If you run an LLC, file as an S-corp, or report business income on a Schedule C, there’s a bill working its way through Congress right now that could directly affect how much of your income you never pay tax on. Rep. David Kustoff (R-TN) introduced H.R. 8415, the Small Business Tax Cut Act of 2026, on April 21, 2026, with a simple but meaningful goal: push the Section 199A qualified business income deduction from 20% to 23%. It has six House co-sponsors, the backing of the NFIB and the S Corporation Association, and according to analysts at Frazier & Deeter, Republican committee members are calling themselves “optimistic” about broad support. It hasn’t passed yet, and there are real hurdles ahead. But if you own a pass-through business, this is the tax proposal you should be watching right now.

What the QBI Deduction Actually Does (and Where It Stands Today)

You might be wondering whether this even applies to you. Here’s the short version: if your business income flows through to your personal tax return, which it does for sole proprietors, partnerships, S-corps, and most LLCs, the QBI deduction lets you exclude a portion of that income from federal taxation entirely. You don’t have to do anything special to claim it. It just reduces your taxable income.

The deduction started at 20% back in 2018 and was always scheduled to expire after 2025. That uncertainty is over. The One Big Beautiful Bill Act, signed on July 4, 2025 and effective January 1, 2026, made the 20% deduction permanent. The OBBBA also added a $400 minimum deduction for anyone with at least $1,000 of qualified business income, which matters for smaller operations that didn’t always see a meaningful benefit. And it widened the phase-in income ranges to $201,750 to $276,750 for single filers (double that for joint filers), up from the tighter 2025 bands. That means more owners are now eligible for the full deduction than were before.

So if you were worried about the deduction going away, that worry is gone. What H.R. 8415 is proposing is building on that foundation.

What a 3-Point Jump Actually Means for Your Bottom Line

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ScenarioQBI AmountDeduction at 20%Deduction at 23%Tax Savings at 24% Rate
Small business$200,000$40,000$46,000$1,440
Medium business$400,000$80,000$92,000$2,880

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Three percentage points sounds small. It isn’t.

Say your business generates $200,000 in qualified business income. At 20%, you deduct $40,000 from your taxable income. At 23%, that deduction becomes $46,000. That extra $6,000 in deductible income, taxed at a 24% marginal rate, saves you $1,440 in federal taxes for that year alone. Scale that up to $400,000 in QBI, and you’re looking at nearly $3,000 in annual savings from the rate change.

The Tax Foundation estimates the full cost of this change at roughly $104 billion in lost federal revenue over the budget window. That’s a real number, and it’s also why the bill faces its biggest obstacle: congressional budget rules require lawmakers to identify a “pay-for,” some offset that covers that cost, before the bill can advance. As of late June 2026, that offset hasn’t been identified. Frazier & Deeter’s analysts note that the most likely window for this bill to move forward is tied to expiring OBBBA consumer provisions in 2028 and 2029, when Congress will be revisiting the broader tax picture anyway.

Why the Business Community Is Taking This Seriously

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More than 90% of U.S. businesses are structured as pass-through entities, according to Rep. Kustoff’s office. That’s not a niche issue. Any change to the 199A rate touches an enormous share of the country’s employers, freelancers, and small business owners at once.

That reach is exactly why the NFIB moved quickly to endorse H.R. 8415 after its April 21 introduction. Their support, combined with the S Corporation Association and the SBE Council, gives the bill a coalition of organizations that have real lobbying presence on Capitol Hill. Co-sponsors include Reps. Steube, Tenney, Carey, Miller, Fischbach, and Blake Moore, which signals at least some bipartisan-adjacent credibility within House Republican ranks. That’s not nothing, even if the bill hasn’t moved to a committee vote.

Here’s what I tell people when they ask whether they should pay attention to a bill that isn’t law yet: watch who’s backing it, not just who introduced it. When established small business advocacy groups put their name on something this early in the process, it usually means they’re working the phones behind the scenes too.

What This Means for Your Planning Right Now

This is where I want to be direct with you, because the temptation is to either ignore the bill until it passes or start making business decisions as if it already has. Neither is the right move.

For 2026, plan around what’s real: the 20% deduction, the $400 minimum, and the expanded phase-in thresholds. Make sure your entity structure is set up to actually capture the deduction you’re entitled to. A surprising number of small business owners I’ve worked with over the years were leaving QBI money on the table because their bookkeeping wasn’t clean enough to clearly identify qualified business income, or because they hadn’t revisited their entity election in years.

If H.R. 8415 does pass and takes effect for 2027, the 3-point increase won’t require you to restructure anything. The deduction is calculated the same way; the percentage just gets better. But that’s exactly why now is a good time to make sure your system is tight. If your records are a mess, you won’t be ready to capture either rate cleanly.

On the question of 2027 planning specifically: keep this bill in your peripheral vision, not your windshield. Check in on it again in late 2026 when the pay-for conversation picks up. If you have a tax advisor, it’s worth a 15-minute conversation before year-end about what a 23% rate would mean for your specific situation, particularly if your income is near a threshold or if you operate a specified service trade or business where QBI rules get more complicated.

The broader picture here is actually encouraging. Whether or not this specific bill passes, the fact that the 20% deduction is now permanent represents a huge shift in planning certainty for pass-through owners. For years, advisors like me were telling clients to enjoy the deduction but not count on it. That caution is no longer necessary. What H.R. 8415 is asking is whether “permanent” can also mean “better,” and as of right now, that’s a live question.

The answer won’t come this week. But it may come sooner than most people expect. Stay informed, keep your books clean, and talk to a qualified tax professional before making any structural changes to your business based on legislation that hasn’t crossed the finish line.

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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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