Self-employed deduction would rise from 20% to 23% under HR 8415

What does this do?

HR 8415 would increase the Section 199A deduction for qualified business income from 20% to 23%, beginning in the 2027 tax year. The bill would also adjust phase-out thresholds for higher earners and reset the inflation indexing from 2018 to 2025. Additionally, it would extend the deduction to interest dividends paid by Business Development Companies, a treatment previously limited to REIT dividends.

Who does it affect?

Owners of pass-through businesses, including sole proprietors, partners in partnerships, and S-corporation owners, are the primary group affected. Investors who receive qualifying interest dividends from Business Development Companies would also be affected, while regular wage employees would not.

Why does it matter?

Raising the deduction percentage and updating inflation thresholds would reduce the share of pass-through business income subject to taxation for eligible owners starting in 2027. Expanding the deduction to Business Development Company dividends would extend a tax advantage that currently applies only to certain REIT dividends.

Where does it stand?