What Is an SSTB for Form 8995?

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Casey Epton, CPA, is a Senior Tax Advisor at Deduction, where he helped design Taylor, CPAI from day one, building an AI tax agent that works seamlessly for both clients and the CPAs who verify every return.

Last updated:

Sep 2026

A Specified Service Trade or Business (SSTB) is a category of business defined under IRC §199A(d)(2) that receives restricted treatment under the Qualified Business Income (QBI) deduction rules. For higher-income taxpayers, income from an SSTB is partially or entirely excluded from the QBI deduction calculated on Form 8995 or Form 8995-A. Understanding whether your business qualifies as an SSTB is one of the most consequential determinations in §199A planning.

1. How SSTB Status Fits Into Form 8995

The QBI deduction under §199A generally allows eligible pass-through business owners, sole proprietors, partners, S corporation shareholders, and certain trust and estate beneficiaries, to deduct up to 20% of their qualified business income. Form 8995 is the simplified version of this calculation, available to taxpayers whose taxable income falls at or below the income thresholds. Form 8995-A is required for taxpayers above those thresholds, or anytime an SSTB is involved above the phase-in range.

The key distinction is this: non-SSTB businesses qualify for the full QBI deduction at any income level (subject to separate W-2 wage and property basis limitations above the threshold). SSTB businesses are subject to an income-based phase-out that progressively eliminates the deduction as taxable income rises.

2. The Listed SSTBs Under IRC §199A(d)(2) and Treas. Reg. §1.199A-5

The following fields are specifically listed as SSTBs in the statute and Treasury Regulations:

Health services provided by physicians, surgeons, nurses, dentists, pharmacists, veterinarians, physical and occupational therapists, psychologists, and similar licensed healthcare professionals performing medical services directly
Law services of attorneys, paralegals, legal arbitrators, mediators, and similar providers of legal services
Accounting services of CPAs, enrolled agents, tax preparers, bookkeepers, and similar providers of accounting, tax return preparation, and financial reporting services
Actuarial science services of actuaries and similar professionals
Performing arts services of performers such as actors, singers, musicians, entertainers, and directors whose income flows from their personal performance; does not include technicians or production crew behind the scenes
Consulting services providing professional advice, counsel, or advocacy to clients (including lobbying); does not include sales, training, or educational activities; does not include consulting embedded in a non-SSTB product or service when not separately billed
Athletics services of athletes, coaches, and team managers in sports; does not include stadium/facility operators or broadcasters
Financial services wealth management, financial advisory services, investment advice, retirement planning, valuations, and merger and acquisition advisory
Brokerage services arranging transactions between buyers and sellers of securities for a fee or commission; explicitly excludes real estate brokers, insurance agents and brokers
Investing and investment management managing client assets, providing investment advice for a fee, trading in securities, partnership interests, or commodities on behalf of clients

3. The 'Reputation or Skill' Catch-All

IRC §199A(d)(2)(B) includes a broad catch-all provision: any trade or business 'where the principal asset of such trade or business is the reputation or skill of one or more of its employees or owners.' Treasury Regulations §1.199A-5(b)(2)(xiv) narrowed this provision significantly. It is now interpreted to cover only:

Businesses that receive compensation, fees, or income for endorsing products or services
Businesses that license or receive fees for the use of an individual's likeness, name, image, signature, voice, trademark, or other identity-related symbols
Businesses whose revenue is generated primarily by the individual appearing at events, on radio, television, or other media formats

Despite early concern, this provision does not broadly capture skilled professionals or knowledge workers. The IRS confirmed in final regulations that the catch-all was intended to target celebrity-style income, not the general premise that a service business depends on the skill of its staff.

Architects and engineers are explicitly excluded from the SSTB definition by statute even though their businesses are clearly skill-dependent. Real estate agents, insurance agents, mortgage brokers (in most circumstances), and insurance agents are also excluded.

4. The De Minimis Rule - When a Mixed Business Escapes SSTB Classification

A business that has some SSTB activity but is not primarily a service business may avoid SSTB classification entirely under the de minimis rule in Treas. Reg. §1.199A-5(c)(1):

If the business's total gross receipts are $25,000,000 or less: the business is not treated as an SSTB if less than 10% of its gross receipts come from SSTB activities
If the business's total gross receipts exceed $25,000,000: the business is not treated as an SSTB if less than 5% of its gross receipts come from SSTB activities

Businesses using the de minimis rule must maintain separate books and records for SSTB and non-SSTB activities. If the threshold is exceeded in any year, the entire business is treated as an SSTB for that year.

5. The Common Ownership Anti-Abuse Rule

If a non-SSTB provides services or property to a related SSTB, and there is 50% or more common ownership between the two entities, the portion of the non-SSTB's income attributable to those related-party services or property is treated as a separate SSTB. This prevents business owners from circumventing the SSTB rules by spinning off service functions into separate related entities.

6. How SSTB Status Affects the QBI Deduction - 2025 Income Thresholds

Whether SSTB income qualifies for the QBI deduction depends entirely on the owner's taxable income (before the QBI deduction itself). The 2025 thresholds are:

Filing Status	Full Deduction	Phase-Out Range	No Deduction
Married Filing Jointly	Below $394,600	$394,600 – $494,600	Above $494,600
All other filers	Below $197,300	$197,300 – $247,300	Above $247,300

In the phase-out range, an 'applicable percentage' of SSTB income is treated as qualifying for the deduction — this percentage decreases linearly from 100% at the bottom of the range to 0% at the top. Taxpayers with taxable income in this range must complete Schedule A (Form 8995-A) to calculate the applicable percentage.

The income thresholds apply to taxable income before the QBI deduction itself. These thresholds are adjusted annually for inflation. Non-SSTB pass-through businesses are not subject to this phase-out on the SSTB basis — though they remain subject to W-2 wage and qualified property limitations above the lower threshold.

7. Form 8995 vs. Form 8995-A - Which Form You Use

Taxpayers with SSTB income must use Form 8995-A (with Schedule A for the applicable percentage calculation) whenever their taxable income exceeds the lower threshold for their filing status. Taxpayers with SSTB income at or below the lower threshold may use the simplified Form 8995. If your taxable income is below $197,300 (or $394,600 for MFJ), your SSTB income qualifies fully for the 20% QBI deduction just like any other pass-through business.

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