or consulting during retirement, the OBBBA offers new ways to lower taxes, improve cash flow, and strengthen long-term security.
Bigger Deductions for Business Expenses
- Bonus Depreciation: 100% first-year bonus depreciation returns for qualified assets placed in service after Jan. 19, 2025. Qualified production property (QPP) also qualifies for full depreciation on certain U.S.-based nonresidential real estate.
- Section 179 Expensing: Deduction limit doubles to $2.5 million (up from $1.25 million in 2024), with a phase-out threshold at $4 million. Both adjust for inflation starting in 2026.
- Qualified Business Income (QBI): Now permanent, with higher phaseout limits—$70,000 (single) and $150,000 (married filing jointly). Plus, a minimum $400 deduction applies for businesses earning at least $1,000 in qualified income beginning in 2026.
Flexibility for Small Business Stock Gains
For QSBS issued after July 4, 2025, a tiered system allows earlier tax-free gains:
- 50% exclusion after 3 years
- 75% exclusion after 4 years
- 100% exclusion after 5 years
New Deduction for Tips
Qualified tips now earn a $25,000 deduction (through 2028), in addition to the standard deduction. The deduction phases out gradually for incomes above $150,000 (single) or $300,000 (married filing jointly).
Overtime Deduction
If your spouse works overtime before reaching full retirement age, you may claim:
- $12,500 (single) or $25,000 (married filing jointly)
This deduction also phases out at higher income levels and is reported on the W-2 for clarity.
Why Planning Matters
Extra income in retirement can impact tax brackets and benefits. A proactive strategy can:
- Optimize business expense deductions for maximum after-tax savings
- Prevent earned income from reducing other benefits
- Align investments and retirement plans for long-term impact
At First National Bank and Trust Company, we use a holistic approach, covering investments, retirement, estate and tax planning to help you make the most of these changes. Every situation is unique, and the real advantage comes from tailoring these rules to your goals.
Ready to optimize your plan? Schedule a complimentary consultation today to ensure your retirement strategy aligns with the new tax landscape.