Most Business Owners Don’t Know This Tax Rule Changed

In 2026, a major tax change quietly took effect that could significantly reduce the tax liability for many small business owners. The State and Local Tax (SALT) deduction limit, which was capped at $10,000 since 2017, has now increased to $40,000. For founders, operators, and partners in high-tax states like California, New York, and New Jersey, this opens up a meaningful planning opportunity, if they know about it.

But most don’t.

That’s not surprising, considering 34% of business owners admit to making mistakes when filing business taxes. The most common issues: underpaying, overpaying, or missing key deductions altogether. The result is either leaving money on the table or triggering unwanted attention from the IRS. Neither outcome is good.

Why the SALT Deduction Change Matters

The SALT deduction increase doesn’t apply automatically. Business owners need to itemize their deductions, structure compensation properly, and in many cases, coordinate with passthrough entity (PTE) elections to make it work.

This is exactly the type of planning that CFO Plans supports. Tax compliance is only one part of the conversation. Tax optimization is where the real impact is.

The Risk of Relying on Standard Tax Prep

Many business owners work with tax preparers who focus only on filing returns, not planning ahead. That’s how critical changes like the SALT deduction update get missed. Without forward-looking analysis and proactive structuring, tax opportunities slip by unnoticed.

CFO Plans works differently. We integrate tax planning directly into your monthly workflows, so you're not scrambling in April to fix problems that started the previous summer.

Where Tax Mistakes Usually Happen

In our experience, the most common tax planning gaps show up in these areas:

• Entity structure
  Many businesses operate under structures that made sense at one point but no longer match current income levels, ownership models, or growth plans.

• Timing of expenses and revenue
  Cash basis vs. accrual basis decisions, capital expenditures, and income timing all influence tax outcomes.

• Owner compensation
  Improper distributions, overdrawn accounts, or unoptimized payroll strategies create avoidable tax inefficiencies.

• State-level compliance
  With each state applying different rules on nexus, pass-through entity tax (PTET), and SALT conformity, it’s easy to miss something important—especially when operating across multiple locations.

Planning Now Prevents Scrambling Later

Tax season isn’t the time to think about tax strategy. It’s the time to execute on the plan you’ve already built.

With the SALT limit change and other tax code adjustments happening now, Q2 and Q3 are the best time to evaluate your current position, update your planning model, and make the necessary changes before year-end.

Final Note

The biggest tax mistakes often aren’t about misfiling—they’re about missed planning. CFO Plans helps business owners stay ahead of rule changes and avoid common traps by integrating strategic tax planning into the broader financial picture.

If you’re unsure whether you’re positioned to take advantage of the latest changes, now is the time to get clarity.