There are certain types of businesses that, under certain earnings circumstances, will not qualify for the QBI deduction. These businesses include:
- Actuarial science
- Performing arts
- Financial services
- Brokerage services
- Any trade or business where the principal asset of such trade or business is the reputation or skill of one or more of its employees,
For any of the above businesses, there is no QBI deduction if their taxable income, before considering the deduction, exceeds the $415,000/$207,500 threshold.
However, if these taxpayers have a taxable income less than $315,000/$157,000, the deduction is allowed in full. Furthermore, the limitation will be phased-in for those with taxable income between $315,000/$157,500 and $415,000/$207,500. However, tax planning opportunities do exist for those that exceed the $315,000/$157,500 threshold.
Note: Engineers and architects are not subject to this limitation.