Senate Changes to 199A Deduction

The Senate has now released its version of Trump’s “big, beautiful bill” and, as expected, it does not neatly align with the House-passed version. Notably, the Senate provision on Section 199A differs from the House version, though both versions make the 199A deduction permanent. The House draft would raise the 20% qualified business income (QBI) deduction to 23% and make it easier for specified service trades and businesses (SSTBs) to qualify. Instead of phasing in the existing SSTB and wage and investment limitations over a fixed range of taxable income, the House would phase the limitations in at a fixed rate. For each dollar of taxable income over the threshold amount, a taxpayer’s deduction for QBI would be reduced by 75 cents until the SSTB and wage/investment limitations are fully phased in. The Senate version did not contain the increase or the 75-cent phaseout. Instead, it would increase the threshold phase-out ranges by increasing the $50,000 (non-joint returns) and $100,000 (joint returns) amounts to $75,000 and $150,000.

We asked two professors and authors of ALM’s Tax Facts with opposing political viewpoints to share their opinions about the changes to the 199A deduction for QBI in the Senate draft tax legislation when compared to the House version.

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