Sponsors (9)
The bill expands and preserves the QBI deduction for more small-business owners, pass-through taxpayers, and certain BDC investors—lowering taxes for those groups—while reducing federal revenue and adding tax complexity and uneven benefits across investors.
Small-business owners and pass-through taxpayers receive a larger Qualified Business Income (QBI) deduction (23% vs. 20%), lowering taxable income and reducing federal income tax liability.
Investors in electing Business Development Companies (BDCs) can treat certain interest-derived dividends as QBI, allowing those investors (and related financial firms) to claim the QBI deduction.
Low- and middle-income taxpayers at or below the SSTB threshold are phased in/exempted from SSTB disqualification, preserving QBI deductions for more lower-income filers.
Expanding the QBI deduction reduces federal revenue, which could increase deficits or require spending cuts or offsets elsewhere.
New phase-in rules, added definitions (e.g., for BDC dividends), and other changes increase tax-law complexity, raising compliance burdens for taxpayers and administrative workload for the IRS.
Including dividends from electing BDCs in QBI could advantage certain investors and financial firms, creating uneven tax benefits across investment types.
Based on analysis of 2 sections of legislative text.
Raises the QBI deduction from 20% to 23%, changes income limits and phase-ins for specified service trades, adds an elective qualified BDC interest dividend rule; effective after 2026.
Raises the qualified business income (QBI) deduction rate from 20% to 23% for owners of pass-through businesses and makes several technical changes to the QBI rules, including modifying income-based limitation and phase-in mechanics for specified service trades or businesses and other limits. It also creates an elective category for certain dividends from business development companies (a “qualified BDC interest dividend”) and adjusts an inflation-adjustment rule; the changes apply to taxable years beginning after December 31, 2026. The changes mainly reduce federal taxes for many small business owners and some investors, while adding technical complexity that will affect tax filing, IRS guidance, and possibly state tax conformity. The effective date delays the tax cut until tax year 2027 onward.
Introduced April 21, 2026 by David Kustoff · Last progress April 21, 2026