The 20% Small Business Deduction is set to expire after 2025
The Tax Cuts and Jobs Act was signed into law five years ago, with one of the law’s most important provisions set to expire after 2025: the Small Business Deduction, a federal tax deduction that allows eligible small businesses to deduct up to 20% of their business income from their taxes. The Washington Times published a new op-ed by NFIB Federal Government Relations Director Courtney Titus Brooks. In the op-ed, she explained why Congress should give Main Street tax certainty by taking action to make the Small Business Deduction permanent.
“The Small Business Deduction is more than halfway to expiration, and there’s no urgency to extend it,” Brooks wrote. “The expiration would result in economic consequences such as lower optimism and less investment, which is why Congress should make the deduction permanent in the 118th Congress.”
The Small Business Deduction (Section 199A) has allowed small businesses organized as pass-through entities like Sole Proprietorships, S-Corporations, Partnerships, or LLCs to deduct up to 20% of their qualified business income. Small businesses across the nation have benefited from this tax cut, using the funds from their deduction to invest in employees, benefits, and their businesses.
“This historic tax relief gives small businesses a better chance to compete with big businesses, which received a permanent rate decrease in the same law,” Brooks explained. “The corporate tax cut is permanent, while the small business relief is temporary. The Small Business Deduction expires after 2025, which is right around the corner for a Main Street small business owner who’s trying to plan for the long haul.”
For small business owners unsure if they qualify for this deduction, NFIB has a simple flowchart to help determine if your small business is benefiting from the deduction.
“Small businesses have been calling for this certainty since the Tax Cuts and Jobs Act was signed into law,” Brooks continued. “As the fifth anniversary of the enactment passes, Congress should realize it’s not too early to make the Small Business Deduction a permanent part of the tax code, and it’s not too late to give Main Street the same permanent relief that Wall Street received.”
As Congress continues to consider changes to tax policy, it is important to show lawmakers how the Small Business Deduction makes a big difference for small businesses, their communities, and their employees. Please take a few minutes to tell us what you were able to do with your Small Business Deduction in 2022 and what you plan to do in 2023.