What Is an SSTB? Specified Service Trade or Business
The fields that lose the qualified business income deduction above the income threshold — the list, the edge cases, and the de minimis rule
Reviewed by the Fairlight Accounting cross-border tax team — U.S. & Canadian Tax Desks
An SSTB (specified service trade or business) is a business in a field listed in section 199A — health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, brokerage, investing and trading — or one whose principal asset is its owners' reputation or skill. Above the income threshold, SSTB owners' 20 percent QBI deduction phases out to zero.
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Why does the SSTB label matter?
The qualified business income (QBI) deduction lets owners of pass-through businesses deduct up to 20 percent of their business income. For taxpayers below the taxable-income threshold (US$201,750 for single filers and US$403,500 for joint filers in 2026), every business qualifies. Above it, an SSTB's deduction phases out over a range (US$75,000 for single filers and US$150,000 for joint filers from 2026, widened from US$50,000 and US$100,000 by the 2025 legislation) and disappears entirely above the range, while a non-SSTB keeps the deduction subject to the wage-and-property limitation (the SSTB vs non-SSTB guide). For a consultant or a physician netting well into six figures, SSTB status is the difference between a deduction worth tens of thousands and nothing.
What is on the SSTB list?
| Field | What the regulations include | What they exclude |
|---|---|---|
| Health | Physicians, pharmacists, nurses, dentists, veterinarians, physical therapists, psychologists, and other health care professionals providing medical services to patients | Health clubs and spas providing exercise or conditioning, payment processing, and the research, testing, manufacture, or sale of pharmaceuticals or medical devices |
| Law | Lawyers, paralegals, arbitrators, mediators | Printers, delivery services, stenographers serving law firms |
| Accounting | Accountants, enrolled agents, return preparers, bookkeepers, financial auditors | None listed — the field is not limited to licensed professionals |
| Actuarial science | Actuaries | Analysts and economists not performing actuarial services |
| Performing arts | Actors, singers, musicians, entertainers, directors, and others who participate in creating performing arts | Broadcasters and disseminators; those who maintain or operate equipment and facilities for performances |
| Consulting | Providing professional advice and counsel to clients to assist them in achieving goals and solving problems (strategy, operations, finance, and similar) | Training and educational courses; sales and economically similar services; advice embedded in selling goods when there is no separate payment for it; architecture and engineering |
| Athletics | Athletes, coaches, and team managers in sports | Broadcasters; facility operators and maintainers |
| Financial services | Financial advice, wealth management, retirement planning, M&A advisory, valuation, raising capital | Banking (taking deposits and making loans) |
| Brokerage services | Securities brokers arranging transactions for a commission | Real estate agents and brokers; insurance agents and brokers |
| Investing, investment management, trading, dealing | Managing others' investments; trading securities, commodities, or partnership interests, for one's own account or others'; dealing | Directly managing real property |
| Reputation or skill catch-all | Endorsement income, licensing of an individual's image, name, or likeness, and appearance fees | The general reputation of a skilled professional in any other field |
The exclusions carry the most planning weight. Real estate agents and insurance agents are not SSTBs even though they broker; training is not consulting; a spa is not health care; a sound engineer is not a performer. And the catch-all, which sounded like it could sweep in any famous chef or star architect, was narrowed by the regulations to three specific income types.
What about a business with mixed activities?
The de minimis rule: a business with gross receipts of US$25 million or less is not an SSTB if less than 10 percent of its receipts come from specified service activities; above US$25 million the threshold is 5 percent. Cross that percentage, and the whole business is an SSTB — there is no proration. The escape is the separate-trade-or-business analysis: if the specified service line and the other line are genuinely separate businesses (separate books, separable operations and customers, often separate entities), each is classified on its own. A coaching business that is 88 percent courses and 12 percent one-on-one advisory fails de minimis but may split (the coaching deductions guide).
Where are the edge cases?
Consulting versus sales: advice given to sell your own product is not consulting. Consulting versus training: a curriculum delivered as instruction is not consulting, but advice dressed as a workshop is. Health: a physical therapist is health care by the regulations' own list; a personal trainer is not on it and sits closer to the excluded health-club services. Performing arts: a DJ who performs is arguably an entertainer; a lighting company that operates equipment is excluded (the DJ entity guide). Accounting: a bookkeeper is accounting (SSTB); a payroll processor is not on the accounting list, though the answer turns on what else it does. Each is decided on what the business actually does, documented in the books by revenue type — the file that makes the classification an argument rather than an assertion.
Worked example
Three businesses, each netting US$320,000 to a single owner with taxable income above the range. A management consulting firm: consulting by definition — SSTB, no QBI deduction. A real estate brokerage: brokerage services, but real estate brokers are excluded — non-SSTB, QBI deduction available subject to the wage-and-property limitation (the brokerage's W-2 staff supply the wages). A physical therapy clinic that also sells fitness memberships (18 percent of receipts): health care is 82 percent of receipts — the de minimis test fails, so the whole clinic is an SSTB unless the gym is run as a separate business with its own books, staff, and members, in which case the gym's income qualifies for the deduction and the therapy income does not.
Frequently asked questions
What is an SSTB?
A specified service trade or business — a business in health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, brokerage, investing and trading, or one whose principal asset is the owner's reputation or skill (narrowly defined). SSTB owners lose the qualified business income deduction gradually across the phase-out range above the taxable-income threshold, and entirely above it.
Is consulting an SSTB?
Yes — providing professional advice and counsel to help clients achieve goals and solve problems is consulting by definition. Training and educational courses, and advice embedded in selling goods with no separate charge for it, are excluded.
Is real estate an SSTB?
No. Real estate agents and brokers are excluded from "brokerage services," and rental real estate is not on the list at all. Rental income's QBI eligibility turns instead on whether the rental rises to a trade or business.
What is the SSTB de minimis rule?
A business with US$25 million or less of gross receipts is not an SSTB if under 10 percent of its receipts come from specified service activities (5 percent above US$25 million). Above the percentage, the whole business is an SSTB unless the lines are separate trades or businesses.
Official sources
The IRS Section 199A FAQs define an SSTB this way: “An SSTB is a trade or business involving the performance of services in the fields of health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, investing and investment management, trading or dealing in certain assets, or any trade or business where the principal asset is the reputation or skill of one or more of its employees or owners.” — Internal Revenue Service, Section 199A qualified business income deduction FAQs, https://www.irs.gov/newsroom/tax-cuts-and-jobs-act-provision-11011-section-199a-qualified-business-income-deduction-faqs
The IRS states: “The QBI Component is subject to limitations, depending on the taxpayer's taxable income which may include the type of trade or business, the amount of W-2 wages paid by the qualified trade or business, and the unadjusted basis immediately after acquisition (UBIA) of qualified property held by the trade or business.” — Internal Revenue Service, Qualified business income deduction, https://www.irs.gov/newsroom/qualified-business-income-deduction
Next step
Fairlight Accounting is a cross-border accounting and tax practice with a U.S. Tax Desk and a Canadian Tax Desk. Our U.S. Tax Desk handles SSTB classification analysis with revenue-by-type documentation, the de minimis test, separate-trade-or-business structuring, and QBI planning around the threshold. See pricing or book a call.
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