Business owners should be aware of the potential disruption that may arise from the end of a tax break, according to an expert.

• The Qualified Business Income Deduction (QBI), enacted through the Tax Cuts and Jobs Act of 2017, allows for a deduction of up to 20% of eligible revenue, but is subject to certain limitations.
• The tax break, which affects millions of filers, is set to expire after 2025 unless Congress makes changes.
• According to Howard Gleckman, senior fellow at the Urban-Brookings Tax Policy Center, it is crucial to many privately held businesses.

Congress must act to extend trillions of dollars in tax breaks that are set to expire after 2025, including a significant deduction for self-employed filers and business owners.

The Tax Cuts and Jobs Act of 2017 introduced the qualified business income deduction, or QBI, which allows businesses to deduct up to 20% of eligible revenue, subject to certain restrictions.

Pass-through businesses, including sole proprietors, partnerships, S-corporations, some trusts, and estates, are subject to temporary deductions.

If the tax break expires, it will be very disruptive for many business owners, according to Dan Ryan, a tax partner at law firm Sullivan and Worcester.

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The Tax Cuts and Jobs Act included a temporary QBI deduction to align tax rates for pass-through businesses with those of corporations.

The QBI deduction will no longer be available after 2025, but the legislation permanently reduced corporate taxes by lowering the top federal rate from 35% to 21%.

The number of QBI claims increased from 18.7 million in 2018 to approximately 25.9 million in tax year 2021, as per the IRS.

According to Howard Gleckman, senior fellow at the Urban-Brookings Tax Policy Center, it is crucial to many privately held businesses.

An extension would be 'fairly pricey'

According to Garrett Watson, senior policy analyst and modeling manager at the Tax Foundation, there have been "very strong feelings" about whether to extend the QBI deduction as the 2025 tax cliff approaches.

Some policy experts and lawmakers argue that the deduction is expensive and complicated, while business advocates maintain that it encourages growth and should be made permanent.

The estimated 10-year cost of the QBI deduction, which Watson said is "fairly pricey," could pose a challenge amid debate over the federal budget deficit.

While some argue that the QBI deduction mainly benefits the wealthy due to their higher likelihood of having pass-through income, millions of middle-income taxpayers also utilize the deduction, as per IRS data.

Watson stated that some Democrats desire the tax break to expire, which conflicts with the president's tax promise.

In June, Lael Brainard, the White House National Economic Advisor, confirmed President Biden's pledge to maintain Trump's tax breaks for individuals earning below $400,000.