“To amend the Internal Revenue Code of 1986 to increase the deduction for qualified business income, and for other purposes.”
No CRS summary available for this bill.
This section increases the qualified business income (QBI) deduction to 23% (from 20%) under section 199A of the Internal Revenue Code and makes related modifications, effective for taxable years beginning after December 31, 2026. (As background, the QBI deduction allows eligible taxpayers, generally owners of pass-through businesses such as sole proprietorships, partnerships, and S corporations, to deduct up to 20% of qualified business income from taxable income, subject to wage and capital limitations that phase in above an inflation-adjusted threshold and exclusions for certain specified service trades or businesses (SSTBs) above that threshold.) Specifically, the section (1) revises the limitations phase-in under new section 199A(b)(3) to exempt taxpayers below the threshold from wage/capital limits and SSTB exclusions, and above the threshold to reduce the otherwise allowable deduction by 75% of the excess of taxable income over the threshold (and strikes the prior SSTB conforming provision); (2) includes qualified business development company (BDC) interest dividends—defined as dividends from electing BDCs (i.e., BDCs electing regulated investment company treatment) attributable to interest income allocable to a qualified trade or business—as eligible income, akin to qualified REIT dividends; and (3) updates the inflation adjustment for the threshold amount to a 2025 base year (from 2018).