Lands on Form 8995 or 8995-A — decided before either is filled in
If your taxable income is below the threshold, this article is not for you. Below it the SSTB question never arises and the deduction is computed without any reference to the field you work in. Everything here starts at a number.
Consulting is on the list. It is named in the statute, and at the incomes an independent consultant reaches, being on that list costs the whole 20% deduction.
Which makes it worth knowing that the rule does not count job titles. It counts receipts — and it stops counting at ten per cent.
The short answer
| Is consulting an SSTB? | Yes, by name |
|---|---|
| What the rule means by it | Advice and counsel — not the work that follows |
| Explicitly not consulting | Sales, training and educational courses |
| Advice inside a non-SSTB job | Not counted — unless separately paid for |
| The de minimis line | Under 10% of gross receipts, at $25M or less |
| Over $25M of receipts | The figure is 5% |
| If you are under the line | Not an SSTB — regardless of taxable income |
| Splitting off the advisory arm | Blocked at 50% common ownership |
| 2026 threshold, single / joint | $201,750 / $403,500 |
"Consulting" is narrower than your business card
The instructions define the field:
"Consulting, including persons providing clients with professional advice and counsel to assist in achieving goals and solving problems, and persons providing advice and counsel regarding advocacy with the intention of influencing decisions made by a government or governmental agency, and lobbyists attempting to influence legislators and other government officials on behalf of a client, and other similar professionals."
Advice and counsel. That is the whole content of the category, and it describes what is being sold rather than who is selling it.
Then the same page takes work back out of it:
"the performance of services other than advice or counsel, such as sales or the provision of training and educational courses"
Building the system is performance. Running the workshop is performance. Delivering the migration, writing the code, doing the analysis somebody else will act on — performance. None of it is advice and counsel, whatever the word on the contract.
So a person who calls themselves a consultant may be selling very little consulting, in the sense the rule means.
The line that ends the question
This is the part that rarely reaches the people it would help, and it is worth reading slowly:
"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 isn't considered an SSTB."
"If your gross receipts from the trade or business are more than $25 million and less than 5% of the gross receipts are from the performance of services, then your trade or business isn't considered an SSTB."
Under the line, the business is not an SSTB. Not "phases out more slowly" — not one at all. The threshold, the phase-in range and the whole apparatus stop applying, regardless of taxable income.
| A practice with $280,000 of gross receipts | Amount | SSTB? |
|---|---|---|
| Strategy reviews and written recommendations | $24,000 | Yes — advice |
| Implementation, delivered and invoiced as a build | $186,000 | No |
| Training courses run for client staff | $48,000 | No — named as excluded |
| Ongoing support and maintenance | $22,000 | No |
| SSTB share | $24,000 ÷ $280,000 = 8.6% | under 10% |
Move $6,000 of that year from delivery into separately billed advice and the share passes 10%. Same work, same client, same total — and the entire deduction turns on it.
The two words that decide the mix
"consulting services embedded in or ancillary to the activities of a trade or business that isn't an SSTB, if there is no separate payment for the consulting services"
Separate payment. Judgement exercised inside a delivery is part of the delivery. The same judgement, invoiced as its own line, is consulting receipts.
This is not licence to relabel. If a client is buying advice and paying for advice, calling the invoice something else does not change what was sold — and a paper trail that says one thing while the engagement says another is worse than the deduction is worth. What it does mean is that a practice which genuinely builds and delivers should not be describing itself as an advisory firm on its invoices out of habit.
The mirror case is worth seeing: translation is not on the SSTB list at all, and a translator who starts separately invoicing "localisation consultancy" can walk into the category from outside it.
The exit that is already closed
The obvious structure — put the advisory work in one entity and the delivery work in another — has a rule waiting for it:
"If your trade or business provides services or property to an SSTB and there is 50% or more common ownership of the trades or businesses, that portion of the business that provides services or property to the SSTB is treated as a separate SSTB concerning the common owners."
At 50% or more common ownership, the part serving the SSTB is treated as an SSTB itself. The split has to be real to do anything, and a split that is real has consequences beyond tax.
There is a prior question too, and it is genuinely open: are the advice and the delivery one trade or business or two? The de minimis test applies per trade or business, so the answer changes the denominator. Separate books, separate clients and separate contracts point one way; a single invoice stream and one set of records point the other. That is a fact question, and the right time to put it to a qualified tax professional is before the year closes.
The 2026 numbers
Revenue Procedure 2025-32, for taxable years beginning in 2026:
| Filing status | Threshold | Top of the phase-in range |
|---|---|---|
| Married filing jointly | $403,500 | $553,500 |
| Married filing separately | $201,775 | $276,775 |
| All other returns | $201,750 | $276,750 |
The figure measured is taxable income on the return, not the profit of the practice — so a spouse's salary can start this for you.
And if you find $197,300 quoted, that is the 2025 threshold, including in the currently published Instructions for Form 8995-A, which are still the 2025 edition. The definitions there are stable. The dollar amounts are not.
What to do with this
- Split the year's receipts into advice and everything else. Not by client and not by project — by what was actually sold.
- Work out the percentage. If it is comfortably under 10%, the SSTB question may not apply to you at all, at any income.
- If it is near the line, look at what is driving it — and in particular at anything billed as advice out of habit rather than because advice is what the client bought.
- Do it before the year ends. In April the receipts are what they are.
One honest caveat to close on. This rule rewards accurate description, not clever description. A practice that sells advice is an SSTB and should plan as one — the deduction is not the largest number on that return, and a retirement contribution that lowers taxable income often does more for it than any amount of reclassification.
Common questions
Is consulting a specified service trade or business?
What does the rule actually mean by consulting?
So implementation work is not consulting?
What is the de minimis rule?
Does that still apply if my income is high?
Does advice I give inside a project count against me?
Can I move the advisory work into a second company?
What are the 2026 thresholds?
Below the threshold, does any of this matter?
Are my advice work and my build work one business or two?
Are the Form 8995-A instructions current for 2026?
This article is for educational purposes only and does not constitute tax, legal, or financial advice. Consult a qualified tax professional about your situation.