# Plain Language Summary: Small Business Prosperity Act of 2023

This bill makes several major changes to how small business owners and self-employed people are taxed. The centerpiece is expanding a tax break called the "qualified business income deduction," which lets business owners deduct a portion of their business profits from their taxable income. Currently, this deduction is set to expire after 2025, but this bill makes it permanent. More importantly, it nearly doubles the deduction from 20 percent to 43 percent (jumping to 47 percent after 2025), meaning business owners could potentially avoid paying taxes on almost half their business income. This applies to most types of businesses—from freelancers and contractors to partnerships and small corporations—as long as the owner isn't just an employee working for someone else.

The bill also removes several restrictions that currently limit who can use this deduction. Right now, certain service-based businesses like consulting, accounting, and law firms face restrictions on using the full deduction if they earn above certain income thresholds. This bill eliminates those restrictions entirely, allowing service businesses to benefit equally with other types of businesses. Additionally, it removes a rule that ties the deduction to how much workers a business pays—meaning a business doesn't need to pay high wages to its employees to qualify for the maximum deduction.

The bill includes two other significant provisions. One allows businesses to change their legal structure (like converting from a corporation to an LLC) without triggering a tax bill, as long as the owners and assets stay the same. The other provision completely eliminates the federal estate tax—the tax that applies when wealthy people pass their assets to heirs—and preserves the "step-up in basis," which means heirs inherit assets at their current market value rather than the original purchase price, avoiding capital gains taxes on inherited property.

Overall, this bill would substantially reduce taxes for business owners and wealthy individuals, particularly benefiting those with higher incomes and significant assets to pass down to heirs.

Small Business Prosperity Act of 2023

Biggs, Andy

Small Business Prosperity Act of 2023 This bill modifies the tax deduction for qualified business income to (1) make such deduction permanent, (2) limit to 21% the top tax rate on qualified business income, (3) repeal the limitation on the deduction based on amount of wages paid, and (4) revise the definition of qualified trade or business to mean any trade or business other than the trade of business of performing services as an employee. The bill provides that a change in the organizational structure of a corporation is not a taxable event if there is no change among the owners, their ownership interests, or the assets of the organization, The bill repeals the estate tax&nbsp;after 2022.