199A Qualified Business Income Deduction

Last Updated: May 13, 2025

The Issue

The 199A Qualified Business Income Deduction for pass-through entities—privately held companies that pay taxes by passing them through an owner's personal income taxes—has helped many small and family businesses maintain competitive federal tax treatment with their corporate competitors since its enactment as part of the 2017 tax law.

This 20% deduction has allowed qualified businesses to be treated almost in parity with c-corps. However, the 199A deduction is scheduled to expire on December 31, 2025. This would constitute a crippling tax increase on pass-through entities. The U.S. House of Representative’s version of the 2025 reconciliation legislation would not only make the 199A deduction permanent, but increase it to 23%.

Retail Impact

Most convenience retailers are organized as pass-through entities. If the 199A deduction expires, pass-through entities would pay federal income tax rates as high as 37% or 39.6% if the individual rates section of the 2017 tax law expires. Meanwhile, competitors organized as c-corps would continue to have a 21% tax rate. This disparate tax structure could be detrimental to many family businesses.

NACS Position

NACS supports the permanent extension and expansion of the 199A tax deduction for pass-through entities included in the House version of the 2025 reconciliation package.