Impact of 199A Deduction

As 2025 approaches, members of Congress are seriously evaluating many of the 2017 tax reform provisions that are scheduled to expire after 2025. One provision gaining significant attention is the 20% Section 199A deduction for qualified business income of pass-through entities. Post-TCJA, a pass-through entity is entitled to deduct 20% of qualified business income (which generally excludes service business income, although service businesses with income that falls below the annual threshold levels also qualify for the deduction). When income exceeds the relevant threshold, the deduction is capped at the greater of (1) 50% of W-2 wage income or (2) the sum of 25% of the W-2 wages of the business, plus 2.5% of the unadjusted basis, immediately after acquisition, of all qualified property.

We asked two professors and authors of ALM’s Tax Facts with opposing political viewpoints to share their opinions about the impact of the Section 199A deduction as it currently exists.

Below is a summary of the debate that ensued between the two professors.