If you own a business, you’ve probably noticed that tax rules like to use big, complicated phrases that sound like they belong in a law school textbook. “Specified Service Trade or Business” (SSTB) is one of them.

But don’t worry. You don’t need a Master’s in Taxation to understand it. And you certainly don’t need to lose sleep over it. This article covers what an SSTB is, why it matters, and why it’s more important than ever under the new One Big Beautiful Bill Act (OBBBA).

What is an SSTB?

An SSTB is a business that provides services based on the skills or reputation of one or more people. Think of companies where you are the product, or where expertise, rather than equipment or inventory, is the primary value.

According to the IRS Instructions for Form 8995-A, an SSTB includes fields such as:

• Health: physicians, pharmacists, nurses, dentists, veterinarians, physical therapists, and psychologists
• Law: lawyers, paralegals, legal arbitrators, mediators
• Accounting: accountants, enrolled agents, return preparers, financial auditors
• Actuaries
• Consulting: people involved in providing clients with professional advice and counsel to assist in achieving goals and solving problems, advocacy with the intent of influencing decisions made by a government or governmental agency, lobbyists attempting to influence legislators and other government officials
• Athletics: athletes, coaches, and team managers
• Financial services: wealth managers, financial advisors, retirement planners, etc.
• Performing arts: actors, singers, musicians, entertainers, directors
• Investing and investment management: brokers, transaction advisors, stock brokers, securities traders, asset managers, investment managers, commodities traders, etc.

This list isn’t exhaustive. Any business that relies on the reputation or skills, expertise, training, talent, or professional judgment of the owner or one or more of their employees likely falls into the SSTB category. But if your business is more about selling goods, manufacturing items, managing property, building things, or running a restaurant or store, you’re likely not an SSTB.

Why does being an SSTB matter? In a word: taxes.

Here’s where things get interesting.

SSTBs are limited in their ability to claim the 20% Qualified Business Income (QBI) deduction once income crosses certain thresholds. This means high-earning service professionals sometimes see the deduction shrink and even disappear if their income is too high.

The QBI deduction came out of the Tax Cuts and Jobs Act (TCJA) of 2017, and was initially scheduled to expire at the end of 2025. However, the One Big Beautiful Bill Act (OBBBA), passed in mid-2025, made the QBI deduction permanent. It also made some other substantive changes to the QBI deduction, which are especially meaningful to SSTBs.

Expanded phase-in thresholds

For owners of an SSTB, the limitation phases in once your income exceeds a certain threshold. The OBBBA expanded that window from $50,000 over the income threshold to $75,000 over the threshold for single filers and from $100,000 to $150,000 over the threshold for joint filers.

This expanded threshold means small business owners who previously didn’t qualify for the QBI deduction may be eligible for a partial deduction.

Introduced a minimum deduction

The OBBBA created a “floor” for the QBI deduction, creating a minimum deduction of $400 for taxpayers with qualified business income.

For business owners with modest QBI, the new minimum deduction ensures a minimum benefit, even if other factors might reduce the deduction.

What should business owners do now?

The changes to the QBI deduction are modest, but making it permanent is a clear benefit for owners of pass-through businesses because it provides greater certainty and offers a longer timeline for tax planning.

Determine whether your business is an SSTB

Knowing whether you’re an SSTB helps you plan ahead, so you’re not caught off guard when income thresholds shift.

Review your entity structure with a professional

The QBI deduction is just one aspect of the decision on your entity structure. It’s always a good idea to revisit that decision from time to time. An experienced tax advisor can help you decide whether an S corporation, LLC, partnership, or C corporation could help you maximize deductions or reduce taxable income.

Plan ahead before tax season—not during

Year-round tax planning gives you options. Last-minute planning gives you stress.

Whether you’re an SSTB or not, you work too hard to have uncertainty tagging along like an unwanted plus-one at a dinner party. Work with a tax advisor to understand where your business fits, get a clearer picture of future tax liabilities, and identify planning opportunities.

Your path to clarity starts here

Navigating the QBI deduction and SSTB definition can be complicated, but you don’t have to become a tax expert. You just need the right guidance and a plan that supports your business goals.

If you need help figuring out how the OBBBA changes apply to you or what moves you can make to stay ahead, NewWay Accounting is here. We’ll translate the jargon, explain your options, and help you make informed decisions. Reach out today to start building a smart, stress-free tax strategy for your business.