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Halfway Through 2026: How is Small Business Faring
Six months into 2026, America’s roughly 34 million small businesses and self-employed workers are navigating a landscape of genuine policy wins undercut by real economic strain.
The Optimism Rollercoaster
The NFIB Small Business Optimism Index tracked a volatile path through the first half of the year — dipping to 95.3 in May, its lowest reading since the post-election surge, before climbing back to 97.4 in June and then jumping to 99.8 in July, the highest level since August 2025. Hiring plans and capital expenditure intentions drove the July rebound, even as the Uncertainty Index stayed well above its historical average, with owners citing labor quality and availability as their top concern.
Legislative Wins: The One Big Beautiful Bill Act
The single biggest tailwind for small business and the self-employed has been the One Big Beautiful Bill Act (OBBBA), signed July 2025 but taking full effect this year. It permanently extended the Section 199A Qualified Business Income deduction — previously set to expire after 2025 — while widening the income phase-in range and adding a new $400 minimum deduction for those with at least $1,000 in qualifying income. The law also restored 100% first-year bonus depreciation and reversed a looming compliance headache: rather than letting the 1099-K threshold fall to $600, OBBBA locked it at $20,000 and 200 transactions, and raised the 1099-NEC/MISC threshold from $600 to $2,000 starting this tax year — sparing millions of freelancers and gig workers from a flood of new tax forms.
Regulatory relief followed. In February, the Department of Labor proposed rescinding the Biden-era 2024 independent contractor rule in favor of a framework that gives more weight to worker control and profit-and-loss opportunity — a change the Small Business Administration’s Office of Advocacy estimates could save small businesses over $2 billion over a decade. The comment period drew more than 16,500 submissions before closing in April, and a final rule is still pending.
The Persistent Headwind: Tariffs
Tariffs remain the dominant drag on the small-business outlook. A Federal Reserve Bank of New York analysis of the Small Business Credit Survey found small firms in goods and retail sectors were disproportionately hit by 2025 tariff costs and entered 2026 more pessimistic about hiring and revenue as a result. Separate research from the Center for American Progress estimated small-business importers paid roughly $306,000 more in tariffs over the year than the prior period — even after the Supreme Court ruled in February that the administration’s use of emergency powers to impose the tariffs was unlawful. A March Small Business Majority poll found 53% of affected businesses facing higher supplier costs, with many delaying expansion or hiring as a result.
The Bottom Line
Small business owners in 2026 are getting real structural help on the tax and regulatory side — permanence on QBI, lighter 1099 paperwork, a friendlier contractor classification standard in the pipeline — while absorbing real cost pressure from trade policy. Optimism is climbing, but it remains a fragile, hard-won recovery rather than a boom.
Meet The Author:
As Vice President for Government Relations and Public Affairs, I work to explain how actions on Capitol Hill can impact the self-employed. I love D.C. and have made my home in Capitol Hill, where I live with my husband and black Labrador, Coltrane. We love playing volleyball and softball on the National Mall.
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