A central tax benefit for self-employed filers and business owners, enacted under the 2017 Tax Cuts and Jobs Act, is slated to expire at the end of 2025, potentially triggering significant financial disruption unless Congress acts to extend it.

The qualified business income (QBI) deduction allows owners of pass-through businesses—including sole proprietors, partnerships, S-corporations, and some trusts and estates—to deduct up to 20% of their eligible income. Created to align pass-through tax rates more closely with the permanent corporate tax cut from 35% to 21%, the deduction has grown in use, with claims rising from 18.7 million in 2018 to roughly 25.9 million in 2021.

“The hope is that this gets extended because it’s going to be very disruptive for a lot of business owners,” said Dan Ryan, a tax partner at Sullivan and Worcester. However, extending the deduction presents a fiscal challenge, with an estimated 10-year cost exceeding $700 billion.

The debate over its future is intensifying. Business advocates argue the deduction stimulates growth and should be made permanent, while critics highlight its complexity, high cost, and disproportionate benefit to higher earners. President Joe Biden has pledged to extend tax cuts only for those earning under $400,000, adding a political layer to the negotiation.

“It’s something that is very important to a lot of privately held businesses,” said Howard Gleckman, senior fellow at the Urban-Brookings Tax Policy Center. With the 2025 tax cliff approaching, the fate of the QBI deduction remains a pivotal issue for millions of small business owners and a significant test for congressional tax policy.