Sponsors (12)
The bill expands and preserves the QBI deduction for more small businesses, pass-through owners, and some BDC investors—delivering tax relief to many filers—at the cost of reduced federal revenue, added complexity for taxpayers and the IRS, and potentially uneven benefits for certain financial investors.
Small-business owners and pass-through taxpayers receive a larger qualified business income (QBI) deduction (raised from 20% to 23%), reducing their taxable income and federal income tax liability.
Low- and middle-income taxpayers at or below the SSTB thresholds are phased in/exempted from specified service trade or business (SSTB) disqualification, preserving QBI deductions for more lower- and middle-income filers.
Investors in electing business development companies (BDCs) whose dividends are treated as interest-derived may include those dividends in QBI, allowing certain financial investors to claim the deduction.
All taxpayers and the federal budget face reduced federal revenue because the expanded QBI deduction lowers tax receipts, which could increase deficits or require spending cuts or offsets.
Taxpayers, small-business owners, and the IRS will face added complexity and compliance/administrative burdens due to new phase-in rules, new definitions for BDC dividends, and statutory changes.
Certain investors and financial firms could receive preferential tax treatment by including electing BDC dividends in QBI, creating uneven tax benefits across investment types.
Based on analysis of 2 sections of legislative text.
Raises the qualified business income deduction from 20% to 23% and revises eligibility/limitation rules, adding a new elective BDC dividend category.
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 rate for eligible taxpayers from 20% to 23% and changes several technical rules that determine who can claim the deduction and how limits phase in. It adds an elective category for certain dividends from business development companies and updates an inflation-adjustment clause. The changes apply to tax years beginning after December 31, 2026. This is a targeted tax-law change that primarily affects owners of pass-through businesses (including many small businesses and self-employed individuals) by increasing a key deduction and adjusting eligibility and limitation rules that determine how much of the deduction they may claim.