Key Takeaways

• Major TCJA provisions are set to expire at the end of 2025, including lower individual tax rates, the 20% QBI deduction for pass-throughs, high estate tax exemptions, and bonus depreciation.
• Business owners and enterprise leaders face significantly higher tax bills beginning in 2026 unless Congress takes action to extend or modify current law.
• Strategic tax planning before year-end 2025 is critical—review income acceleration, maximize estate transfers, front-load capital expenditures, optimize the QBI deduction, and bunch deductions to take full advantage of current law.
• Waiting for Congressional intervention is risky. Act now to lock in tax advantages while they’re available.
• Broader business strategy, risk, and operational impact should be considered alongside tax planning (see insights on long-term strategic planning).

The Tax Cuts and Jobs Act (TCJA) of 2017 is approaching its sunset date on December 31, 2025. Major provisions affecting individual and business taxes will expire, potentially increasing tax burdens significantly for SMEs and enterprise businesses starting in 2026. Key changes include:

• Top tax rates rising from 37% to 39.6%, compressing tax brackets for business owners
• Standard deductions cut in half, from approximately $30,000 to $15,000 for married couples
• Complete elimination of the 20% Qualified Business Income (QBI) deduction for pass-through entities
• Estate tax exemptions dropping from $13.6 million to approximately $7 million per person
• Bonus depreciation phasing to zero after declining to 20% in 2026
• SALT deduction caps lifting, potentially benefiting high-tax state businesses

Business leaders must act before year-end 2025 to maximize current tax benefits. Strategic planning includes accelerating income, maximizing estate transfers, purchasing qualified assets, and optimizing pass-through deductions. Congressional action may extend provisions, but waiting carries significant financial risk. For more about how business leaders are using long-term strategic planning to cope with market shifts and uncertainty beyond taxes, see: business resilience in uncertainty.

 

Picture this: you’re sitting in your office, coffee in hand, reviewing your 2026 budget projections.

 

Everything looks solid until your CFO walks in with news that could cost your business tens of thousands—or even millions—in additional taxes. *Welcome to the 2026 tax season, where the party favors from 2017 are about to be collected.*

The Tax Cuts and Jobs Act isn’t just expiring; it’s about to create one of the most significant tax shifts in modern business history. For SMEs, managers, CEOs, and enterprise leaders, this isn’t simply another policy change to file away. *This is a financial earthquake that demands your immediate attention and strategic response.*

 

The Great Tax Reversal: What’s Actually Happening?

Back in 2017, Congress passed the TCJA with a built-in expiration date. *Think of it like a promotional lease on a luxury office space—great while it lasts, but the terms change when the clock runs out.* That clock strikes midnight on December 31, 2025.

Here’s the twist that catches most business leaders off guard. While corporate tax rates stay permanently at 21%, individual and pass-through provisions vanish. Since roughly 95% of U.S. businesses are structured as pass-throughs (S-corps, LLCs, partnerships, sole proprietorships), this sunset hits the majority of American enterprises directly.

The reversal isn’t gradual or negotiable without Congressional action. January 1, 2026, flips the switch back to pre-TCJA tax law. Your tax planning strategies built over the past eight years? *They’re about to face their biggest stress test.*

 

The Numbers That Will Hit Your Bottom Line

Let’s cut through the tax jargon and talk real dollars. The changes coming in 2026 will impact your business across multiple dimensions.

Tax Brackets: The Squeeze Is On

Your top tax rate jumps from 37% to 39.6%. That’s an additional 2.6% bite out of your highest-earning dollars. If you’re pulling $500,000 in taxable income from your business, that’s potentially $13,000 more in federal taxes annually on that income alone.

But here’s where it gets tricky. The brackets themselves compress and shift. Middle-income thresholds change, meaning more of your income gets taxed at higher rates faster. It’s not just the top earners feeling the pressure—this cascades down through the brackets.

