Big Tax Breaks for Small Businesses May Disappear

Are You Ready?

If you’re running an LLC, S-Corp, or freelance business, you’ve likely benefited from the 20% pass-through deduction — one of the biggest tax breaks for small businesses in decades. But here’s the catch: it’s scheduled to disappear after December 31, 2025.

Unless Congress acts, your 2026 tax bill could be thousands of dollars higher.

Let’s break down what’s happening, and what you can do now to get ahead of it.

What Is the Pass-Through Deduction?

Also known as the Section 199A deduction, this tax break was created under the 2017 Tax Cuts and Jobs Act (TCJA). It allows owners of pass-through entities — think sole proprietors, LLCs, S-Corps, and partnerships — to deduct up to 20% of their qualified business income on their personal tax return.

That means if you had $100,000 in qualified income, you could potentially knock $20,000 off your taxable income. That’s real money.

This deduction was designed to give small businesses a similar break to the big corporate tax cut (from 35% to 21%) that corporations received under TCJA.

What’s Happening in 2025?

Here’s the kicker: the pass-through deduction expires at the end of 2025.

That’s not a maybe — it’s written into the law. Without new legislation, it goes away starting with your 2026 tax return.

Let’s say you’re an LLC owner making $120,000 in net income. Right now, you might be deducting $24,000 and only paying tax on $96,000. If 199A goes away, you’ll be taxed on the full $120,000 — which could cost you $5,000–$6,000 more in taxes, depending on your bracket.

This affects millions of small business owners nationwide. And most don’t even know it’s coming.

Will Congress Extend It?

That’s the big question. There’s growing political momentum to extend or make permanent the deduction, especially from Republicans who say it’s vital for small business competitiveness.

There’s even some bipartisan support, particularly from lawmakers in states where small businesses make up a large part of the economy.

But here’s the reality: Congress is facing a tight budget, and this deduction is expensive — to the tune of hundreds of billions over 10 years. With debates over deficits and competing priorities like child tax credits and corporate tax cuts, nothing is guaranteed.

What You Can Do Right Now

Don’t wait until December 2025 to figure this out. Here’s what to do today:

• Talk to our tax advisor. Ask them how the loss of 199A would impact your personal tax return.
• Let us run a projection for 2026. You might be surprised at the tax increase coming your way.
• Consider your business structure. If you’re a sole proprietor, would forming an S-Corp help or hurt? What about revisiting your compensation split?
• Accelerate income or investments if needed. Depending on your situation, you may want to pull income into 2025 or rethink timing on big expenses.

Final Thoughts

The loss of the pass-through deduction isn’t just a tax code technicality — it’s a real-world financial hit to your bottom line. For some business owners, it could mean delaying a hire, scaling back growth plans, or changing strategy altogether.

The good news? You’ve got time to prepare, and we are here to help.

Just don’t ignore it. Because come January 1, 2026, the IRS isn’t going to send you a reminder that your deduction disappeared — but your tax bill will.