SSTB (specified service trade or business) is a classification given to certain service businesses. If your business provides a service rather than a product, the business likely classifies as a SSTB. This is important because being an SSTB reduces or eliminates the 20% Qualified Business Income (QBI) deduction at higher income levels.
The SSTB label is irrelevant if your 2023 total taxable income (which includes non-business as well as business income) is $182,100 (or $364,200 if you're filing jointly) or less. At these lower income levels, owners of SSTB as well as non-SSTB businesses can qualify for the same QBI deduction.
The QBI deduction phases out for SSTBs. You'll still qualify for a partial deduction based on the applicable percentag if your taxable income before the QBI deduction is:
- More than $182,100 but less than $232,101 if single, head of household, married filing separately or qualifying surviving spouse, or
- More than $364,200 but less than $464,201 if married filing jointly
Select your business for more details on what's considered an SSTB: