Sponsors (9)
The bill expands and preserves QBI deduction access for more small businesses, lower-income filers, and certain BDC investors—reducing tax bills for many—but does so at the cost of federal revenue, added tax complexity, and potentially uneven benefits across investors.
Small-business owners and pass-through taxpayers get a larger qualified business income (QBI) deduction (23% vs. 20%), lowering taxable income and reducing federal income tax liability for many filers.
Low- and middle-income taxpayers at or below the SSTB threshold are phased in and effectively preserved from immediate disqualification, allowing more lower-income filers to keep the QBI deduction.
Investors in electing Business Development Companies (BDCs) whose dividends are interest-derived can include those dividends in QBI, enabling certain BDC investors and related financial firms to claim the deduction.
Expanding the QBI deduction reduces federal revenue, which could increase deficits or require cuts or offsets to other federal programs and services.
New phase-in rules, added definitions (e.g., for BDC dividends), and other changes increase tax complexity, raising compliance burdens for taxpayers and administrative workload for the IRS/Treasury.
Including dividends from electing BDCs in QBI may advantage certain investors and financial firms, creating uneven tax benefits across different investment types.
Based on analysis of 2 sections of legislative text.
Raises the QBI deduction from 20% to 23%, revises SSTB phase-in rules, adds an elective qualified BDC dividend category, and updates indexing rules.
Official title: To amend the Internal Revenue Code of 1986 to increase the deduction for qualified business income, and for other purposes.
Introduced April 21, 2026 by David Kustoff · Last progress April 21, 2026
Raises the qualified business income (QBI) deduction for owners of pass-through businesses from 20% to 23%, changes income-phase-in and limitation rules for specified service trades or businesses, adds an elective category for certain Business Development Company (BDC) dividends, updates a definition and an inflation-adjustment clause, and makes these tax-code changes effective for taxable years beginning after December 31, 2026. The bill is a targeted tax change aimed at expanding a deduction used primarily by small business owners and other pass-through taxpayers.