Small Business Tax Cut Act

Bigger deduction for pass-through owners

This bill would raise parts of the pass-through qualified business income (QBI) deduction rate from 20% to 23%. It would add certain dividends from electing business development companies to items eligible for the QBI deduction. For taxpayers with taxable income above the section 199A threshold, the combined QBI amount would be reduced by a phase-in equal to 75% of the income over the threshold. For taxpayers at or below the threshold, some specified service businesses would not be disqualified from the deduction. These changes would apply to tax years beginning after December 31, 2026.