Standard Deduction: Halved and Hurting

For married business owners filing jointly, the standard deduction drops from approximately $30,000 to $15,000. Single filers see their deduction cut from roughly $15,000 to $7,500.

Why does this matter for business leaders? Many entrepreneurs take the standard deduction for simplicity. Suddenly, an additional $15,000 of your personal income becomes taxable. At the 35% bracket, that’s $5,250 more in taxes without any change in your actual income.

 

The QBI Deduction Disappears Completely

This one stings. The Section 199A deduction allows pass-through business owners to deduct up to 20% of qualified business income. For a business generating $300,000 in QBI, that’s a $60,000 deduction—potentially saving $21,000 in taxes at the 35% rate.

Come 2026, that deduction vanishes entirely. Zero. Zilch. Gone.

For SMEs relying on pass-through structures for flexibility and tax efficiency, this represents one of the most significant financial impacts of the sunset. The QBI deduction has been a cornerstone of small business tax strategy since 2018. Its elimination fundamentally changes the value proposition of pass-through entities. Major changes like this often require businesses to review their overall strategic approach, including risk management—see this exploration of how firms in other sectors approach high-impact regulatory shifts: strategic business lessons.

 

Estate Planning: The Window Is Closing

The estate and gift tax exemption currently sits at approximately $13.6 million per individual ($27.2 million for couples). In 2026, it drops to roughly $7 million per person ($14 million for couples).

If you’re a business owner planning succession or wealth transfer, you have a limited window. The difference between transferring assets now versus post-2026 could mean millions in estate taxes. For family businesses valued above $14 million, this sunset provision creates both urgency and opportunity. Leadership handoffs and legacy planning are a core part of enterprise risk management, especially in industries facing external pressure: strategic risk and efficiency.

Business-Specific Impacts: Beyond Personal Taxes

The TCJA sunset doesn’t just affect your personal return. It ripples through business operations in ways that demand strategic adjustment.

Bonus Depreciation: The Vanishing Asset Advantage

Bonus depreciation has been declining yearly: 100% in 2022, 80% in 2023, 60% in 2024, 40% in 2025, and 20% in 2026. After 2026, it hits zero.

This provision allows immediate expensing of qualified asset costs rather than depreciation over years. For businesses making significant equipment purchases or facility improvements, the tax benefits diminish rapidly. A $100,000 equipment purchase in 2025 gives you a $40,000 immediate deduction. In 2027, you’re back to standard depreciation schedules. Major strategic investments, especially in capital equipment or technology, benefit from similar proactive timing principles seen throughout the 2026 business environment: NVIDIA RTX 50 GPUs buying guide.

 

SALT Cap: The Silver Lining for Some

One provision actually improves post-sunset. The $10,000 cap on state and local tax (SALT) deductions lifts, allowing full deductibility again.

For businesses and owners in high-tax states like California, New York, New Jersey, and Illinois, this provides meaningful relief. If you’re paying $50,000 annually in state and local taxes, you currently deduct only $10,000. Post-2026, you deduct the full $50,000—potentially saving $14,000 in federal taxes at the 35% bracket.

However, this benefit primarily helps those who itemize deductions. With the standard deduction cut in half, more taxpayers will itemize, but the calculus becomes complex.

Child Tax Credit and Personal Exemptions: The Family Business Factor

The Child Tax Credit drops from $2,000 to $1,000 per qualifying child. Simultaneously, personal exemptions return at approximately $2,000 per person but phase out at higher incomes.

For business owners with families, this creates a complex trade-off. You lose $1,000 per child in credits but potentially gain exemptions. The net effect depends on your income level and family size. High earners may see exemptions phase out, leaving them with purely negative impacts.

What Congress Might Do (And What You Shouldn’t Count On)

Here’s the political reality: full expiration hurts too many voters. History shows Congress typically intervenes during these “fiscal cliff” moments. The Bush tax cuts got extended. The AMT patch became permanent. There’s precedent for action.

