Mom and Pop Tax Relief Act

This bill amends the Internal Revenue Code to modify the qualified business income deduction under Section 199A. It changes the deduction to a flat $25,000 limit per taxpayer, removes the 20% calculation, and simplifies related rules.

Sec. 2, Modification of 199A deduction: The bill replaces the current 20% qualified business income deduction with a flat $25,000 limit on the combined qualified business income amount for all trades or businesses. It removes the previous formula and the separate deduction for qualified cooperative dividends. It adds an adjusted gross income limitation that reduces the combined qualified business income by the amount the taxpayer's adjusted gross income exceeds $200,000 ($400,000 for joint returns). It eliminates the loss carryover rule and several other provisions, including the W-2 wage limit and the specified service trade or business exclusion. It also redefines "qualified trade or business" to exclude only the trade or business of performing services as an employee, and defines taxable income for the deduction as computed without regard to the deduction itself. The changes apply to taxable years beginning after December 31, 2025.