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H.R. 8415House119th Congress (2025-2027)In Committee

Small Business Tax Cut Act

To amend the Internal Revenue Code of 1986 to increase the deduction for qualified business income, and for other purposes.

Sponsored by David KustoffRep. David Kustoff (R-TN)
Introduced April 21, 2026

AI-Generated Summary

Updated April 28, 2026 at 6:11 AM UTC

The Small Business Tax Cut Act amends the tax code to increase the deduction for qualified business income from 20% to 23%, making it larger for small‑business owners and other eligible taxpayers. It also revises the income‑level limits that reduce the deduction, adds certain business‑development‑company interest dividends to the list of qualifying income, and updates the inflation‑adjustment formula. The changes apply to tax years beginning after December 31, 2026.

Key Provisions

  • Raises the qualified business income (QBI) deduction from 20% to 23% for eligible taxpayers.
  • Changes the way the deduction phases out for taxpayers whose taxable income exceeds a set threshold, using a new formula that limits the deduction based on 75% of the income above the threshold.
  • Allows dividends from certain business development companies (BDCs) that earn net interest income to be treated like qualified REIT dividends for the QBI deduction.
  • Updates the inflation‑adjustment rule for the QBI deduction, moving the reference year from 2018 to 2025 and adjusting the calendar year used in the calculation.
  • Sets the new rules to take effect for tax years that start after December 31, 2026.

Legislative Activity

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HouseIntro Referral Latest Action

Referred to the House Committee on Ways and Means.

Ways and Means Committee

April 21, 2026

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HouseIntro Referral

Introduced in House

April 21, 2026

HouseIntro Referral

Referred to the House Committee on Ways and Means.

Ways and Means Committee

April 21, 2026

Bill Text

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Introduced in HouseIssued April 21, 2026

I

119th CONGRESS

2d Session

H. R. 8415

IN THE HOUSE OF REPRESENTATIVES

April 21, 2026

Mr. Kustoff (for himself, Mrs. Miller of West Virginia, Mr. Steube, Ms. Tenney, Mr. Carey, Mrs. Fischbach, and Mr. Moore of Utah) introduced the following bill; which was referred to the Committee on Ways and Means

A BILL

To amend the Internal Revenue Code of 1986 to increase the deduction for qualified business income, and for other purposes.

1.

Short title

This Act may be cited as the Small Business Tax Cut Act.

2.

Increase in deduction for qualified business income

(a)

In general

Subsections (a)(2), (b)(1)(B), and (b)(2)(A) of section 199A of the Internal Revenue Code of 1986 are each amended by striking 20 percent and inserting 23 percent.

(b)

Modification of limitations based on taxable income

(1)

In general

Section 199A(b)(3) of such Code is amended to read as follows:

(3)

Modification of determination of combined qualified business income amount based on taxable income

(A)

Exception from limitations

In the case of any taxpayer whose taxable income for the taxable year does not exceed the threshold amount—

(i)

paragraph (2) shall be applied without regard to subparagraph (B), and

(ii)

a specified service trade or business shall not fail to be treated as a qualified trade or business solely by reason of subsection (d)(1)(A).

(B)

Phase-in of limitations

In the case of any taxpayer whose taxable income for the taxable year exceeds the threshold amount, the sum described in paragraph (1)(A) (determined without regard to this subparagraph) shall instead be an amount (if greater) equal to the excess (if any) of—

(i)

the sum described in paragraph (1)(A) (determined by applying the rules of clauses (i) and (ii) of subparagraph (A)), over

(ii)

the limitation phase-in amount.

(C)

Limitation phase-in amount

For purposes of subparagraph (B), the limitation phase-in amount shall be an amount equal to 75 percent of the excess (if any) of—

(i)

the taxable income of the taxpayer for the taxable year, over

(ii)

the threshold amount.

.

(2)

Conforming amendment

Section 199A(d) of such Code is amended by striking paragraph (3).

(c)

Deduction for qualified business income To apply to certain interest dividends of qualified business development companies

(1)

In general

Subsections (b)(1)(B) and (c)(1) of section 199A of such Code are each amended by inserting , qualified BDC interest dividends, after qualified REIT dividends.

(2)

Qualified BDC interest dividend defined

Section 199A(e) of such Code is amended by adding at the end the following new paragraph:

(5)

Qualified BDC interest dividend

(A)

In general

The term qualified BDC interest dividend means any dividend from an electing business development company received during the taxable year which is attributable to net interest income of such company which is properly allocable to a qualified trade or business of such company.

(B)

Electing business development company

For purposes of this paragraph, the term electing business development company means a business development company (as defined in section 2(a) of the Investment Company Act of 1940) which has an election in effect under section 851 to be treated as a regulated investment company.

.

(d)

Modified inflation adjustment

Section 199A(e)(2)(B) of such Code is amended—

(1)

by striking 2018 and inserting 2025, and

(2)

in clause (ii), by striking , determined by substituting calendar year 2017 for calendar year 2016 in subparagraph (A)(ii) thereof.

(e)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2026.