More Lawyers, Accountants, Lobbyists to Get Break in GOP Bill

House Republicans’ proposal to expand a deduction typically used by pass-through entities means more white-collar workers could get a tax benefit.

The House Ways and Means Committee Monday released draft legislation that would make the Section 199A qualified business income deduction permanent and increase the deduction from 20% to 23%. The 199A plan also creates a new, two-step formula to calculate the deduction, which could allow lawyers, accountants, and lobbyists who aren’t typically eligible to receive a tax benefit.

Most businesses are taxed as pass-through entities—such as sole proprietorships, partnerships, or S corporations—which means business income isn’t taxed on an entity level but instead passed to the owners who report it on personal tax returns.

The extension and expansion of the qualified business income deduction is just one tax cut House Republicans are proposing in their mammoth tax bill, which also includes reviving a trio of expired or expiring tax breaks popular with businesses. Ways and Means is debating the bill, and the GOP plans for it to pass the House by Memorial Day.

The Joint Committee of Taxation estimates the changes to the qualified business income will cost over $800 billion over the next 10 years, one of the more costly provisions in the bill.

“There’s a potential for folks who are in specified service trades or businesses to benefit where they haven’t previously,” said Caleb Egli, a Crowe LLP managing director specializing in partnership tax.

Changing Calculations

Those working in specified service trades or businesses—which include law, accounting, and consulting firms—don’t receive the 199A benefit under current law unless their taxable income is below a certain threshold.

The plan allows for a phase-in of the deduction based on a flat percentage for those above the taxable income threshold rather than disallowing the deduction entirely. The threshold amount is $197,300 for single filers in 2025, according to the IRS.

The proposed calculation is set to increase eligibility among those businesses, Egli said, but the new calculation is complicated and makes it difficult to model the impact of the change for clients.

Under the new proposal, tax benefits still generally decrease as income increases for those in specified service trades or businesses. The American Institute of CPAs previously asked Congress to remove the difference for service businesses entirely or at least expand the deduction.

Qualified trades or businesses, such as retail, have a similar benefit as that in current law.

Negotiating Business Breaks

While the increased deduction is a win for pass-through entities, tax benefits directly tied to business investments are better for economic growth and reduce tax law complexity, said Erica York, vice president of federal tax policy at the right-leaning Tax Foundation.

For example, the draft legislation would restore companies’ ability to immediately deduct full costs for the purchase of certain business property, along with domestic research and development. It also would allow companies to include amortization and depreciation when calculating a limit on business interest deductions. All three provisions are temporary, but York said they are better pro-growth policies than the pass-through deduction.

“It would be so much better to use that revenue for something that’s much more powerful than kind of maintaining the status quo with a few tweaks around the edges,” York said.

The 199A deduction was already more valuable to wealthy taxpayers, according to the Tax Law Center at New York University Law. And the proposed expansion adds to that, especially for lawyers and lobbyists, Executive Director Chye-Ching Huang said in a statement.