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 full analysis lists 4 implications of this text.
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