Small Business Prosperity Act of 2025
The Small Business Prosperity Act of 2025 would overhaul the way the Qualified Business Income (QBI) deduction under Section 199A works, make that deduction permanent, and significantly expand who can take it. It would raise the top deduction percentage to 43% (47% for tax years beginning after 12/31/2025), remove the W-2 wage and certain eligibility limits, and eliminate the exclusion for service-based industries. In addition, the bill includes provisions to ease the tax treatment of corporate reorganizations, lowers barriers for changing corporate form, and repeals the federal estate tax (Chapter 11) starting with estates of decedents dying after 12/31/2024, while preserving the basis step-up generally. The amendments are slated to apply to tax years beginning after 12/31/2024. The sponsor is listed as Mr. Biggs of Arizona, introduced January 3, 2025, and referred to the Ways and Means Committee. In short, the bill would dramatically expand and permanently elevate the QBI deduction for many owners of pass-through businesses, while eliminating estate taxes and simplifying some corporate structuring rules.
Key Points
- 1Makes the Section 199A deduction permanent by removing the sunset provision, ensuring the deduction remains in place indefinitely.
- 2Increases the deduction to 43% of qualified business income (47% for taxable years beginning after 12/31/2025), effectively delivering a much larger tax cut for QBI than current law.
- 3Repeals the W-2 wage limitation and the exclusion of specified service trades or businesses (SSTBs), meaning more types of businesses (including many service businesses) could qualify for the deduction.
- 4Recasts and broadens conformity provisions within Section 199A (including pass-through taxation rules for partnerships and S corporations, treatment of Puerto Rico-source QBI, and removal of several complexities and calculations related to the deduction).
- 5Repeals the estate tax (Chapter 11) for estates of decedents dying after 12/31/2024 and retains the basis step-up in basis for inherited property, with an added provision that corporate reorganizations may occur without triggering a taxable event if ownership and assets remain substantially the same.