What H.R. 8415 Actually Does

The Small Business Tax Cut Act, H.R. 8415, was introduced by Rep. David Kustoff (R-TN) and previewed in late April 2026. It does three concrete things to the IRC § 199A deduction: it raises the rate from 20% to 23%, it adjusts the income-based phase-in and phase-out so the “benefit cliff” gets smoother, and it removes the discrimination against specified service trades or businesses (SSTBs) below a new income threshold.

The third piece is the one most NYC owners care about. Under current law, an SSTB — a business performing services in health, law, accounting, consulting, financial services, performing arts, athletics, brokerage, and several other categories — gets the deduction phased out completely once the owner’s taxable income exceeds the threshold ($241,950 single / $483,900 joint for 2026, indexed). Kustoff’s bill would let SSTB income qualify for the full 23% deduction up to a new threshold, then phase it out from there. The press release uses the phrase “create a smoother, more predictable structure as businesses grow.”

Why The Cost Argument Will Be The Sticking Point

The Senate killed the same idea last year. The OBBB version of the bill that passed the House proposed the same 20% to 23% jump. The Senate dropped it. The reason was straightforward: cost. The Congressional Budget Office scored extending the 20% deduction alone at over $700 billion over ten years. Going to 23% with threshold adjustments adds more than $100 billion on top of that, per PwC’s Rohit Kumar in public remarks last June.

Sen. Steve Daines (R-MT) said publicly last spring that the House’s 23% proposal “came as a little bit of a surprise” — Senate Republicans had been focused on making 20% permanent, not boosting the rate. NYU Tax Law Center’s Chye-Ching Huang called the same idea “inefficient, inequitable, and costly” and said it “makes it more generous and more valuable to higher-income people, especially those in certain industries including lawyers and lobbyists.” Those critiques are the same ones that would apply to H.R. 8415.

So this isn’t a stalking horse. It’s a serious push, but the price tag is the same as last year and the Senate hasn’t signaled appetite. The likeliest path is the House passes a version, the Senate drops the rate boost, and what survives is the SSTB threshold tweak — which costs less and has cross-aisle interest because it benefits middle-income professionals, not just six-figure ones.

Practical Implications By Client Situation

You’re an NYC SSTB owner above the current threshold

Your 199A deduction today is zero. We see this most often with NYC dentists, plastic surgeons, mid-firm lawyers, financial advisors, and CPA practices that hit the threshold the moment they have a couple of partners and a healthy book. If H.R. 8415 passes with the SSTB carveout intact, the math changes overnight. Plan now so you don’t end up restructuring in December — the time to think about reasonable compensation, partner allocations, and whether to push deductions into 2027 versus 2026 is before Congress acts, not after.

You’re a non-SSTB pass-through above the wage / UBIA limit

You already get some 199A. The bill would push your deduction from 20% to 23%, a 15% relative increase. For an NYC contractor, restaurant group, or e-commerce S-corp doing $1M of QBI, that’s an extra $30K of deduction — about $10K of federal tax at the top bracket. Worth tracking. Worth not making big structural decisions to optimize for, since the rate boost is the piece most likely to be cut in conference.

You’re below the threshold today

You already get the full 20% deduction without SSTB or wage limit issues. The bill makes you a little better off — 23% on the same income — but the change is incremental. The bigger story for you is the “smoother phase-in” language. If the bill recalibrates the cliff so growing into the threshold is gradual rather than abrupt, that removes a real planning trap that catches NYC business owners every year as they cross $241,950 / $483,900 of taxable income.

You operate through both a non-SSTB and an SSTB (mixed practice)

This is the population that lives with the 199A SSTB rules every day — a doctor with a non-SSTB billing entity, an attorney with a litigation funding side, a financial advisor with an insurance agency. Today, the SSTB taint can flow across affiliated entities under the “crack and pack” anti-abuse rules. The bill doesn’t obviously fix that, but if Congress is rewriting the SSTB definition for purposes of the new threshold, expect downstream changes to the regulations under Reg. § 1.199A-5 too. That’s a regulatory project that could take 12-18 months even if the statute changes fast.

