At the end of 2025, business owners could face a significant turning point in tax policy. The Tax Cuts and Jobs Act (TCJA) of 2017, which dramatically reformed the U.S. tax code, included numerous provisions set to expire on Dec. 31, 2025. With the return of the Trump administration and Republican control of Congress, there’s […]
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At the end of 2025, business owners could face a significant turning point in tax policy.
The Tax Cuts and Jobs Act (TCJA) of 2017, which dramatically reformed the U.S. tax code, included numerous provisions set to expire on Dec. 31, 2025.
With the return of the Trump administration and Republican control of Congress, there’s growing momentum to extend these provisions — including continuing the popular Qualified Business Income Deduction (Section 199A).
What would these extensions mean for your business taxes? Let’s explore the potential impact.
Qualified Business Income Deduction
One of the most impactful provisions of the TCJA for small and medium-sized businesses has been the Section 199A deduction, which allows eligible pass-through business owners to deduct up to 20% of their qualified business income.
According to the American Farm Bureau Federation, more than 850,000 farms and ranches nationwide have enjoyed lower tax bills because of this provision, and its expiration could cause “the single largest tax increase for farm and ranch families in 2026.”
The good news is that “there appears to be bipartisan support in Congress for retaining the deduction as part of a broader TCJA extension package,” according to analysis from the Penn Wharton Budget Model.
This suggests that businesses structured as sole proprietorships, partnerships and S corporations may continue to benefit from this valuable tax break.
For business owners, the potential continuation of the QBI deduction:
- Preserves tax parity: The deduction helps level the playing field between pass-through entities and C corporations, which permanently benefited from the 21% corporate rate under TCJA.
- Affects business structure decisions: The potential extension of this deduction may influence whether maintaining pass-through status or converting to a C corporation is more advantageous for your business.
- Impacts retirement and succession planning: For business owners approaching retirement, the continuation of this deduction could significantly affect the after-tax income available during transition years.
Business interest deductibility
Another important TCJA provision facing expiration involves business interest deductibility.
Before TCJA, businesses could generally deduct interest expenses in the year paid or accrued, with some limitations. If Congress fails to extend the current rules, the business interest deduction will revert to pre-TCJA standards.
For businesses with significant debt financing, or those considering taking on new debt for expansion or acquisitions, this could have substantial implications for their cost of capital and overall tax strategy.
Economic impact of TCJA extensions
The potential economic effects of extending TCJA provisions extend beyond individual businesses to the broader economy.
The Tax Foundation estimates that permanently extending the expiring individual, estate and business tax provisions would boost long-run economic output by 1.1%, wages by 0.5%, and create the equivalent of 847,000 full-time jobs.
However, these extensions would come with fiscal implications.
According to the Tax Foundation, extending the expiring 2017 TCJA provisions would decrease federal tax revenue by approximately $4.5 trillion from 2025 through 2034.
The political dynamics around TCJA extensions are complex.
Strategic business planning in an uncertain tax environment
Given the uncertainty around which TCJA provisions will be extended and in what form, business owners should consider several strategic planning approaches:
- Scenario planning: Model different tax scenarios and understand their impact on your business’s financial position.
- Flexible investment strategies: Consider how potential tax changes might affect the return on investments in equipment, technology or expansion.
- Business structure review: Evaluate whether your current business structure remains optimal under different tax scenarios.
- Succession and exit planning: For owners considering retirement or sale in the next few years, understand how changing tax provisions might affect your transition timeline and valuation.
- Cash flow management: Maintain sufficient liquidity to adapt to changing tax environments and potential temporary increases in tax obligations.
James Zahansky is a principal, managing partner and chief strategist at WHZ Strategic Wealth Advisors, which has offices in Pomfret and Tolland. WHZ Strategic Wealth Advisors does not provide tax or legal advice, and nothing in this column should be construed as specific tax or legal advice.
