Enhanced Small Business Growth Act of 2026

Key Points

• This bill increases the qualified business income (QBI) tax deduction from 20% to 30% for domestic manufacturers who earn at least 85% of their income from making tangible products in the U.S. This lets qualifying business owners keep more of what they earn.
• To qualify, a business must show that at least 20% of its cost of goods sold goes toward labor and overhead expenses within the United States. This ensures the tax benefit targets companies that truly operate and employ workers domestically.
• The bill doubles the wage-based limit on the deduction from 50% to 100% of W-2 wages for qualifying manufacturers. This helps businesses with higher payrolls claim a larger deduction without being penalized for paying workers well.
• The bill also changes how taxable income is computed for the QBI deduction. Taxpayers who itemize can now exclude charitable contributions from the calculation, potentially increasing the deduction amount.
• The new rules would take effect for tax years beginning after December 31, 2025, meaning qualifying businesses could claim the enhanced deduction starting with their 2026 tax returns.