Open Questions and Timing

The bill is in the Ways and Means queue. There’s no markup date scheduled yet. The political calendar is tight: 2026 is an election year, and tax-cut bills always look easier to advance pre-election than post-election. Realistically, anything passing this Congress would have to move by late summer or fall.

The Senate is the bigger question. Daines and other Senate Republicans wanted permanence and got it in OBBB. The argument now is that they shouldn’t be paid twice — they already got 20% permanent, they shouldn’t also get 23%. Whether the rate boost survives depends on whether House leadership wants to spend chips on this versus other 2026 priorities.

For planning, we’d watch three things: the markup, any conference committee draft, and revenue offsets. If the bill picks up offsets — pay-fors that look like trims to other deductions — that’s a sign leadership thinks it has Senate runway. If it stays a clean rate boost with no offsets, it’s probably dying in the Senate.

How The Reed Corporation Works With Clients On 199A

For our NYC professional-services clients — the doctors, lawyers, financial advisors, dentists, and consultants who lose 199A under current SSTB rules — we run an annual taxable-income projection by mid-fall and model what 199A would look like at every plausible scenario. That sits inside our broader tax strategy work and feeds directly into the year-end 1040 and 1120-S / 1065 conversations. If H.R. 8415 advances, we’ll fold the new thresholds into that model immediately rather than waiting for IRS guidance.

For non-SSTB pass-through owners, the planning play is different — it’s about wages, UBIA of qualified property, and entity structure. Our business owner clients see this every fall. If you have a single-member LLC running through Schedule C, an S-corp, or a partnership and you’re not sure how 199A is being calculated on your return, that’s worth a 30-minute conversation. See also our QBI deduction primer.

Common Questions

Is the 199A deduction permanent now?

Yes — the OBBB made the 20% deduction permanent. H.R. 8415 would raise the rate to 23% and adjust the SSTB / threshold rules. None of that touches the underlying permanence.

What is an SSTB and why does it matter?

SSTB stands for “specified service trade or business” — health, law, accounting, financial services, consulting, performing arts, athletics, and a few other categories. Above the income threshold, SSTB owners lose the 199A deduction entirely. H.R. 8415 would let SSTB income qualify up to a new (likely higher) threshold.

Will my deduction change for the 2026 tax year if Congress acts in summer 2026?

Possibly. Most pass-through tax bills include retroactive effective dates — the OBBB itself reached back to the start of 2025 in places. If H.R. 8415 passes, watch the effective date language carefully. If it’s 2026, every projection we’ve run for the year changes.

Should I restructure my entity now in case the bill passes?

No. Restructuring is permanent; bills are not. Wait for an actual statute. The smart move now is to keep clean books and clean compensation arrangements so that whatever Congress does, your numbers are ready.

How does 199A interact with the NYC PTET for S-corp owners?

199A is a federal deduction; PTET is a state-and-local-tax workaround at the entity level. They don’t directly offset, but they both reduce federal taxable income — PTET by reducing pass-through income at the federal level, 199A by deducting 20% (or 23%) of that income. The interaction matters when modeling reasonable comp on an S-corp.

What about real estate? Do I get 199A on rental income?

Generally yes, but only if the rental activity rises to the level of a §162 trade or business. The IRS provides a safe harbor under Rev. Proc. 2019-38. Triple-net leases generally don’t qualify. If H.R. 8415 changes the rate, it changes the rate on real estate income too.

Source

This analysis draws on Maureen Leddy’s reporting at Thomson Reuters Checkpoint News, “A Push to Boost the Pass-Through Deduction,” published April 28, 2026, and on Reedcorp’s working knowledge of IRC § 199A and the implementing regulations under Reg. § 1.199A-5.