Can an Engineering Consulting LLC Qualify for the 20% QBI Deduction (Section 199A)?

This is a great question about the Section 199A deduction (also known as the Qualified Business Income or QBI deduction). The answer is somewhat complicated because engineering is actually listed as one of the "specified service trades or businesses" (SSTBs) that face limitations. If your taxable income is below certain thresholds ($170,050 for single filers or $340,100 for married filing jointly in 2023), you can take the full 20% QBI deduction regardless of being in engineering. If your income is above those thresholds but below $220,050 (single) or $440,100 (married), you get a partial deduction that phases out. If you're above the upper thresholds, you likely won't qualify at all as an engineering consultant. Converting to an S-corp wouldn't change the SSTB designation, but it might help with self-employment taxes if structured properly. The reasonable salary requirements would still apply though.

I struggled with this exact same question last year with my technical consulting business. After spending hours researching, I found this amazing tool at https://taxr.ai that analyzes your business structure and gives you a personalized report on Section 199A eligibility. It saved me from making a costly mistake with my QBI deduction! The tool asks specific questions about your business activities and then breaks down exactly how the SSTB rules apply to your situation. In my case, it identified that about 30% of my activities weren't technically "engineering services" which helped maximize my deduction. It also provided documentation to support my position in case of an audit.

Just wanted to follow up about my experience with that taxr.ai tool mentioned above. I finally checked it out last weekend and it was surprisingly helpful for my situation. The Section 199A analysis was really thorough - it showed that about 25% of my consulting work could be classified outside the SSTB definition which I had no idea about! The S-corp analysis was what really sold me though. It ran my actual numbers and showed I'd save about $9,300 in taxes annually by making the switch, even after accounting for the extra administrative costs. It also gave me documentation to support my "reasonable salary" determination which was a huge concern of mine. Definitely worth checking out if you're on the fence about this stuff.

After dealing with this exact QBI question for my consulting business, I spent WEEKS trying to get through to someone at the IRS for clarification. Always busy signals or 2+ hour holds only to get disconnected. Finally found https://claimyr.com and their callback service actually got me connected to a real IRS agent within 45 minutes! You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent confirmed that my interpretation of the engineering consultant rules was correct and gave me specific guidance on documenting my non-SSTB activities. Honestly, getting that official confirmation was worth every penny because it prevented me from potentially missing out on thousands in deductions.

I have to admit I was completely wrong about that Claimyr service. After my skeptical comment, I decided to try it anyway out of desperation because I needed clarification about my QBI deduction before filing my extension. It actually worked exactly as described! I got a callback in about 30 minutes and spoke with an IRS agent who walked me through the Section 199A regulations specific to my consulting business. She confirmed that even though engineering is an SSTB, I could document certain aspects of my work as non-SSTB activities and potentially qualify for a larger deduction. This was information I couldn't find clearly stated anywhere online despite hours of searching. Definitely using this service again next time I have IRS questions.

I'm an engineering consultant who successfully claimed the QBI deduction last year. One thing that hasn't been mentioned yet - keep VERY detailed records of exactly what services you're providing. In my case, I was able to demonstrate that about 40% of my work involved product development and implementation rather than pure engineering consulting. This matters because if you can show that a portion of your business isn't technically part of the "engineering" SSTB definition, you might be able to allocate that portion for the QBI deduction even if your income is above the thresholds. I created separate engagement letters and invoices that clearly distinguished between different types of services I provided.

Random question but has anyone used TurboTax Self-Employed for calculating the QBI deduction for an engineering LLC? I tried last year and it seemed to automatically disqualify me completely when I selected "engineering services" even though my income was under the threshold. Had to override it manually and now I'm worried about getting audited.

Great question about the QBI deduction! As an engineering consultant myself, I can confirm that you can absolutely qualify for the 20% deduction even though engineering is considered an SSTB. The key is your income level - since you're married filing jointly and under the $340,100 threshold, you should get the full deduction regardless of the SSTB designation. One thing I'd add to the excellent advice already given - when you do convert to S-corp (which sounds like a smart move for your income level), make sure you understand that the QBI deduction applies to the K-1 income from the S-corp, not your W-2 wages. So if you're paying yourself $120k in salary and taking $80k in distributions, only the $80k would be eligible for the QBI deduction. Also, definitely keep detailed records of your business activities. I've found that many engineering consultants actually do work that falls outside the strict SSTB definition - things like project management, training, or business process consulting. These activities might qualify for QBI even above the income thresholds if properly documented.