What is a specified service trade or business (SSTB)?

A specified service trade or business (SSTB) is a type of business that generally does not qualify for the Qualified Business Income (QBI) deduction under Section 199A of the Internal Revenue Code, unless certain income thresholds are met. SSTBs include businesses providing services in specific fields such as health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, brokerage services, investing and investment management, trading or dealing in securities, commodities, or partnership interests. Additionally, any trade or business where the principal asset is the reputation or skill of one or more employees or owners—such as those earning income from endorsements, licensing of image or likeness, or appearances on media—also qualifies as an SSTB.

Fields Included in SSTBs

• Health: Includes physicians, pharmacists, nurses, dentists, veterinarians, physical therapists, psychologists, and similar healthcare professionals. Excludes unrelated services like operating health clubs or spas.
• Law: Includes lawyers, paralegals, mediators, arbitrators. Excludes non-specialized services like printing or stenography.
• Accounting: Includes accountants, enrolled agents, return preparers, auditors.
• Actuarial science: Includes actuaries and similar professionals.
• Performing arts: Includes actors, singers, musicians, directors. Excludes maintenance of equipment or broadcasting services.
• Consulting: Includes professionals providing advice or counsel to clients. Excludes sales or training unless separately billed.
• Athletics: Includes athletes, coaches, team managers. Excludes facility maintenance or broadcasting.
• Financial services: Includes wealth management, financial advising, retirement planning, mergers and acquisitions. Excludes taking deposits or making loans.
• Brokerage services: Includes stock brokers arranging securities transactions. Excludes real estate or insurance agents.
• Investing and investment management: Includes asset management and investment advice. Excludes direct real property management.
• Trading or dealing: Includes trading in securities, commodities, or partnership interests.
• Reputation-based businesses: Businesses where income is derived from endorsements, licensing of image/likeness/name/signature/voice/trademark, or media appearances.

Exclusions and Exceptions

• De minimis rules:
  • If gross receipts are $25 million or less and less than 10% come from specified services, the business is not an SSTB.
  • If gross receipts exceed $25 million and less than 5% come from specified services, the business is not an SSTB.
• Common ownership rule: If a business provides services to an SSTB and there is 50% or more common ownership, the portion providing services to the SSTB is treated as a separate SSTB for the common owners.
• Income thresholds:
  • If taxable income is ≤ $197,300 (or $394,600 if married filing jointly), the SSTB is treated as a qualified trade or business and may qualify for the QBI deduction.
  • If taxable income is > $197,300 but ≤ $247,300 (or $494,600 if married filing jointly), a partial QBI deduction may be available by completing Schedule A (Form 8995-A).
  • If taxable income exceeds $247,300 (or $494,600 if married filing jointly), the SSTB does not qualify for any QBI deduction.

Source:

Disclaimer: Always verify with current Federal or State Department of Revenue Forms and Instructions. This guidance is based on IRS publications and form instructions for tax year 2025. For complex situations, consult a CPA or tax attorney.