The new section 199A deduction allows a tax cut for pass through businesses. This deduction allows up to a 20% deduction on qualified business income (QBI) plus 20% of qualified REIT dividends and qualified PTP income, or, 20% of the taxpayers taxable income minus capital gains. This deduction is available to what the IRS considers a “qualified trade or business”.  With the new 199A deduction, the IRS created a specified service trade or business (SSTB) classification that can limit and potentially disqualify a business from being able to take this new deduction. 

What it a specified service trade or business? 

These businesses include professions in the fields of health, law, accounting, actuarial science, performance, consulting, athletics, financial services, brokerage services, and Trades or business where the principal asset of such is the reputation or skill of 1 or more employee or owner. Specific examples for each of the fields can be found at the bottom of this article. 

Within these businesses the IRS also included several exceptions that would fall within these fields.  These include: banks, real estate brokers, insurance brokers, engineers, and architects. 

What limitations are put on specified service trades or businesses? 

As the proposed regulations are written, the deduction will allow qualified trade or businesses a 20% deduction on qualified business income. For the specified service trade or businesses, this is limited depending upon the filing status and income of the business owner. For joint filers, the income limit is $315,000. For all other filing statuses, the limit is $157,500. This means that if a SSTB is under these income limits, they will be allowed the full 20% deduction. When business owners’ income goes above these incomes, the deduction begins to get phased out. These “phase out” ranges are between $315,000 - $415,000 for joint filers, and $157,500 - $207,000 for all other filers. If a business owners income goes over the phase out income ranges, they will not be allowed to take the deduction. Below is a chart for filing status/income ranges. 


In 2018 a single filer taxpayer reports $150,000 of taxable income. Does this taxpayer need to determine if their income is from a SSTB to qualify for the deduction? 

  • No, this taxpayers income is below the single filer income threshold. Therefore, they will qualify for the 20% QBI deduction, plus 20% of qualified REIT dividends and qualified PTP income.  Or 20% of taxable income minus net capital gains. They do not need to determine if their income is from a SSTB. This example would also hold true for any joint filer below the $315,000 threshold. 

In 2018 a married filing joint couple report $420,000 of taxable income not from an SSTB. Will they be allowed the deduction? 

  • Yes, since their income is NOT from an SSTB, they will be able to take the deduction if they have qualified business income (QBI). If there income was from an SSTB, they would not be entitled to the deduction. 

In 2018, a single filer has a taxable income of $200,000 from an SSTB with QBI. Does this taxpayer still qualify for the deduction? 

  • Yes. This taxpayer is above the threshold but is still under the phase out limit. Their 199A deduction will be limited however.  

Professional examples from each field:


Includes medical services by  physicians, pharmacists, nurses, dentists, veterinarians, physical therapists, psychologists, and other similar healthcare professionals who provide medical services directly to a patient.


Includes  lawyers, paralegals, legal arbitrators, mediators, and  similar professionals in their capacity as such.


Includes accountants, enrolled agents, return preparers, financial auditors, and similar professionals in their capacity as such.

Actuarial Science 

Includes services by actuaries and similar professionals in their capacity as such. This provision does not include analysts, economists, mathematicians, and statisticians not engaged in analyzing or assessing the financial costs of risk or uncertainty of events.

Performing Arts

Includes individuals who participate in the creation of performing arts, such as actors, singers, musicians, entertainers, directors, and similar professionals performing services in their capacity as such.


Includes providing advice and counsel regarding advocacy with the intention of influencing decisions made by a government or governmental agency and all attempts to influence legislators and other government officials on behalf of a client by lobbyists and other similar professionals performing services in their capacity as such.


Includes the performances of services by individuals who participate in athletic competition such as athletes, coaches, and team managers in sports such as baseball, basketball, football, soccer, hockey, martial arts, boxing, bowling, tennis, golf, skiing, snowboarding, track and field, billiards, and racing.

Financial Services

Includes financial services to clients including managing wealth, advising clients with respect to finances, developing retirement plans, developing wealth transition plans, the provision of advisory and other similar services regarding valuations, mergers, acquisitions, dispositions, restructurings (including in title 11 or similar cases), and raising financial capital by underwriting, or acting as the client’s agent in the issuance of securities, and similar services.

Brokerage Services 

Includes services provided by stock brokers and other similar professionals, but does not include services provided by real estate agents and brokers, or insurance agents and brokers.

Trades or business where the principal asset of such is the reputation or skill of 1 or more employee or owner
Includes endorsing products or services; using an individuals image, likeness, name, signature, voice, trademark, or symbol; and appearance fees/income from television, social media, forums, radio, media hosts, and video games. 

Did this answer your question?