In 2017, the Tax Cuts and Jobs Act (TCJA) was passed by the Senate and signed into law by President Donald Trump, introducing major tax cuts for individuals and businesses. Many of these tax breaks are set to expire at the end of 2025 unless Congress extends them.
For small business owners, this could mean higher tax bills in 2026. If you don’t prepare now, you could be caught off guard when these changes hit. Let’s talk about what steps you can take to protect your business and savings.
What’s Expiring in 2025?
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Higher Individual Tax Rates
One of the biggest changes under TCJA was lower tax brackets for individuals and families. If these cuts expire, tax rates will increase across the board, meaning more of your income will be taxed at higher rates. This will affect all taxpayers, from low-income earners to high-net-worth individuals.
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Standard Deduction Shrinks
The TCJA nearly doubled the standard deduction, reducing taxable income for most Americans and making itemizing deductions unnecessary for many. If Congress does not extend this provision:
- Single filers could see their deduction drop from $13,850 to $6,350 (based on 2017 levels).
- Married couples filing jointly could see their deduction drop from $27,700 to $12,700.
More of your income will be subject to taxation, increasing your overall tax burden.
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Child Tax Credit Reduction
The child tax credit was nearly doubled under TCJA, increasing from $1,000 to $2,000 per qualifying child. If this provision expires, parents will lose a significant tax break, making it more expensive to raise a family.
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State and Local Tax (SALT) Deduction Cap Could Change
The TCJA placed a $10,000 cap on the State and Local Tax (SALT) deduction, which was previously uncapped. This change significantly impacted taxpayers in high-tax states like California, New York, and New Jersey.
Some lawmakers are pushing to raise or remove the cap, but if no action is taken, the deduction rules could revert to pre-2017 levels, allowing unlimited SALT deductions again.
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Loss of the Qualified Business Income (QBI) Deduction
The QBI deduction is one of the most significant tax breaks for LLCs, S-Corps, and sole proprietors. It allows small business owners to deduct 20% of their business income before taxes.
If this deduction expires, business owners will immediately lose a major tax break, effectively raising their taxable income by 20%. This could mean thousands of dollars more in taxes each year, making it harder for small businesses to remain competitive.
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Bonus Depreciation Phases Out
Under TCJA, businesses could take advantage of 100% bonus depreciation, allowing them to immediately deduct the full cost of major purchases like equipment, machinery, and property upgrades.
However, this benefit has been phasing out by 20% per year since 2022 and will hit 0% in 2026. Without an extension, businesses will have to spread out deductions over multiple years, making large investments less attractive from a tax perspective.
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Estate and Gift Tax Exemptions Shrink
The TCJA doubled the estate and gift tax exemption, allowing individuals to pass down more wealth tax-free—up to $12.92 million per person in 2023.
If this provision expires, the exemption could drop to around $5.5 million, meaning that more estates will be subject to the 40% federal estate tax. This change would impact families that plan to pass down businesses, properties, and other high-value assets.
What Will Congress Do?
The biggest question right now is whether Congress will extend, modify, or allow these tax cuts to expire.
Some tax cuts, like the corporate tax rate reduction to 21%, are permanent and won’t change unless new laws are passed. However, many individual and small business tax breaks will expire at the end of 2025 unless Congress acts. Provisions like the QBI deduction and SALT cap adjustments have bipartisan support, making them more likely to be extended.
Congress has until December 2025 to pass legislation before these tax breaks expire. Because of ongoing political uncertainty, don’t assume that any of these provisions will be renewed—planning ahead is essential.
What Should You Do Now?
Even though we don’t know exactly what will happen, you should start preparing now. Here’s how:
Stay Informed
Tax laws change rapidly, and waiting until the last minute could cost you thousands. Follow tax updates to stay ahead of upcoming changes.
Work with a Tax Strategist
A proactive tax plan is more important than ever. Working with a tax professional can help you:
- Optimize your business structure (S-Corp vs. C-Corp)
- Maximize available deductions before they disappear
- Plan ahead for potential higher tax rates in 2026
Take Advantage of Deductions Before 2025 Ends
If tax breaks like bonus depreciation and QBI disappear, use them while they are still available. Some strategies to consider:
- Make large business purchases before 100% bonus depreciation is gone.
- Leverage the QBI deduction while it’s still in place.
- Review estate planning strategies to avoid higher estate taxes in 2026.