Republican control of government favors extension, given the party’s general preference for lower taxes. Democrats push for targeted modifications—perhaps extending some provisions while reforming others like the SALT cap. The likely scenario involves partial extension or modification rather than complete expiration.

But here’s the dangerous gamble: counting on Congressional action is like planning your business strategy around winning the lottery. *It might happen, but building your financial future on “might” isn’t strategic—it’s reckless.*

As of early 2026, no legislation has passed. Midterm election politics, budget constraints, and competing priorities make timing uncertain. Even if Congress acts, the details matter enormously. Which provisions get extended? At what cost? With what modifications?

You can’t run your business on political speculation. You need action plans for both scenarios. For context on navigating uncertainty at both the regulatory and global market levels, review this post: Chinaplas 2026: Innovations & Sustainability.

Strategic Tax Planning: Your 2025 Action Checklist

The sunset creates a narrow window for strategic moves. Acting before December 31, 2025, locks in current benefits. Here’s your tactical playbook

Income Acceleration vs. Deferral

Traditional tax wisdom says defer income to future years. The sunset flips this logic.

If you expect provisions to fully expire, accelerate income into 2025. Take that year-end bonus now. Realize capital gains under current rates. Convert traditional retirement accounts to Roth accounts at lower brackets. The 2025 rates may be the lowest you’ll see for years.

Conversely, if you’re confident Congress will extend provisions, defer income to 2026 and beyond. This is the gamble. You’re betting on political action to save money.

For most business leaders, a hybrid approach makes sense. Accelerate some income to hedge against full expiration while maintaining flexibility for extension scenarios.

Maximize Gift and Estate Transfers Now

The estate tax exemption represents a “use it or lose it” opportunity. Transferring $13.6 million per person under current law avoids potential estate taxes on approximately $6.6 million per person come 2026.

For business owners planning succession, this creates urgency. Transfer ownership interests, establish trusts, fund gift programs—all under current exemptions. Even if Congress extends the higher exemption, you lose nothing. If it sunsets, you’ve saved potentially millions in future estate taxes.

Work with estate planning attorneys now. These strategies require time to structure properly. Waiting until December means rushed decisions and potential mistakes.

Front-Load Capital Expenditures

With bonus depreciation declining to 20% in 2026 and zero thereafter, purchase qualified assets in 2025. Lock in the 40% immediate expensing while available.

This isn’t about buying assets you don’t need. It’s about timing necessary purchases strategically. If your three-year equipment plan includes significant investments, front-loading into 2025 maximizes tax benefits. The cash flow impact balances against immediate tax deductions.

For businesses with strong 2025 earnings, bonus depreciation provides powerful tax management. It reduces current-year liability while investing in operational capacity. Similar logic applies for companies making major technology purchases and facing volatile procurement markets in 2026: NVIDIA RTX 50 GPUs business strategy.

Optimize Your QBI Deduction

The 20% QBI deduction expires completely in 2026. Maximize it while available.

Review your business structure. Ensure you’re capturing full QBI benefits within income limitations and industry restrictions. For businesses near phase-out thresholds, strategies like retirement contributions or equipment purchases can keep you within qualifying ranges.

Consider whether business structure changes make sense post-2026. The QBI deduction has influenced entity choice significantly. Its elimination may shift the calculus toward C-corporations for some businesses, despite double taxation concerns.

Bunch Deductions and Charitable Contributions

With standard deductions halving, itemizing becomes viable for more taxpayers. Bunching deductions—concentrating multiple years’ worth into a single year—maximizes tax benefits.

Prepay property taxes (where legal). Accelerate charitable contributions using donor-advised funds. Schedule elective medical procedures. The goal is alternating between itemizing one year and taking the standard deduction the next, maximizing total deductions over multi-year periods.

