SSTB status for 1099 work

[stephenpatrickd]

Hello all,

I've been working 1099 through my own s-corp and I'm trying to figure out my taxes for 2023, I wonder if anyone has insight.

There is a line on the return that has to do with form 8995 related to specified service trades or businesses (SSTBs).

The question is, is my s-corp an SSTB or not? If yes, for my income (~600k) there is no deduction. If no, there is a ~$70k deduction. I have seen both opinions expressed. Any insight is appreciated.

I believe this is the relevant IRS page for this question, but it is still not clear to me.

Instructions for Form 8995 (2023) | Internal Revenue Service

www.irs.gov

Thanks in advance for any replies.
-spd

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[BLADEMDA]

Hello all,

I've been working 1099 through my own s-corp and I'm trying to figure out my taxes for 2023, I wonder if anyone has insight.

There is a line on the return that has to do with form 8995 related to specified service trades or businesses (SSTBs).

The question is, is my s-corp an SSTB or not? If yes, for my income (~600k) there is no deduction. If no, there is a ~$70k deduction. I have seen both opinions expressed. Any insight is appreciated.

I believe this is the relevant IRS page for this question, but it is still not clear to me.

Instructions for Form 8995 (2023) | Internal Revenue Service

www.irs.gov

Thanks in advance for any replies.
-spd

The Trump tax cuts excluded physicians with incomes above a certain threshold for the pass through deduction.
Your business is considered a specified service trade or business. No deduction.

_—-__—————_——————



Oddly, only certain professions are allowed to take full advantage of the QBI deduction, but if your taxable income is below a certain threshold, it doesn’t matter how your small business makes money. Even physicians are eligible.

The cutoff to get the full deduction available to you is the same as the jump from the 24% to the 32% federal income tax bracket. In 2020, the top of the 24% bracket is $329,850 for couples married filing jointly and $164,925 for single filers.

If your (pre-QBI deduction) taxable income is at or beneath those thresholds, you’ll qualify for the full QBI deduction no matter your profession.

When you get into the 32% bracket, the QBI deduction is phased out to zero in a linear fashion over the next $100,000 in income for couples or $50,000 for individuals in a specified service or trade businesses.

That’s right. The authors of the bill singled out a number of professions that can only claim the deduction with income in the ranges discussed above. Those whose businesses are not considered a “specified service trade or business (SSTB), but rather a “qualified trade or business” don’t need to worry about these income limits. They can deduct 20% of an unlimited amount of QBI.

Professions considered specified service trades or businesses include those in:

• Health
• Law
• Accounting
• Actuarial science
• Consulting
• Athletics
• Financial Services
• Brokerage Services
• Investment Management
• Product endorsement (i.e. celebrity branding)

 

[maxxor]

The Trump tax cuts excluded physicians with incomes above a certain threshold for the pass through deduction.
Your business is considered a specified service trade or business. No deduction.

_—-__—————_——————



Oddly, only certain professions are allowed to take full advantage of the QBI deduction, but if your taxable income is below a certain threshold, it doesn’t matter how your small business makes money. Even physicians are eligible.

The cutoff to get the full deduction available to you is the same as the jump from the 24% to the 32% federal income tax bracket. In 2020, the top of the 24% bracket is $329,850 for couples married filing jointly and $164,925 for single filers.

If your (pre-QBI deduction) taxable income is at or beneath those thresholds, you’ll qualify for the full QBI deduction no matter your profession.

When you get into the 32% bracket, the QBI deduction is phased out to zero in a linear fashion over the next $100,000 in income for couples or $50,000 for individuals in a specified service or trade businesses.

That’s right. The authors of the bill singled out a number of professions that can only claim the deduction with income in the ranges discussed above. Those whose businesses are not considered a “specified service trade or business (SSTB), but rather a “qualified trade or business” don’t need to worry about these income limits. They can deduct 20% of an unlimited amount of QBI.

Professions considered specified service trades or businesses include those in:

• Health
• Law
• Accounting
• Actuarial science
• Consulting
• Athletics
• Financial Services
• Brokerage Services
• Investment Management
• Product endorsement (i.e. celebrity branding)

Notably, real estate is not on that list.

 

[Blockit]

Notably, real estate is not on that list.

Shocker 🙄

 

[stephenpatrickd]

Thank you very much !