The National Federation of Independent Business (NFIB) announced on April 15 that a new report details the economic impact and tax savings for California’s small businesses following the decision to make the 20% Small Business Tax Deduction permanent. The organization said this change will benefit more than 4.3 million small businesses in the state and is expected to result in significant job growth and increases in gross domestic product over the next decade.
The NFIB’s findings are important because they suggest that making the deduction permanent could lead to an annual gain of approximately 141,000 new jobs for California over ten years, with an estimated yearly GDP increase of $9.8 billion during that period, according to information provided by NFIB.
John Kabateck, state director for NFIB in California, said, “Call Tax Day a day for celebration and someone is likely to summon the orderlies to escort you back to your room, but this year’s Tax Day is worth positively commemorating for the historic accomplishment Congress achieved in making the Small Business Deduction a permanent feature of the tax code, instead of letting it expire at the end of last year.” Kabateck added that more than 80% of small businesses are organized as pass-through entities and file their earnings on personal income tax forms. He said, “The Small Business Deduction allows them to keep more of their hard-earned money and decide how to reinvest it back into their business.”
Since its introduction in 2017, this deduction has allowed eligible small businesses to deduct up to one-fifth of their income. The provision was set to expire at the end of 2025 but was made permanent after Congress passed legislation signed by President Trump on July 4, 2025.
The National Federation of Independent Business California acts as a leading voice for small businesses in the state and works toward enhancing economic opportunities according to its official website. The organization represents more than 35,000 owners statewide according to its official website, advocating through legislative engagement while providing resources such as updates and support tools according to its official website. It also aims at protecting these enterprises from excessive regulations or taxes while promoting supportive policies according to its official website.
Kabateck said that keeping this deduction ensures certainty for entrepreneurs facing competition from larger corporations. He stated it will help business owners use more funds “to support their business and employees instead of sending it” away as taxes.
