This bill increases tax deductions for small businesses and manufacturers that produce goods domestically in the United States. Specifically, it enhances the qualified business income deduction under tax law for companies that qualify as "domestic manufacturers," raising the deduction percentage from 20 percent to 30 percent for eligible businesses and removing certain limitations on wage-related deductions. To qualify, a company must derive at least 85 percent of its business income from manufacturing tangible products and ensure that at least 20 percent of the costs of goods sold are tied to labor and overhead expenses within the United States. The changes take effect for tax years beginning after December 31, 2025, meaning they apply starting with the 2026 tax year. The legislation does not specify direct funding amounts but effectively reduces federal tax revenue by allowing larger deductions for qualifying domestic manufacturers.
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