Congress urged to make contractor-friendly tax break permanent

A key tax break allowing small business owners to exclude up to 20 percent of their qualified earnings from federal income tax is set to expire this year, creating uncertainty among the business community. Catch up

Why it matters: The law affects pass-through businesses, which make up 95 percent of all U.S. businesses, according to Brookings. 

What’s happening: Two lawmakers last month re-introduced a bill to make the 20-percent deduction permanent, garnering support from over 200 business organizations nationwide, including ACCA, HARDI, and PHCC.

• “Despite its importance, the… deduction is scheduled to sunset at the end of 2025, even as the businesses it supports continue to struggle with rising prices [and] labor shortages,” the two lawmakers wrote in a letter. 

Zoom out: If Congress doesn’t act, “more than 30 million small businesses will face a massive tax hike at the end of this year,” added Brad Close, president of the National Federation of Independent Business. 

What’s next: “The more quickly Congress acts to make [it] permanent,” the lawmakers said, “the sooner Main Street businesses can return their focus to economic growth and job creation.”

• While no timeline is available, the bill will now make its way through the legislative process.