Small Business Tax Cut Act

Bill Number: H.R. 8415
Origin Chamber: House
Congress: 119th Congress, Session 2
Policy Area: Taxation
Status: Introduced
Latest Action: 2026-04-21: Referred to the House Committee on Ways and Means.
Last Updated: 2026-06-10T08:08:02Z

AI-Generated Summary

H.R. 8415: Small Business Tax Cut Act

Purpose

This bill aims to provide tax relief to small businesses and pass-through entities (like sole proprietorships, partnerships, and S corporations) by increasing and expanding the qualified business income (QBI) deduction under Section 199A of the Internal Revenue Code. The QBI deduction allows eligible business owners to deduct a percentage of their business income from their taxable income.

Key Provisions

Increases the QBI deduction rate from 20% to 23% of qualified business income.
Relaxes limitations for lower-income taxpayers:
Taxpayers with taxable income below a threshold amount (adjusted annually for inflation) get the full 23% deduction without limits based on wages paid or business property (W-2 wage/capital limits), and "specified service trades or businesses" (SSTBs, like law or consulting firms) fully qualify.
For income above the threshold, limitations phase in more gradually using a formula based on 75% of the excess income over the threshold.
Expands eligible income to include qualified interest dividends from electing Business Development Companies (BDCs)—investment firms that lend to small/mid-sized businesses and elect regulated investment company status.
Updates inflation adjustments for income thresholds, using 2025 as the base year instead of 2018.
Effective date: Applies to tax years beginning after December 31, 2026.

Significant Changes to Existing Law

Boosts deduction percentage: Raises the core QBI deduction from 20% to 23%, directly increasing the tax benefit.
Eases phase-out rules: Replaces the prior 50% phase-in range with a new 75% formula, allowing more taxpayers (especially SSTB owners) to access fuller deductions at moderate income levels.
Removes SSTB restriction for low earners: Previously, SSTBs were excluded above certain incomes; now fully eligible below the threshold.
Adds BDC dividends: New inclusion of specific BDC interest income in QBI-eligible amounts, broadening the deduction beyond REIT dividends.
These changes build on the 2017 Tax Cuts and Jobs Act's temporary Section 199A provisions, which expire after 2025, effectively extending and enhancing them.

Potential Impacts

On citizens: Lowers taxes for millions of pass-through business owners, potentially increasing disposable income, business investment, and job creation. Benefits vary by income—greatest for those below/near thresholds.
On government agencies: Reduces federal tax revenue (estimates not provided in bill), affecting IRS administration and Treasury budgeting; no direct agency mandates.
No notable international relations impacts.

Main Stakeholders Affected

Primary beneficiaries: Owners of pass-through businesses (e.g., small business owners, freelancers, professionals in SSTBs like doctors/lawyers).
Secondary: BDCs and their investors, as their dividends now qualify.
Others: High-income taxpayers see partial benefits; C-corporations (with flat 21% rate) unaffected.

Notable Legal, Constitutional, or Political Implications

Legal: Straightforward tax code amendments; aligns with Congress's power to set tax policy under Article I. No challenges anticipated.
Constitutional: None highlighted; promotes equal treatment for pass-throughs vs. corporations.
Political: Sponsored by Republicans; frames as pro-small business relief amid expiring 2017 tax cuts, potentially influencing 2026+ tax debates. Neutral on revenue loss or deficit effects.

This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.

Sponsor

Rep. Kustoff, David [R-TN-8]

Cosponsors (8)

Rep. Miller, Carol D. [R-WV-1], Rep. Steube, W. Gregory [R-FL-17], Rep. Tenney, Claudia [R-NY-24], Rep. Carey, Mike [R-OH-15], Rep. Fischbach, Michelle [R-MN-7], Rep. Moore, Blake D. [R-UT-1], Rep. Fuller, Clay [R-GA-14], Rep. Flood, Mike [R-NE-1]