It’s often said that Congress doesn’t do much unless it’s coming up on a deadline. And we are likely to see that notion in full effect next year as many of the individual and small business-oriented tax provisions of the 2017 Tax Cuts and Jobs Act (TCJA) are scheduled to expire at the end of 2025.

Back when legislators were drafting the bill, they had to make certain concessions on the overall cost of the package to use the fast-track method known as reconciliation. Reconciliation allows for legislation that has a significant budgetary impact to pass the Senate by a simple majority, rather than being subject to a 60-vote threshold or filibuster. However, in exchange for that fast-track authority it must stay within a total cost constraint set by a budget resolution, and it must not cause deficits beyond a 10-year window as calculated by the Congressional Budget Office (CBO).

As Congress prioritized making the corporate tax rate in the United States permanently more competitive on a global scale, they chose to offset that cost by ending the reduced taxes on individuals and small businesses after only seven years. By CBO’s math that meant the law would not run afoul of either requirement.

With almost all taxpayers in the United States facing a 2% to 3% increase in their individual taxes in 2026, Congress is likely to take some kind of significant action to forestall that increase before the end of 2025. Though if you are hoping for it be done early in 2025, don’t hold your breath.

Americans are also looking at losing the significantly higher standard deduction, which simplified tax filings for millions. They’re also facing higher thresholds on death tax liabilities and increases in capital gains and other investment taxes, among other tax hikes. The fact that all House Members and one-third of the Senate will be facing voters just seven months after those taxes would be due all but guarantees they will scramble together some kind of fix.

Small businesses, like most convenience stores, may face the worst outcome should Congress not act.

Small businesses, like most convenience stores, may face the worst outcome should Congress not act. One of the biggest benefits to family businesses, which operate as pass through entities, was the 199A Qualified Business Income Deduction that came from the TCJA. 199A allows for s-corps to immediately deduct 20% of their business income from their taxes. The deduction is an effort to bring their marginal tax rates closer to parity with c-corps, which saw their tax rate permanently cut to 21% in the TCJA.

Recently, NACS Board of Directors Member and President of HJB Convenience, Raymond Huff, was invited to testify before the House Small Business Committee about the impact losing 199A would have on his business. During his testimony, Huff told the Committee that 199A felt like the first time that tax policy was really aimed at him as a small business owner, and he talked about the significant investments he made into his business that would not have been possible without that particular provision. Some of those investments made it possible for him to keep some stores operating during the pandemic when they may have otherwise been forced to close. Should 199A be allowed to expire, he said he would have to significantly scale back plans to reopen a number of stores in the coming years, taking away jobs from local communities where those stores would be located.

There are several other provisions at risk of expiration in 2025 that small businesses rely on. During his testimony, Huff also talked about the 100% Bonus Depreciation provisions that allowed businesses to deduct the full amount of certain improvement costs immediately rather than over a period of 15 or 30 years. That provision has already begun to phase out, only allowing 80% deduction last year and 60% this year, and is scheduled to completely phase out in 2027. Likewise, the Work Opportunity Tax Credit (WOTC), used widely in the convenience industry as a benefit to hiring disadvantaged populations, is set to expire at the end of 2025 as well.

So what is Congress likely to do? Like so many things in Washington, the answer to that question is largely dependent on the outcome of the 2024 elections. Which party controls the White House and majorities in Congress will tell us a lot about where the 2025 package is likely to head.

Some work on the package is already getting started, however. House Ways and Means Committee Chair Representative Jason Smith (R-MO) has begun establishing small groups of members of his committee to brainstorm different parts of the tax code. Should Republicans retain the majority—and Smith the gavel—he has said it is his intention to have everything on the table as part of this discussion, not just the expiring provisions. Should Democrats wrest the majority in the House, and Rep. Richie Neal (D-MA) or another Democrat take the gavel back, you can likely expect a similar approach where they will want to look at all parts of the tax code. The same is likely true in the Senate.

Huff testified to a Congressional committee that 199A felt like the first time tax policy was really aimed at him as a small business owner.

Republican majorities will be looking to do whatever they can to extend the individual tax provisions, if not make them permanent. It’s even possible they would entertain a small increase in the corporate rate to help make that happen, though that would certainly not be a guarantee.

A Democratic majority would likely seek to allow the tax rates on higher incomes to increase while protecting the rate for lower- and middle-class taxpayers, while also seeking a potential significant increase in the corporate tax rate and possible additional restrictions on the use of 199A.

The wildcard is who wins the White House. A return of former President Trump would likely increase the pressure—at least on Republicans in Congress—to protect the TCJA entirely, as Trump views that law as one of the crowning achievements of his term in office. A second Biden Administration would likely be much more open to dismantling parts of that law.

There is a lot on the line for all Americans, but certainly on small businesses as to how Congress chooses to address the expiring provisions of the TCJA next year. Stay tuned throughout the fall and into next year as the outcome will hopefully become a bit clearer.