Small Business Tax Cut Act
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Progress
Where this bill stands in the legislative process.
- Introduced
- Passed House
- Passed Senate
- To President
- Became Law
Overview
This bill, the Small Business Tax Cut Act, increases the deduction available to small businesses for qualified business income. Specifically, it raises the deduction rate from 20% to 23% and modifies how the deduction is calculated based on a business’s taxable income. It also expands the deduction to include qualified dividends from electing business development companies (BDCs). The changes are set to take effect beginning in 2027.
Key provisions
- Increases the qualified business income deduction rate from 20% to 23%.
- Modifies the calculation of the deduction based on a taxpayer’s taxable income.
- Expands the deduction to include qualified dividends from electing business development companies (BDCs).
- Defines ‘qualified BDC interest dividend’ as dividends from BDCs related to properly allocable net interest income.
- Establishes a ‘limitation phase-in amount’ for taxpayers with higher taxable income.
- Adjusts the inflation adjustment used to calculate the deduction to 2025.
- Specifies that the changes apply to taxable years beginning after December 31, 2026.
Who is affected
- Small businesses
- Business owners
- Taxpayers with qualified business income
- Business development companies (BDCs)
- Investors in BDCs
Notable changes
Bill text
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Sponsors
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Cosponsors
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