It depends. There are several
layers to the SSTB considerations.
First, if your taxable income
is under the thresholds of $157,500 single or $315,000 joint, then all
qualified business income from self-employment, whether an SSTB or not, is able to receive the qualified business income deduction.
Next, here is the definition of
Consulting from IRS Publication 535:
Consulting
, including providing advice and counsel with the intention
of influencing decisions made by a government or governmental agency and all
attempts to influence legislators and other government officials on behalf of a
client by lobbyists, and other similar professionals. However, it excludes the
performance of services other than advice or counsel, such as sales, training
or educational courses. It also excludes embedded or ancillary services that
are otherwise not SSTBs, if there is no separate payment for the services.
The
reputation and skills test you mention above is very narrow and relates more to
"celebrity" from IRS Publication 535:
Any trade or
business where the principal asset is the reputation or skill of one or more of
its employees, as demonstrated by:
- Receiving fees, compensation, or
other income for endorsing products or services;
- Licensing or receiving fees, compensation
or other income for the use of an individual’s image, likeness, name,
signature, voice, trademark, or any other symbols associated with the
individual’s identity; or
- Receiving fees, compensation, or
other income for appearing at an event or on radio, television, or an-other
media format.
And there is a de-minimis rule related
to scenarios where a business may have combinations of SSTB businesses and non-SSTB
businesses:
If your
gross receipts from a trade or business are $25 million or less and less than
10% of the gross receipts are from the performance of services in a specified
service field, then your trade or business is not considered specified service
trade or business, and thus may generate income eligible for the QBI deduction
for the tax year.
Therefore, if your consulting
business is tied into your engineering business – meaning that the fees for your
business are a combination of both and you do not bill consulting fees separate,
then your business would not be considered an SSTB. Plus, if your consulting business accounts
for less than 10% of the gross receipts (if your gross receipts are under $25
million), then your business would not be considered an SSTB as well. Your name and reputation may be your biggest intangible
asset, but from the definition supplied here, it would not categorize your
business as an SSTB, as engineering firms are specifically excluded from the
SSTB definition.
For more information see: https://www.irs.gov/pub/irs-pdf/p535.pdf
