On December 31, 2025, the Qualified Business Income (QBI) deduction, along with other TCJA provisions, will expire, leaving many people with a higher tax burden—that is, unless it’s extended. Confused? TaxGlobal is here to break it down for you.
In this article, we’ll cover:
What the TCJA is and why it’s set to expire
Which TCJA provisions are set to expire
What the Qualified Business Income (QBI) deduction is
How the end of the QBI deduction may affect your business
Why the QBI deduction might be extended, and what will happen if it is
What is the TCJA?
The Tax Cuts and Jobs Act (TCJA) is a 2017 tax code that lowered the corporate tax rate to 21%, limited state and local tax deductions (SALT) to $10,000, increased standard deductions, and expanded eligibility for the child tax credit.
Congress passed TCJA in 2017 to try and stimulate the economy and give U.S. businesses a leg up. The goal was to give people more tax breaks and provide some relief from tax measures that cut into business’ profits.
Why is the TCJA set to expire?
Much of the TCJA was only meant to be temporary, meaning an expiration date was attached to some of the new provisions. This was done in an attempt to minimize costs and avoid increasing the federal deficit or changing Social Security.
As a result, certain TCJA provisions are scheduled to expire at the end of 2025 (specifically, December 31, 2025).
Which TCJA provisions are set to expire?
TCJA provisions that are set to expire in 2025 include:
Qualified business income (QBI) deduction
Business expense deductions (bonus depreciation, research and development, and business interest deduction)
International tax provisions
Individual tax rates
Standard deductions
Mortgage interest and charitable donation deductions
Estate and gift taxes
Child tax credit
The TCJA includes both corporate and individual tax provisions, so if it does expire, it could have consequences not only for business taxes, but for individual tax returns as well.
What is the Qualified Business Income (QBI) deduction?
The Qualified Business Income (QBI) deduction, also known as the pass-through income deduction or 199A deduction, allows pass-through businesses to deduct as much as 20% of their qualified business income from their taxes owed.
Pass-through businesses include sole proprietorships, partnerships, and S-corporations. Many of these businesses are in the manufacturing or real estate industries, and have been lobbying Congress to extend the QBI deduction.
Will the Qualified Business Income (QBI) deduction expire?
If Congress doesn’t intervene, the Qualified Business Income deduction will expire at the end of 2025. However, Congress might act to extend it.
When will the Qualified Business Income (QBI) deduction expire?
The Qualified Business Income deduction will expire at midnight on December 31, 2025, assuming it isn’t extended.
How might the QBI deduction expiring affect my business?
Currently, if you own a pass-through business, you can deduct as much as 20% of your qualified business income. If the QBI deduction expires, however, you’ll simply be taxed at ordinary individual income tax rates, without being able to deduct that 20%—leaving you with a higher tax burden. Luckily, the QBI deduction might be extended.
Why might the QBI deduction be extended?
Republicans are considering extending some of the TCJA provisions, including the QBI deduction, as not extending them could result in heavier tax burdens for both individuals and businesses.
What else might be extended?
While it’s not certain just what will happen, here are some of the things President-elect Donald Trump has proposed doing:
Extend the 20% QBI deduction
Extend the 100% bonus depreciation—which allows businesses to write off 100% of eligible property costs immediately
Extend the individual income tax rates specified by the TCJA
Lower the corporate income tax rate to 20% (currently 21%), or 15% for businesses who perform their manufacturing in the U.S.
Extend the lifetime gift and estate tax exemption
Get rid of the $10,000 limit for SALT deductions
How likely is Congress to extend the TCJA?
At this point, it’s hard to say. Whether or not Trump is able to achieve all of his proposed tax cuts, including his extension of the TCJA, will depend on whether or not he can get Congress to pass them. But with a Republican-dominated Senate and House, his chances at least look decent.
If you need help figuring out how the expiration of the TCJA may affect your business or individual income taxes, TaxGlobal can help. Check out our range of AI-powered tax aids, or connect with a professional tax consultant through our matchmaking portal.