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16072: QBI Deduction - Specified Service Trade or Business (SSTB)


QBI

What is a specified service trade or business? How do I indicate this for QBI? What does this affect for QBI? 

 

A specified service trade or business is any trade or business providing services in the fields of health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, brokerage services, or any other trade or business where the taxpayer receives fees, compensation, or other income for endorsing products or services, for the use of the taxpayer’s image, likeness, name, signature, voice, trademark, or any other symbols associated with the taxpayer’s identity, or for appearing at an event or on radio, television, or another media format. In addition, the trades or businesses of investing and investment management, trading or dealing in securities, partnership interests, or commodities are specified trades or businesses.

To indicate that the entity or activity is for a SSTB, use the following data entry:

  • 1120S or 1065:
    • In Drake20, the checkbox Treat as a "specified service business" is available on the 199A screen. You will also have to mark Check box to override 1120S/1065 main form amounts only at the bottom of the screen in order to have the SSTB column reflect Yes on the Wks QBI.    
    • In Drake19 and 18: the checkbox Specified Service Trade or Business (SSTB) can be marked on screen 1.
  • 1040 or 1041 income: 
    • This is indicated by the checkbox Treat as a "specified service business" on the applicable income screen. Screens where this selection can be made are: Schedule or E, or the K199 screen directed to a K1 screen (K1P, K1S, K1F).
      • Note: In Drake18, on screens K1P, K1S, and K1F, this checkbox is also available on the second tab of the data entry screen.

If the qualified business income is below the lower threshold, a SSTB is treated as any other trade or business for QBI deduction calculations. If the income is between thresholds, the deduction allowed for the business is phased-out based on income. If the taxable income (as defined per QBI guidelines) exceeds the upper threshold, the SSTB is not considered a qualified business, and no deduction is allowed.

Worksheets

In view mode, the QBI Explanation calculates the qualified business income for an activity that is subject to additions/subtractions after the gain or loss per form/schedule.

Examples include a Schedule C that must reduce the QBI amount by self-employment tax, a SEP/SIMPLE, or SEHID.

Since the income for the purposes of QBI may be different from the gain/loss on the form/schedule, this worksheet shows how that figure is affected. Review either QBI Simple Wks or QBI Complex Wks to see the calculated QBI Deduction that flows to the Form 1040, line 13 (Form 1040, line 10 in Drake19; Form 1040, line 9 in Drake18).

If the activity is a SSTB, and the taxable income is between thresholds, review QBI Schedule A for details how the income is further limited. The result then flows to QBI Complex Wks, part II to the line(s) indicated on the worksheet. The calculated QBI deduction then flows to Form 1040, line 13 (Form 1040, line 10 in Drake19; Form 1040, line 9 in Drake18).

See the IRS' FAQs and the form instructions for details.


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