As tax season approaches, small business owners are bracing for what is often a dizzying array of complexities that go far beyond the average taxpayer’s experience. While individuals may face a straightforward W-2 or 1099, small business owners grapple with a tangled web of quarterly estimates, payroll taxes, and an alphabet soup of tax forms. A key component at the center of this tax discourse is the Section 199A deduction, a crucial lifeline that allows LLCs and other “pass-through” businesses to deduct 20% of their business income. However, this essential benefit is at risk of disappearing come the end of 2025, unless Congress acts decisively to make it permanent.
“Every dollar matters,” says Angel Johnson, founder of ICONI, a size-inclusive activewear brand. Johnson emphasizes how tax savings can be reinvested into businesses, enabling growth and community engagement. Entrepreneurs like Johnson are not just crunching numbers; they are often the backbone of local economies, using tax incentives to create jobs, expand services, and strengthen their communities.
Small business owners, in contrast to their larger corporate competitors, lack the extensive resources to navigate the complexities of federal tax codes. “For small businesses, any amount of money we’re able to deduct is helpful,” shares Erin Myles, founder of Brave Daughters, a sustainable fine jewelry brand. About 80% of small business owners report that the federal tax code creates an uneven playing field, often resulting in fewer resources to navigate the labyrinthine tax system.
For many small business owners, the Section 199A deduction acts as a rare equalizer. “We’ve been able to take advantage of it as part of our strategy,” says Nic Trapani of Door County Candle Company. However, uncertainty surrounding the future of this deduction compels business owners to make tough financial decisions. The Trapani family often restructures their staffing based on expected tax implications, underscoring the direct influence tax policies have on operational choices.
With approximately 61 million people employed by small businesses in the U.S.—representing nearly half of all private-sector jobs—understanding the impact of tax legislation is crucial. “Small businesses are the businesses that pour back into their neighborhoods,” continues Johnson, noting that many local initiatives such as youth sports sponsorships typically arise from small business revenue, not large corporations. However, this essential contribution, which often goes unnoticed, could be jeopardized if 199A is not made permanent.
The current political landscape gives rise to hope, as the Main Street Tax Certainty Act, which would solidify the 199A deduction, boasts considerable bipartisan support. Yet, the looming expiration creates anxiety among small business owners. “We’re not these massive Fortune 500 companies, but a lot of us little guys still make a huge impact,” Trapani expresses, highlighting that small businesses are often more impacted by regulatory fluctuations.
Still, navigating these waters isn’t without its challenges. “It can feel like there are so many things in your way,” Myles acknowledges. From rising material costs to the intricacies of loan applications, the potential loss of 199A adds another layer of difficulty for entrepreneurs already facing an uphill battle. More than 80% of small business owners feel overlooked in policy discussions, which places additional pressure on them to advocate for policies that support their interests.
As small businesses continue to endure the repercussions of tax code uncertainties, they remain vital players in job creation and economic vitality. Their resilience showcases the importance of supporting policies that foster growth. While entrepreneurship invites challenges, the potential elimination of critical tax benefits could stifle innovation and expansion efforts.
In light of these implications, small business owners must stay informed and engaged in tax discussions to ensure their voices are heard. While tax codes may appear as bureaucratic jargon, they represent lifelines for locals who are shaping their communities. Making the 199A deduction permanent would not just benefit small business owners; it would serve as a critical investment in the heart of the American economy.
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This article, "Small Businesses Turn to Tax Relief as Economic Pressures Mount" was first published on Small Business Trends
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