Tax Reform

Section 199A Qualified Business Income Guidance

Early this year, the IRS finalized guidance on Section 199A, which impacts independent and community pharmacies. There are still considerations if your pharmacy revenues are above a certain threshold. In this video, Scotty Sykes shares more information about the Section 199A qualified business income guidance, discusses what pharmacy owners can expect and why this is a key tax planning tool.


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If you prefer to read this content, the video transcript is below.

Section 199A, the qualified business income deduction that we’ve talked previously in several videos, you know, previously we had proposed rules, we had proposed guidance on 199A. And at first, it said a pharmacist was not eligible for 199A. The IRS asked tax payers to comment on the proposed rules. I know we commented, Sykes and Company, commented on those rules. The NCPA also commented on those rules. Trying to explain that pharmacists and pharmacies, in the retail industry of pharmacy should be eligible for the 199A deduction. Previously, it was not clear whether a pharmacist and a pharmacy were eligible there. So we made comments, the NCPA made comments, the IRS Treasury Department did listen, they agreed.

Retail pharmacy and the businesses selling pharmaceuticals, prescriptions, is allowed the 199A. So that’s great news for pharmacies out there or pharmacy owners out there. One thing it did clarify as well though, the final rules, is that if you do have other services in your pharmacy, such as immunizations or NTM, whatever it may be, those other services, if greater than ten percent of your total revenue, you’re gonna run into some issues with the 199A.

If your revenue’s over $25 million dollars, prior three year gross receipts are over $25 million dollars in your pharmacy, that ten percent limit decreases to five percent. So if five percent of your revenue is from NTMs or immunizations or whatever, that is gonna cause some issues there for the 199A. Something to keep in mind, the $25 million dollar revenue test also applies to control groups. So if you are an owner of four or five different pharmacies and those revenues for all those pharmacies is greater than $25 million dollars, you’re gonna run into some issues there. So that is also something to take into consideration.

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