Small-business tax deduction capped at $25K, simplified but narrower
H.R. 3249 — Mom and Pop Tax Relief Act · Filed by Gwen Moore (D-WI) · 7 cosponsors · Introduced May 7, 2025 · Referred to committee
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What it does
This bill modifies the qualified business income (QBI) deduction under Section 199A of the tax code to cap the deduction at $25,000 per year for small business owners and self-employed individuals, phasing it out for those with adjusted gross income above $200,000 ($400,000 for joint filers). It simplifies the deduction by removing the existing 20% limitation and W-2 wage requirements, making it easier for mom-and-pop businesses to claim but narrower in scope than current law.
Why we flagged it
The bill restructures the qualified business income deduction by capping it at $25,000 and simplifying eligibility, shifting from a percentage-based deduction tied to wages to a flat-dollar cap. This is a targeted tax policy change affecting self-employed individuals and pass-through business owners.
What the text implies
- The $25,000 cap may disproportionately benefit very small businesses while reducing tax relief for professional practices (law, accounting, consulting) that currently claim larger deductions, potentially creating a regressive effect within the small-business category.
- Removal of W-2 wage requirements eliminates a complexity check but may reduce incentives for small businesses to hire employees, since wage-based deduction limits are no longer a factor.
- The phase-out at $200,000/$400,000 AGI creates a cliff effect where businesses crossing that threshold lose deduction eligibility, potentially discouraging growth or creating tax-planning distortions.
- Effective date of 2026 creates a retroactive-looking application that may affect tax planning for 2025 filers and creates uncertainty about transition rules for businesses straddling the threshold.
Section numbers refer to the bill text the analysis read — linked under Primary records below.
Who it affects
The bill simplifies tax filing for small business owners by removing complex wage-tracking requirements and lowering the threshold to claim the deduction, which benefits lower-income self-employed workers and sole proprietors. However, it caps the deduction at $25,000 and phases it out for higher earners, potentially reducing tax relief for growing small businesses and professional practices that currently benefit from larger deductions under existing law.
Who stands to gain
- sole proprietors and self-employed individuals with QBI under $25,000
- pass-through entities (S-corps, partnerships, LLCs) with lower combined business income
Named in the bill
Internal Revenue Code Section 199A, IRS, Social Security Administration, self-employed individuals, pass-through businesses
Where it stands
7 cosponsors: 7 Democrats.
- May 7, 2025 — Introduced · Congress.gov: “Introduced in House”
- May 7, 2025 — Referred to House Committee on Ways and Means · Congress.gov: “Referred to the House Committee on Ways and Means”
Dates and quoted wording are Congress.gov's action record; the timeline shows status changes, not every procedural step.
How this was measured
Analysis — Quorum's AI read the bill text published by Congress.gov (3,776 characters) on Jul 25, 2026. Section numbers in the findings refer to that text, linked below; transparency and hidden-provision scores are compared against the median of 16,222 analysed bills.
Status and sponsors — Congress.gov's bill record — actions, committee referrals and cosponsors — loaded nightly. The timeline shows status changes, not every procedural action.
As of — page rendered 2026-10-20.
“Small-business tax deduction capped at $25K, simplified but narrower” QuorumCivic. https://share.quorumcivic.app/bill/119/hr3249 Report an error
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