“The Tax Cuts and Jobs Act” (TCJA) of 2017 was a defining moment in tax legislation, bringing about reduced rates and expanded deductions—especially for small business owners. But with many of its provisions set to expire at the end of 2025, a new chapter in tax reform is taking shape. Leading that charge? What’s being referred to as the ‘One Big, Beautiful Bill.’
This sweeping legislative proposal seeks to extend and expand key TCJA provisions—many of which are highly relevant to pharmacy owners.
In a recent webinar titled The ‘Big, Beautiful Bill’ & Beyond: Proposed Tax Changes & Implications for Pharmacies, special guest, Scotty Sykes, CPA, CFP®, of Sykes & Company, P.A., broke down the critical components of the bill and what independent pharmacies should be doing now to prepare for 2025 and beyond—here’s a summary of the key proposed changes he discussed…
Key changes proposed in the ‘One Big, Beautiful, Bill’
The current proposal contains several important changes that could significantly affect tax planning, deduction strategies, and cash flow for pharmacy owners. The key provisions to note include:
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Qualified Business Income (QBI) Deduction (Section 199A)
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State and Local Tax (SALT) Deduction Expansion
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100% Bonus Depreciation
Let’s break these down further…
Qualified Business Income (QBI) Deduction (Section 199A)
It’s very common that pharmacy tax returns miss this deduction, primarily because, due to IRS regulations, Pharmacists are considered SSTBs. However, pharmacies, in general, are not SSTBs.
What is the Qualified Business Income (QBI) Deduction?
The Qualified Business Income (QBI) Deduction is a deduction that allows qualifying pharmacies to deduct up to 20% of their qualified business income from their taxes.
This is a very technical and specialized area of tax. It’s currently being proposed in the new bill to increase this deduction to 23%, potentially offering even greater tax relief provided your entity qualifies.
Since QBI eligibility is both technical and situational, this is a top item to verify with your CPA as this change can be major for independent pharmacies.
If left unchecked, in some cases, it has led to six-figure tax overpayments.
The key thing here is to review your entity classification and talk to your tax preparer.
State and Local Tax (SALT) Deduction Expansion
State and Local Taxes (SALT) has long been a pain point for pharmacy owners in high-tax states. Currently, there’s a $10,000 cap on deducting state and local taxes. This cap forced pharmacy owners in high-tax states (New York, California, New Jersey, Illinois, etc.) to pay state taxes through the business entity to claim full deductions at the entity level.
Under the new proposal, this cap could be raised to $40,000, but with strings attached: restrictions on paying state taxes through your pharmacy. While the increased cap is a good thing, this dual change could significantly affect entity-level planning and cash flow optimization because the limitation on planning strategies could offset benefits for higher earners in those high-tax states.
With that being said, if your pharmacy is in a high-tax state, you should review your current tax strategies now, as the proposed SALT changes could reduce the effectiveness of entity-level deductions—even with a higher cap.
100% Bonus Depreciation
Under current tax law for bonus depreciation, pharmacies can only deduct 40% of qualifying asset costs in 2025—a steep drop from the 100% immediate expensing allowed in recent years, with a further decline to 20% by 2026.
However, the proposed ‘One Big, Beautiful Bill’ seeks to reverse that trend by restoring full 100% bonus depreciation for investments like equipment, real estate improvements, and pharmacy automation. This change could significantly improve after-tax cash flow, giving pharmacy owners more flexibility in tax planning and greater incentive to invest in modernization and growth—making now the time to review capital budgets and consult your CPA about upcoming purchases.
Other proposed changes to note:
While bonus depreciation, QBI deductions, and SALT cap changes are the key provisions for pharmacies to take note of, several other provisions in the proposed “Big, Beautiful Bill” could also have an impact on pharmacies and small businesses. Here are five additional updates pharmacy owners should keep an eye on:
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R&D expensing (Section 174): The bill would allow businesses to immediately deduct R&D expenses, reversing the current five-year amortization rule. This could benefit pharmacies investing in technology or process improvements.
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PBM reform for Medicaid: Aimed at increasing transparency, this proposal would ban spread pricing in Medicaid, potentially leading to fairer and more predictable pharmacy reimbursements.
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Overtime pay and tips: Overtime and tip income would be excluded from taxable wages, reducing tax liability for employees and simplifying payroll for businesses with hourly staff.
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Child tax credit expansion: The proposal increases the credit amount and refundability, offering more support to low-income families—potentially benefiting both employees and customers.
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Cash accounting threshold: Currently, the cash method of accounting is set to increase for manufacturing businesses only, however, keeping a close eye on it is key because if it rolls out to other businesses it could impact large multi store owners.
Final thoughts: Prepare now, benefit later
Tax legislation is rarely simple—and the “One Big, Beautiful Bill” is no exception. From shifting deduction caps to nuanced eligibility rules, there’s a lot for pharmacy owners to consider in the year ahead. But with the right planning, these changes could be a major win for independent pharmacies.
Want a deeper dive into the ‘Big Beautiful Bill’?
Watch the full webinar replay featuring Scotty Sykes, CPA, CFP®, for expert insights and actionable steps to help you get ahead of the changes on the horizon.
