The SBA published a reminder this week that a lot of small business owners seem to have missed.
The 20% small business deduction - technically Section 199A of the tax code, which allowed pass-through businesses to deduct 20% of qualified business income - was made permanent when the Working Families Tax Cuts were signed into law on July 4, 2025.
That sounds like a tax lawyer's sentence. Here's what it means in plain terms.
What the Deduction Actually Does
If you own a sole proprietorship, LLC, S-corporation, or partnership, you probably pay taxes on your business income at your personal tax rate. The 20% deduction lets you subtract 20% of your "qualified business income" before calculating what you owe.
The math on a concrete example:
- You made $100,000 in net profit from your business last year.
- The 20% deduction means you're taxed on $80,000, not $100,000.
- At a 22% tax rate, that's $4,400 back in your pocket. At a 24% rate, it's $4,800.
For eight million small business owners across the country, the SBA estimates the average benefit is $4,600 per year.
Before this was made permanent, the deduction was scheduled to expire at the end of 2025. Millions of small business owners were looking at their effective tax rate jumping significantly in 2026. That did not happen.
What Changed and When
The original Section 199A deduction came from the 2017 Tax Cuts and Jobs Act. It was always a temporary provision with a sunset date. Congress debated extending it multiple times over several years.
It became permanent in July 2025. This is now the law going forward - not a deduction that expires next year, not something you have to renew. Permanent.
The same legislation also included 100% expensing for new equipment, factory improvements, and business research and development costs - meaning you can deduct the full cost of qualifying purchases in the year you make them, rather than depreciating them over years.
Who Qualifies
The deduction applies to "pass-through" businesses, meaning businesses where the income passes through to your personal tax return rather than being taxed separately at the corporate level. That covers:
- Sole proprietors (Schedule C filers)
- Single-member LLCs
- Multi-member LLCs
- S-corporations
- Partnerships
C-corporations do not qualify. They have their own corporate tax rate.
There are income limits and restrictions for certain professional service businesses - attorneys, financial advisors, consultants, and similar fields face phaseouts at higher income levels. If you're in one of those fields and earn above certain thresholds, the deduction works differently. Talk to a tax professional.
What You Should Do Now
If you have not specifically asked your accountant or tax preparer about the Section 199A deduction for your 2025 return (filed this April), do that before the filing deadline. This is not something that applies automatically in some situations - it requires the right paperwork and calculations.
If you're filing for an extension, flag it before you finalize. If you already filed and didn't take it, an amended return may recover that money.
Going forward, the deduction is baked in. But the 100% expensing provision is worth knowing about if you're planning any major equipment purchases or investments in 2026 - the timing of those purchases now has direct tax implications.
The Bigger Picture
The SBA's April 9 op-ed was framing this as part of a broader message about small business optimism right now. That framing is worth taking with some skepticism given the source.
What is not spin: the math is the math. If you're a pass-through business owner paying federal income tax, you owe less than you would have under the old rules. The deduction exists. The question is whether you're using it correctly.
Sam Torres covers government, regulatory, and policy news for small business owners at The Useful Daily. Sources: SBA Working Families Tax Cuts page, SBA April 9 op-ed: Capital, Confidence, and Opportunity for Small Business, Treasury Department WFTC Fact Sheet