For businesses and owners with philanthropic goals, 2025 presents optimal conditions for significant charitable giving under current deduction rules.

The Economic Elephant in the Room

Let’s talk about the bigger picture. Full extension of TCJA provisions costs approximately $4.2 trillion from 2026 to 2035. That’s trillion with a “T.”

Where does that money come from? Increased deficits, spending cuts, or new revenue sources. Each option carries economic consequences. Higher deficits potentially drive inflation and interest rates. Spending cuts impact government services and contracts. New revenue means taxes increase elsewhere.

Conversely, full expiration raises roughly $4 trillion in revenue but removes significant economic stimulus. Consumer spending drops. Business investment slows. Economic growth potentially stalls. For insights into how macroeconomic shifts and fiscal policy influence business operations—including ripple effects on supply chains, investment, and risk—explore: business environment impact.

For business leaders, this creates macroeconomic uncertainty beyond personal tax impacts. Your strategic planning must account for broader economic shifts resulting from whatever path emerges. Customer behavior changes. Market dynamics shift. Supply chain considerations evolve.

*This isn’t just about your tax bill. It’s about the economic environment in which your business operates.*

 

The Bottom Line for Business Leaders

The 2026 tax season isn’t approaching—it’s here. The decisions you make in the coming months carry multi-year financial consequences measured in tens or hundreds of thousands of dollars for most SMEs, and millions for larger enterprises.

Here’s what you absolutely must do now:

• Model both scenarios. Calculate your tax liability under full expiration and under extension assumptions. Understand the financial impact range. This isn’t speculation—it’s risk management.
• Engage professional advisors immediately. Tax attorneys, CPAs, financial planners, and estate specialists need time to develop and implement strategies. December 2025 will be chaos. Act now while advisors have capacity.
• Communicate with your leadership team. CFOs, controllers, financial managers—everyone involved in financial planning needs to understand these changes. This isn’t a solo decision process. It requires coordinated strategy across your organization.
• Build flexibility into your plans. The legislative outcome remains uncertain. Create strategies that provide benefits under multiple scenarios. Avoid all-or-nothing gambles on political outcomes.
• Document everything meticulously. The strategies you implement need careful documentation for IRS compliance. Rushed year-end transactions attract scrutiny. Proper documentation protects you in audits.

The TCJA sunset represents one of the most significant tax policy shifts in decades. For business leaders, it’s not a spectator sport. Your actions—or inaction—in 2025 will impact your financial position for years to come.

The question isn’t whether the sunset affects you. It does. The question is whether you’ll respond strategically or watch opportunities slip away while tax liabilities mount.

Your move.

 

 

FAQ

 

• What is the TCJA sunset?
  
  The “sunset” refers to the expiration of key Tax Cuts and Jobs Act provisions for individuals and pass-through businesses on December 31, 2025. Most corporate provisions remain permanent, but personal and owner-operator-related provisions revert to pre-2018 law.
  
• Which businesses are most affected?
  
  Pass-through entities (LLCs, S-corps, partnerships, sole proprietorships) representing about 95% of U.S. businesses are most impacted. C-corporations are less affected since their lower 21% rate is permanent.
  
• What should business leaders do now?
  
  Initiate comprehensive tax planning immediately with trusted advisors. Consider accelerating income, maximizing estate/gift exemptions, making large capital purchases, and documenting all year-end actions.
  
• Will Congress extend these tax breaks?
  
  There is a history of extensions (see the Bush tax cuts), but as of early 2026, no law has passed. Political uncertainty means you should plan both for expiration and possible extension or modification scenarios.
  
• How can I manage risk in such an uncertain environment?
  
  Model both tax scenarios, work with expert advisors, keep leadership teams informed, and craft flexible strategies that perform well regardless of legislative outcomes.
  
• Where can I learn more about business strategy amid regulatory change?
  
  Explore related posts like strategic business lessons, innovation & sustainability, and resilient workforce operations.