The Senate took it away. Now Congress wants it back, and this time they’re asking for more. If you run your business as an LLC, S-corp, sole proprietorship, or partnership, there’s a bill sitting in the House Ways and Means Committee right now that could directly lower your federal tax bill starting in 2027. H.R. 8415, the Small Business Tax Cut Act, introduced by Rep. David Kustoff (R-TN) on April 21, 2026, would raise the Section 199A qualified business income deduction from 20% to 23%. That three-point difference sounds small. It isn’t.

What the Numbers Actually Look Like

I’ll be honest: when I first saw “a 3% increase in the QBI deduction,” my eyes almost glazed over. Three percent sounds like rounding error. But the mechanics matter here, so let’s slow down.

The Section 199A deduction doesn’t work like a tax credit. It reduces your taxable income, and its value depends entirely on your marginal rate. If you’re a sole proprietor with $150,000 in qualified business income, here’s the concrete difference this bill would make:

ScenarioQBI Deduction RateDeduction AmountTaxable Income Reduced By
Current law (OBBBA permanent rate)20%$30,000$30,000
H.R. 8415 proposed rate23%$34,500$34,500
Difference+3 points+$4,500+$4,500

That $4,500 in additional deduction is real money coming off the top of your taxable income. At a 22% marginal rate, that’s roughly $990 back in your pocket. At 24%, it’s about $1,080. For a business with $300,000 in QBI, you’re talking about double those figures. This isn’t transformational for every owner, but for millions of pass-through businesses running tight margins, it’s a meaningful number.

The Political Story Behind This Bill

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What surprised me most when I dug into this is that H.R. 8415 isn’t a fresh idea. It’s a comeback attempt.

The House-passed version of what became the One Big Beautiful Bill Act of 2025 had already included the 23% rate. The Senate stripped it out before final passage. So what got signed into law made the 20% deduction permanent, which was genuinely significant since it had been set to expire after 2025. But the 23% piece didn’t make it.

Kustoff’s bill is a direct continuation of that fight. The NFIB, the S Corporation Association, and the Small Business and Entrepreneurship Council all formally endorsed H.R. 8415 in April 2026, framing it explicitly as a “build-on” to the permanent rate that passed. As the NFIB stated in its April 23 press release, the organization sees this as the logical next step for Main Street owners who are still paying higher effective rates than C-corporations. That’s a real policy argument, and it’s one that resonates with a lot of small business owners I’ve talked to over the years.

The bill was referred to the House Ways and Means Committee the same day it was introduced. That’s where it currently sits.

The Obstacle That Won’t Go Away

Here’s where I have to give you the unsanitized version. The bill faces a serious headwind, and it’s the same one that got the 23% provision cut from the OBBBA in the Senate last year: the price tag.

The Tax Foundation estimates that raising the QBI deduction rate to 23% would cost approximately $104 billion in lost federal revenue. That’s not a rounding error for budget hawks, and the Senate’s budget math is tighter than the House’s appetite for tax cuts right now. The political dynamics could shift. More advocacy pressure, a favorable scoring window, or a broader tax vehicle could carry this across the line. But as of mid-2026, $104 billion is a real obstacle, not a talking point.

The research on whether this kind of pass-through deduction meaningfully stimulates small business investment is honestly mixed. Some economists argue the original 20% deduction mostly benefited higher-income owners rather than the small sole proprietors it was designed for. Others point to the structural fairness argument: C-corps pay a flat 21% corporate rate, while many pass-through owners face effective rates well above that, and the QBI deduction partially addresses that disparity. Both things can be true at once.

What You Should Actually Do Right Now

This is where I want to be direct with you, because I’ve seen owners make two opposite mistakes with pending legislation: they either ignore it until it’s too late to plan, or they restructure their entire business around a bill that never passes.

Don’t do either.

What you should do is get a clear picture of your current QBI deduction situation before this bill resolves one way or the other. A lot of business owners I work with don’t actually know whether they’re taking the full deduction they’re already entitled to under the 20% rule, which has its own wage-based and property-based limitations that trip people up. If you’re not optimizing the current 20% deduction, a potential 23% rate is almost beside the point.

Per Frazier & Deeter’s June 2026 analysis, tax committee members are actively working to advance this legislation, so the probability of some movement before year-end isn’t zero. The effective date in the bill is for tax years beginning after December 31, 2026, which means if it passes, 2027 is your first year of benefit. That gives you planning time. But you need to know your baseline now to plan intelligently.

Talk to your CPA or tax advisor before year-end. Specifically, ask them to model two scenarios: your 2027 tax picture at 20% and at 23%. The difference in your case might be modest or it might be significant enough to inform decisions about entity structure, owner compensation, or retirement contributions. Professional consultation here isn’t optional. These rules have enough phase-outs, limitations, and income thresholds that a generic answer is genuinely dangerous.

QBI Deduction Amount by Income Level (20% vs 23%)
$75K QBI @ 20%$15,000
$75K QBI @ 23%$17,250
$150K QBI @ 20%$30,000
$150K QBI @ 23%$34,500
$300K QBI @ 20%$60,000
$300K QBI @ 23%$69,000
Source: H.R. 8415 / Congress.gov, April 2026

The bottom line here is straightforward: this is a real bill with real advocacy muscle behind it, a specific dollar number attached to it, and a clear reason it failed once before. Whether it passes in 2026 is genuinely uncertain. Whether you should understand how it would affect your specific situation is not uncertain at all. You should, and you should start now.

Sources

This article is for general informational purposes only and does not constitute financial, tax, or legal advice. Business finance and tax rules vary by entity type, state, and individual circumstances. Consult a qualified CPA, enrolled agent, or business attorney for advice specific to your situation.

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