Bonus guaranteed deduction for 2026 and 2027

(a) In general Section 63(c) of the Internal Revenue Code of 1986 (as amended by section 2) is amended by adding at the end the following new paragraph: (8) Bonus guaranteed deduction for taxable years 2026 and 2027 (A) In general In the case of a taxable year beginning after December 31, 2025, and before January 1, 2028, the guaranteed deduction shall be increased by the amount of the bonus guaranteed deduction. (B) Bonus guaranteed deduction For purposes of this paragraph, the bonus guaranteed deduction is— (i) $4,000 in the case of a joint return or a surviving spouse (as defined in section 2(a)), (ii) $3,000 in the case of a head of household, and (iii) $2,000 in any other case. (C) Adjustment for inflation In the case of a taxable year beginning after 2026, each dollar amount in subparagraph (B) shall be increased by an amount equal to— (i) such dollar amount, multiplied by (ii) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting 2025 for 2016 in subparagraph (A)(ii) thereof. If any increase under this subparagraph is not a multiple of $50, such increase shall be rounded to the next lowest multiple of $50. (D) Limitation on bonus guaranteed deduction based on modified adjusted gross income (i) In general The bonus guaranteed deduction determined under subparagraph (B) shall be reduced (but not below zero) by 5 percent of so much of the taxpayer's modified adjusted gross income as exceeds the threshold amount. For purposes of the preceding sentence, the term modified adjusted gross income means adjusted gross income increased by any amount excluded from gross income under section 911, 931, or 933. (ii) Threshold amount For purposes of clause (i), the threshold amount is— (I) $400,000 in the case of a joint return or a surviving spouse (as defined in section 2(a)), (II) $300,000 in the case of a head of household, and (III) $200,000 in any other case.. (b) Effective date The amendments made by this subsection shall apply to taxable years beginning after December 31, 2025.