Looking Ahead: What the 2026 Tax Landscape Means for Tustin Business Valuations
As 2025 draws to a close, business owners in Tustin and throughout Orange County are shifting their focus from year-end wrap-ups to strategic planning for 2026. While much of the news over the past few months has been dominated by the passage of the One Big Beautiful Bill Act (OBBBA), the true impact of this legislation will be felt as its provisions fully integrate into the market in 2026.
Rather than looking back at what was missed, smart entrepreneurs are looking forward at how these new rules—combined with California’s own regulatory shifts—will redefine the value of their businesses. Here is a guide to the key changes arriving on January 1st and how they shape your 2026 exit strategy.
A Permanent $15 Million Estate Tax Floor
One of the most significant shifts for 2026 is the removal of the "sunset" uncertainty. The federal estate and gift tax exemption officially moves to $15 million per person ($30 million for married couples) on January 1, 2026.
For the Tustin business owner, this provides a stable foundation for succession planning. Because this limit is now permanent and indexed for inflation, you have more freedom to grow your business’s value without the immediate fear of a "tax cliff" devouring your legacy. In 2026, the focus shifts from "emergency gifting" to "strategic wealth transfer," enabling more sophisticated deal structures during a sale.
100% Bonus Depreciation: A Massive Win for 2026 Buyers
The OBBBA’s restoration of 100% Bonus Depreciation is a game-changer for the 2026 M&A market. This allows buyers to deduct the full purchase price of eligible equipment and tangible assets in year one.
Why this is good news for you in 2026:
- Higher Demand: Buyers have a powerful tax incentive to acquire asset-heavy businesses (like manufacturing, HVAC, or medical practices).
- Stronger Offers: When a buyer’s post-acquisition tax burden is lower, their cash flow is higher—often translating into more competitive offers and better terms for the seller.
Navigating California’s New Sourcing Rules
While federal laws have become more favorable, California business owners must adapt to the Franchise Tax Board’s (FTB) updated Regulation Section 25136-2, effective January 1, 2026.
California is moving toward a more rigorous "Market-Based Sourcing" model for services and intangible assets. For businesses that serve clients outside of the state, the 2026 rules will focus heavily on where the benefit of the service is received. This means your 2026 bookkeeping must be more precise than ever to ensure your business valuation reflects an accurate, tax-optimized bottom line.
Permanence for the 20% QBI Deduction
The OBBBA officially made the Section 199A (QBI) Deduction permanent. For owners of S-Corps and LLCs in Orange County, this ensures that 20% of your qualified business income remains deductible. This permanence allows for more accurate long-term financial modeling—a key component when a potential buyer is performing due diligence on your company’s future earning potential.
2026 Readiness Checklist
Instead of rushing, use Q1 of 2026 to "polish the pearl" for a future sale:
- Update Your Valuation: See how the new 100% depreciation rules affect your industry's current multiples.
- Clean Up Financials: Align your records with California’s new market-based sourcing requirements.
- Review Your Entity: With the OBBBA changes, consult your CPA to ensure your current structure (LLC vs. C-Corp) is still the most tax-efficient for an exit.
Sources & Technical References
- Federal Law: One Big Beautiful Bill Act (OBBBA), P.L. 119-21 (2025).
- IRS Guidance: Revenue Procedure 2025-103 regarding 2026 inflation adjustments and estate exemptions.
- California Regulation: FTB Regulation Section 25136-2, Market-Based Sourcing updates (Effective 1/1/2026).
- Tax Code: Internal Revenue Code Section 168(k) regarding 100% Bonus Depreciation.
First Choice Business Brokers Tustin: Your Strategic Partner for Value Enhancement
Selling a business isn't just about finding a buyer; it’s about engineering value before the first offer ever arrives. At FCBB Tustin, we don’t just list businesses—we act as strategic partners to ensure your company is positioned to command a premium in the 2026 market.
Our partnership goes beyond the transaction. We work with you to:
- Identify "Hidden" Assets: Many owners overlook the value of their proprietary processes, loyal customer databases, or exclusive contracts. We highlight these "intangibles" that buyers in the OBBBA era are specifically hunting for.
- Optimize Financial Presentation: We help you "recast" your earnings, identifying one-time expenses and owner benefits to show a potential buyer the true profit potential of your business.
- Bridge the Tax Gap: By understanding the 2026 changes to 100% Bonus Depreciation and California Sourcing, we help structure deals that minimize your tax bite while maximizing the buyer’s incentive to pay a higher price.
- Navigate Local Market Realities: Tustin isn't just a zip code; it’s a specific economic engine. We leverage local data to ensure your valuation isn't just an estimate, but a reflection of what Orange County buyers are actually paying in the current market.
Ready to Lead in 2026?
The most successful exits aren't the result of luck—they are the result of a partnership. Whether you are ready to transition this spring or are looking to spend 2026 "polishing the pearl" for a future sale, the time to establish your baseline is now.
Contact First Choice Business Brokers Tustin today for a confidential Strategy Session. Let’s turn the 2026 tax shifts into your competitive advantage.
Request Your Confidential 2026 Value Analysis
- One Big Beautiful Bill Act (OBBBA) Congress.gov
- [Regulation Section 25136-2]: California Franchise Tax Board (FTB) official site.
- 100% Bonus Depreciation: IRS.gov guide on depreciation.
Frequently Asked Questions
Does the 100% Bonus Depreciation apply to all business sales?
It primarily applies to asset purchases. Under the OBBBA, buyers can immediately deduct the cost of tangible personal property (like machinery, equipment, and furniture) acquired in a sale. This makes asset-heavy businesses in Orange County highly attractive to investors in 2026.
How does the new $15M Estate Tax exemption help me if I’m not selling this year?
The permanence of the $15 million exemption ($30 million for couples) provides long-term stability for your estate planning. It allows you to focus on growing your business’s value without the fear that a sudden "tax cliff" will force an unplanned sale or liquidate your family’s inheritance to pay federal taxes.
What is "Market-Based Sourcing" and why does it matter for my California business?
Starting in 2026, California will focus on where your customers receive the benefit of your service, rather than where you perform the work. If you are a Tustin-based company with out-of-state clients, this could change your state tax liability and, consequently, your net cash flow—a key figure used to determine your business's market value.
Is the 20% QBI deduction really permanent now?
Yes. The One Big Beautiful Bill Act (OBBBA) removed the expiration date for the Section 199A deduction. This is a significant win for LLCs and S-Corps in Orange County, as it keeps your effective tax rate lower and makes your business more profitable on paper for potential buyers.
Disclaimer: First Choice Business Brokers Tustin provides business brokerage services and is not a CPA firm or law office. This content is for informational purposes only and does not constitute tax, legal, or financial advice. We strongly recommend consulting with a qualified professional to discuss how the 2026 tax changes apply to your specific situation.
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