Business Deductions Ending 2026: What Small Business Owners Must Know About 2025 Tax Year Changes
Are popular business deductions ending in 2026? Headlines and internet rumors have caused plenty of confusion for small business owners heading into 2025. Fortunately, the legislation passed in 2025 made permanent many tax-saving provisions from the Tax Cuts and Jobs Act (TCJA), with some notable exceptions. This guide sets the record straight and shows you how to optimize your taxes before any sunsetting rules take effect.
Key Takeaways
- Most TCJA business provisions have been made permanent by the 2025 legislation known as the One Big Beautiful Bill Act (OBBBA).
- Section 179 expensing limit is now $2.5 million for 2025 and beyond.
- 100% bonus depreciation is available for eligible property placed in service after Jan. 19, 2025.
- QBI (Qualified Business Income) 20% deduction is extended through 2028 for most business owners.
- Certain temporary deductions (senior bonus, overtime pay, tips) end after the 2028 tax year.
What Happened to TCJA Business Deductions?
When the TCJA passed in 2017, many key business provisions were set to expire on December 31, 2025. In July 2025, Congress passed OBBBA, which made nearly all major business deductions permanent. As a result, most of the deductions you rely on continue for 2026 and beyond, removing a lot of uncertainty in business tax planning.
What is “Permanent”?
Permanent means there is no scheduled sunset date, but Congress can always make future changes. For strategic planning, you can confidently forecast using these deductions for 2025 and the next several years.
Section 179 Deduction Limit for 2025
The maximum Section 179 expense deduction for 2025 is $2.5 million. The phase-out threshold starts at $4 million in property placed in service.
Vehicle and Property Limits
- SUVs: $31,300 cap per vehicle
- Passenger autos: $20,200 (subject to business use %)
- Eligible real property: some leasehold improvements qualify
| Property Type | Limit (2025) | Notes |
|---|---|---|
| General Equipment | $2,500,000 | Phase-out begins at $4M |
| SUVs | $31,300 | Per vehicle limit |
| Passenger Autos | $20,200 | Combined with depreciation |
| Qualified Leasehold | $2,500,000 | Special real estate rules |
100% Bonus Depreciation Returns
Bonus depreciation is back at 100% for property placed in service after January 19, 2025. This was originally set to decrease to 40% for 2025 but is fully restored through 2025 and beyond. Combine with Section 179 for rapid write-offs of equipment, qualifying improvements, and some used assets.
- Document the placed in service date—this determines your deduction rate.
- Some states (like Illinois) don’t conform to federal bonus depreciation—check your state rules.
20% Qualified Business Income (QBI) Deduction
The 20% QBI deduction lets sole proprietors, S corps, partnerships, and LLCs deduct up to 20% of qualified business income through 2028. For 2025, the phaseout thresholds are $150,000 (single) and $300,000 (married filing jointly). Higher-income owners face additional W-2 wage and biz property tests, and some professional services are excluded above these levels.
QBI Deduction Example
- Business income: $400,000
- QBI deduction: $80,000
- Tax savings at 24%: $19,200
Temporary Deductions Actually Expiring After 2028
A handful of new deductions added in 2025 expire after the 2028 tax year:
| Deduction | 2025 Limit | Expires |
|---|---|---|
| Senior Bonus | $6,000 (single); $12,000 (MFJ) | 2028 |
| Overtime Pay | $12,500 (single); $25,000 (MFJ) | 2028 |
| Tips | $10,000 (single); $20,000 (MFJ) | 2028 |
| SALT Cap | $40,000 | 2029 |
Uncle Kam In Action: Case Study
Sarah owns a construction business, earning $180,000 net income in 2025. She invests $80,000 in new machinery. With OBBBA’s new rules, she:
- Deducts the full $80,000 with Section 179
- Claims a $36,000 QBI deduction (20% of $180,000)
- Saves an estimated $29,040 in federal income tax (assuming 24% effective rate)
Next Steps for Business Owners
- Confirm your entity structure is optimal: S-Corp, LLC, or Proprietorship
- Document all placed-in-service assets for 2025
- Schedule a tax planning review before year-end
- Maximize temporary deductions if you or workers qualify
- Review 2026 tax changes for small businesses
Frequently Asked Questions
Are business deductions ending in 2026?
No, almost all popular business deductions were made permanent by OBBBA in 2025. A few new deductions sunset after 2028.
What’s the Section 179 limit for 2025?
$2.5 million, with phase-out after $4 million placed in service.
Is 100% bonus depreciation still available?
Yes, for property placed in service after January 19, 2025.
Can sole proprietors use the QBI deduction?
Yes, all pass-through business owners may qualify subject to income limits and business type.
Do these rules vary by state?
Yes, state-level Section 179 and depreciation rules can differ.
Related Resources
Last updated: December 2025
