The 2027 Tax Numbers Are Out: What Changes for 1099s, Equipment and the QBI Deduction

Every fall the IRS publishes a long list of numbers that quietly nudge upward with inflation. Most coverage goes straight to the tax brackets. If you run a small business or work for yourself, the more useful lines are buried further down: the 1099 filing threshold, Section 179 expensing and the income limits on the qualified business income deduction all move for 2027 ^{[1, 2]}.

What the IRS actually released

On November 5, the IRS announced inflation adjustments for almost 70 tax provisions for tax year 2027, with the details in Revenue Procedure 2026-35. A revenue procedure is the IRS’s official rulebook entry for how a provision works in practice. These 2027 amounts generally apply to returns filed in 2028 ^[1].

Here’s the short version for business owners:

• 1099 reporting threshold: For payments made in calendar year 2027, the reporting threshold under Section 6041(a) is $2,100 ^[2]. That is the dollar line above which a business generally has to file an information return, such as a 1099, for payments it makes to another person in the course of its business ^[4].
• Section 179 expensing: You can elect to expense up to $2,640,000 of Section 179 property in 2027, up from $2,560,000 for 2026. Section 179 is a fancy way of saying you can deduct the whole cost of qualifying equipment in the year you buy it instead of spreading it out ^{[1, 2, 3]}.
• The phase-out point: That cap shrinks dollar for dollar once the cost of Section 179 property placed in service during 2027 passes $4,230,000, up from $4,090,000 ^{[2, 3]}.
• SUVs: The Section 179 limit for sport utility vehicles is $33,100, up from $32,000 ^{[1, 6]}.
• QBI thresholds: The income threshold for the Section 199A deduction rises to $208,300 for most filers and $416,600 for married couples filing jointly, from $201,750 and $403,500 ^{[2, 3]}.

A few more items small employers may care about: the cash-method gross receipts test (the rule that decides whether a corporation or partnership can keep simple cash-basis books) rises to $33,000,000 in average annual gross receipts, from $32,000,000 ^{[2, 3]}. The excess business loss limit, which caps how much business loss can offset other income, goes to $264,000 ($528,000 joint), from $256,000 ($512,000) ^{[2, 3]}. The maximum employer-provided childcare credit rises to $515,943.67, or $619,132.40 for an eligible small business ^{[1, 6]}.

Where the 1099 number came from

Before this year, the threshold in the statute was $600. The One, Big, Beautiful Bill Act raised it to $2,000 for payments made after December 31, 2025 ^{[3, 4]}. The same law told the IRS to index it: for calendar years after 2026, the amount rises with inflation, rounded to the nearest $100 ^[4]. That’s how 2027 lands at $2,100 ^[2].

The law also tied two related rules to that same number: reporting on payments for services, and backup withholding on payments reportable under Section 6041 ^[3]. So one threshold now drives all three.

Is this you? Two hypotheticals

Hypothetical one: a two-chair salon. Say a hypothetical salon pays a freelance web designer $2,050 over the course of 2027. That total sits under the $2,100 threshold for 2027 payments, so under Section 6041(a) the salon would generally not need to file a 1099 for that designer ^{[2, 4]}. If the same salon had paid $2,050 in 2026, it would be over that year’s $2,000 line, and the form would generally be required ^{[3, 4]}. Same work, same dollars, different answer depending on the year. Congress, in its wisdom, has given you a threshold that you now need to look up every January.

Hypothetical two: a food truck owner. Say a hypothetical single food truck owner expects 2027 taxable income of $240,000. That is above the $208,300 threshold but below the $283,300 top of the phase-in range ^[2]. Below the threshold, the extra limit tied to W-2 wages and business property does not apply at all. Inside the range, it phases in based on how far income runs over the threshold ^[5]. Here, $31,700 over the threshold, divided by the $75,000 range, puts this owner a bit over 40 percent of the way into that limit (my arithmetic from the statute’s formula) ^{[2, 5]}.

If the business is a “specified service trade or business,” a category the statute defines by pointing to a list of service fields elsewhere in the tax code, the stakes are higher. Inside that range, only a shrinking percentage of its income counts toward the deduction ^[5]. And for an owner with at least $1,030 of qualified business income from an active business, the 2027 minimum deduction is $415 ^[2].

What to do about it

Nothing here requires a filing today. But it does change a few year-end habits, and each of them is small:

1. Close 2026 using $2,000 as the 1099 line ^{[3, 4]}.
2. Change your tracking rule to $2,100 for anything you pay starting January 1 ^[2].
3. If your income is near the QBI range, bring the 2027 numbers to your next planning conversation. Ask specifically whether your business counts as a specified service business and how your W-2 wages affect the limit ^{[2, 5]}.

For most small businesses, the Section 179 cap is not a binding constraint. It’s still worth knowing the number when you price out a big equipment year ^[2].

What I’m keeping an eye on

The final Revenue Procedure. The version of Rev. Proc. 2026-35 posted on November 5 still contains a bracketed “[Release Date, 2026]” placeholder in its opening section ^[2]. I’ll watch for the version published in the Internal Revenue Bulletin and flag any number that changes.

1099 form instructions before January 1, 2027. The new threshold applies to payments made in 2027 ^[2]. I’ll be watching for the IRS to update its 1099-NEC and 1099-MISC instructions so the $2,100 figure shows up where your software vendor and bookkeeper will actually look.

— Sally