your QBI deduction could be limited if you are a Specified Service, Trade or Business
A specified service trade or business (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, 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.
Of course, most businesses depend on the reputation or skill of employees and owners. Thus, to decide whether this amounts to an SSTB for the QBI deduction, the principal asset of a trade or business is considered the reputation or skill of its employees or owners only if the trade or business consists of one of the following:
The receipt of income from endorsing products or services.
The use of an individual's image, likeness, voice, or other symbols associated with the individual's identity.
Appearance at events or on radio, television, and other media outlets.
Take this example of a well-known chef who owns a restaurant and also endorses a line of cookware. The restaurant is not an SSTB, but the money he receives from the endorsements constitutes an SSTB.
If you are in an SSTB but your taxable income is below the limit discussed earlier, you get the full QBI deduction like any other business owner. In effect, it doesn’t matter that you’re in an SSTB.
However, if your taxable income is higher, you are subject to an additional limit. In applying the formula discussed earlier, each item in the formula — QBI, W-2 wages, UBIA — is phased out. If taxable income is high enough, there’s a full phase-out so that no QBI deduction can be claimed.
