A new congressional bill seeks to help small business owners save taxes by lowering the small tax deduction rate.
Representative David Kustoff (R-TN-08) introduced the Small Business Tax Cut Act, which would increase the small business deduction rate from 20 percent to 23 percent. The current deduction lets qualified businesses reduced 20% of their income from federal income taxes.
The One Big Beautiful Bill made the 20 percent small business tax deduction rate permanent after it was created in the 2017 Tax Cuts and Jobs Act.
According to Kustoff, his bill proposal “sends a clear signal that Congress is serious about keeping Main Street competitive.”
“Small businesses and family farms are central to West Tennessee’s economy. By expanding the 199A deduction to 23 percent, we are giving local business owners the flexibility to hire more workers and invest in their operations,” he said.
Kustoff’s bill proposal makes it easier for specified service businesses, such as doctors, lawyers, and consultants, to qualify for the tax deduction. Furthermore, the tax deduction would also expand to include business development companies.
The bill proposal changes the base year of inflation from 2018 to 2025.
If the bill becomes law, it will apply to tax years starting after December 31, 2026.
Along with Kustoff, the bill is being co-sponsored by Representatives Greg Steube (R-FL-17), Claudia Tenney (R-NY-24), Mike Carey (R-OH-15), Carol Miller (R-WV-1), Michelle Fischbach (R-MN-07), and Blake Moore (R-UT-01).
Numerous organizations, including the Small Business & Entrepreneurship Council and the National Federation of Independent Business (NFIB), support the Small Business Tax Cut Act.
Dylan Rosnick, NFIB’s principal of federal government relations, said the small business tax deduction has “been vital for small businesses to remain competitive and grow their businesses.”
“Congress saw these benefits and made the 20% Small Business Tax Deduction permanent through the Working Families Tax Cuts. Rep. Kustoff’s Small Business Tax Cut Act builds on this success and would provide 9 in 10 small businesses with tax cuts,” Rosnick said.
“The legislation would also expand the Small Business Tax Deduction to small businesses who are prevented from utilizing the deduction,” he added.
The NFIB released a report in April showing that the 20 percent tax deduction will help Tennessee create 23,000 jobs annually over the next 10 years, with the state’s GDP growing by $1.2 billion each year during that period.
The report said after 2035, the tax deduction will create 44,000 jobs in Tennessee annually while growing the state’s GDP by $2.4 billion each year.
Jim Brown, the Tennessee state director for NFIB, said the small business deduction “allows small business owners to keep more of their hard-earned income and reinvest it into their employees and operations.”
“Making it permanent gives them the certainty they need to plan for the future,” he said.
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Zachery Schmidt is the digital editor of The Star News Network. Email tips to Zachery at zschmidt1717@gmail.com.
