SSTB QBI Deduction 2025: Thresholds, Phase-In, and Limits

Tax professionals and small-business owners working in Specified Service Trades or Businesses are heading into the fall with familiar rules for the Section 199A Qualified Business Income (QBI) deduction, as the Internal Revenue Service continues to apply the same income thresholds and limits that have shaped filings since the Tax Cuts and Jobs Act created the benefit. As of September 7, 2025, the deduction remains available to many pass-through owners, but it turns off for SSTB filers once taxable income climbs beyond the upper edge of the phase-in range. The IRS has not announced any new carve-outs for SSTBs this year, and the core mechanics—thresholds, the phase-in range, and the total cutoff—still decide who receives a deduction and who does not.

What’s at stake

At stake is the ability to claim up to 20% of QBI, a deduction that can reduce taxable income for owners of partnerships, S corporations, and sole proprietorships. By design, SSTBs—such as law, accounting, consulting, health, athletics, and financial services—face stricter income-based limits.

• If a taxpayer’s taxable income is below the threshold for their filing status, the SSTB limits do not apply and the full QBI rules operate normally.
• Once taxable income enters the phase-in range, only a portion of the SSTB’s qualified items and related wage and property figures count.
• When taxable income passes the top of that window, any QBI deduction tied to an SSTB disappears entirely.

How the SSTB phase-in works

According to analysis by VisaVerge.com, the differentiator is not the type of service alone, but the taxpayer’s taxable income relative to the threshold and the phase-in range. The calculation hinges on three clear bands:

1. Below the threshold: SSTB owners calculate QBI just like other businesses.
2. Within the phase-in range: apply a percentage reduction to qualified items, W‑2 wages, and the unadjusted basis immediately after acquisition (UBIA) of qualified property.
3. Above the phase-in range: SSTB income no longer qualifies for any deduction.

For taxpayers inside the window, the phase-in percentage equals the fraction of how far the taxpayer’s income has moved through the window. For example:

• If a single filer is halfway between $197,300 and $247,300, about 50% of the SSTB-related qualified items would remain in play.
• If they are three-quarters of the way through, only about 25% of the qualified items would remain.
• Move past the top, and the SSTB items drop out entirely.

2025 threshold and phase-in numbers (key figures)

• Threshold amounts: $197,300 (single filers); $394,600 (married filing jointly)
• Phase-in range:
  • Single filers: approximately $50,000 (upper limit ≈ $247,300)
  • Joint filers: approximately $150,000 (upper limit ≈ $544,600)

The expansion for joint filers (from $100,000 to $150,000) gives some married SSTB owners more room to claim a partial deduction before it phases out completely. But the fundamental cliff remains: beyond the top of the phase-in range, SSTB owners cannot claim the deduction on that activity.

Practical example

Consider a standard high-income scenario:

• A single attorney has $250,000 taxable income from her practice and $80,000 in W‑2 wages.
• She is $52,700 above the $197,300 threshold.
• The single filer phase-in range is about $50,000, so the excess places her beyond the top of the window.

Result: the SSTB limitation fully applies and she cannot take any QBI deduction tied to that practice.

Step-by-step approach to applying the rules

A practical way to think about it is in three steps:

1. Check taxable income against the threshold for your filing status.
2. If within the phase-in range, compute the phase-in percentage and reduce SSTB qualified items, W‑2 wages, and UBIA by that percentage.
3. Run the normal QBI limitation tests and apply the cap based on taxable income minus net capital gains.

If taxable income is below the threshold, you can claim the full 20% deduction on SSTB income (subject to the usual caps). If taxable income is between the threshold and the top of the phase-in range, compute the reduced amounts and proceed. If taxable income is above the phase-in range, the QBI deduction tied to the SSTB goes to $0.

Planning implications and common tactics

This structure creates a small but important planning window. While the law blocks high earners in SSTBs from claiming the deduction, taxpayers who can keep taxable income at or below the threshold—or at least within the phase-in range—may still benefit.

Common tactics include:

• Timing income and deductions
• Maximizing retirement plan contributions (pre-tax deferrals)
• Examining and timing year-end bonuses
• Careful quarterly estimates to manage estimated tax and taxable income

Accountants emphasize that small changes in taxable income around the threshold can determine whether an owner lands inside the window or above it. Pre-tax retirement deferrals, for example, can lower taxable income just enough to preserve part of the deduction. Conversely, unplanned income can push a filer over the top, eliminating the benefit entirely.

Recordkeeping and documentation

The IRS has repeatedly encouraged filers to keep records that support:

• Their SSTB status
• Wage figures
• Property basis (UBIA)

This is especially important when income moves in and out of the phase-in range from year to year.

Policy background and outlook

• The Tax Cuts and Jobs Act established Section 199A.
• Subsequent guidance through 2024 and 2025 clarified definitions, math, and documentation.
• The One Big Beautiful Bill Act made the deduction permanent and expanded the phase-in range for joint filers, but it did not change the core SSTB limitation that denies the deduction once taxable income exceeds the upper bound.
• The IRS continues to enforce those limits without exception.

Observers expect the IRS to publish 2026 thresholds later in 2025, but the SSTB calculation method is expected to remain consistent unless Congress takes action.

Quick reference: Policy status and 2025 thresholds

These levels apply before the QBI deduction and determine whether SSTB income is included, reduced, or excluded from the calculation.

Impact on filers and examples

• Single filer example: $250,000 taxable income + $80,000 W‑2 wages → exceeds threshold by $52,700 (more than the $50,000 phase-in). Result: QBI deduction tied to that SSTB drops to $0.
• Inside the phase-in range: filers apply the phase-in percentage to reduce amounts, then apply standard QBI limits (including the cap based on taxable income minus net capital gains).

What to watch next

• The IRS is expected to publish 2026 thresholds later in 2025.
• Until lawmakers change the statute, the threshold and phase-in range will continue to decide who receives the deduction, how much they receive, and when it shuts off entirely.
• Stakeholders across service industries—law firms, medical practices, financial advisory groups, solo consultants—are running year-end “what-if” scenarios to track how the deduction slides down as income rises through the phase-in range and then turns off.

For authoritative guidance and the latest official materials, see the IRS Qualified Business Income deduction page: https://www.irs.gov/newsroom/qualified-business-income-deduction. The agency’s examples mirror the field patterns: full deduction below the threshold, partial deduction within the phase-in range, and no SSTB deduction once income rises beyond the top.