The end of the Tax Cuts and Jobs Act provisions has been talked about for years, but the practical implications for closely-held businesses are only now becoming concrete. Several major sunsets are landing within the next 24 months. Bonus depreciation continues phasing down. The qualified business income deduction faces structural uncertainty. State and local tax workarounds are evolving in response to federal pressure. The reality on the ground is more nuanced than the headlines, and a fair amount of what’s circulating among business owners is either premature, overstated, or simply wrong.
This is worth a careful look, particularly for owners of profitable closely-held businesses who are trying to plan multi-year tax positioning rather than reacting return-by-return.
What’s verifiably changing
Start with the items that are settled, or close to it.
Bonus depreciation, which sat at 100% for years under TCJA, dropped to 80% in 2023, 60% in 2024, and 40% in 2025. The 2026 figure is 20%, and absent legislative intervention it phases out entirely after that. The Section 179 expensing election remains as an alternative for many small and mid-sized purchases, but the limits are lower and the qualifying assets narrower.
The Section 199A qualified business income deduction is set to expire at the end of 2025 unless Congress extends it. The practical effect for pass-through entity owners has been substantial, up to 20% off qualified business income subject to several limitations. If the deduction lapses, effective tax rates on pass-through business income jump meaningfully overnight. Multiple legislative proposals are circulating to extend or modify it, but nothing is settled.
Estate and gift tax exemptions are also scheduled to revert. The current elevated exemption (roughly $13.6 million per individual in 2024) sunsets at the end of 2025, reverting to approximately half that amount adjusted for inflation. For high-net-worth families, this single change drives a significant amount of urgency around lifetime gifting strategies, irrevocable trusts, and entity restructurings before the deadline.
For owners working with experienced tax advisory services for businesses, each of these moving parts needs to be modeled against specific business circumstances rather than addressed with generic guidance.
What’s being overstated
Several narratives circulating among business owners and on social media are exaggerated or misleading.
The “S-Corp is no longer worth it” claim. This is wrong. The S-Corp election still provides substantial self-employment tax savings for owners of profitable single-owner and small partnership businesses. The math hasn’t changed. What has changed is that the IRS has been more aggressive in recent years about challenging unreasonably low salaries, which means the analysis needs to be done with more care, not abandoned.
The “everyone should switch to C-Corp” claim. The 21% flat corporate rate from TCJA made C-Corp structures attractive in narrow circumstances, particularly for capital-intensive businesses retaining earnings for reinvestment. But for most owner-operators, double taxation still erodes the benefit. The C-Corp election makes sense in specific situations and not as a default.
The “the IRS is going to audit everyone now” claim, driven by reporting on enforcement funding. The audit rate has remained remarkably stable for individual returns under $400,000, and the funding increases have been focused on large corporations and high-net-worth filers. The narrative of widespread small business audits has not materialized in the data so far.
What deserves more attention than it’s getting
Several real changes are receiving less coverage than they deserve.
The Corporate Transparency Act, requiring beneficial ownership reporting for most US entities, took full effect for newly-formed entities in 2024 and for pre-existing entities by early 2025. Court challenges have created some uncertainty, but the underlying requirement is in force for most filers. Penalties for non-compliance are significant. A large number of small business owners still don’t know this exists.
Changes to the research and experimentation expense rules under Section 174 are affecting many more businesses than expected. Costs that used to be deductible immediately must now be capitalized and amortized over five years (domestic) or fifteen years (foreign). Software development costs are particularly affected. Software-adjacent businesses are seeing surprising tax bills as a result, and many haven’t restructured their accounting to handle it cleanly.
State income tax planning continues to evolve. The federal SALT cap drove the creation of pass-through entity tax (PTET) elections in over 35 states, allowing pass-through business owners to deduct state income taxes at the entity level. The mechanics vary substantially by state, and the savings can be meaningful for owners with high state tax exposure. Many businesses still haven’t made the PTET election in their state even when it would benefit them.
How sophisticated owners are actually responding
The closely-held business owners who are handling this period well share a few characteristics in their approach.
They run multi-year projections rather than focusing on a single tax year. The decisions that matter most (entity restructuring, gifting strategies, depreciation elections, retirement plan setup) all have multi-year implications and need to be modeled over a five-to-ten-year horizon rather than optimized for the current return.
They use the QBI deduction window deliberately. While it still exists, they’re maximizing its value through retirement plan contributions, salary calibration, and timing of income recognition. If it lapses, they’ve at least captured the value while it was available.
They’re updating their estate plans now rather than waiting for the sunset. The complexity of irrevocable trust strategies, grantor retained annuity trusts, and family limited partnerships requires implementation lead time. Waiting until November 2025 to start the conversation, as some are doing, means missing the window entirely.
They’re rebuilding their books to handle Section 174 capitalization properly. The amortization schedules are complex, and getting them wrong creates compounding errors in subsequent years. A clean accounting framework now prevents reconstruction later.
A final note on advisor selection
The current environment rewards owners who have advisors actively monitoring legislative developments, not just preparing returns. Several of the changes discussed have phase-in periods, transition rules, and elective provisions that only get captured by someone watching closely. The owners who will navigate the next two years well are the ones already in those relationships. Building one starting now is more useful than waiting to see what happens.
There’s a temptation to dismiss the noise around tax law changes as overhyped, and some of it is. But the substantive shifts buried under the noise are real, and they reward preparation. The owners who treat 2025 and 2026 as years for structural planning rather than just compliance will look back on this period as one where they protected significant wealth that less-prepared peers gave back to the government by default. The cost of waiting tends to be invisible until it isn’t.
