Do Engineers and Architects Have Special QBI Deduction Rules? My Structural Engineering Practice Got Phase-Out Limitations!

Wait, so the benefit is just that I don't lose the deduction completely? I thought engineering being excluded from SSTB meant I would get the full 20% regardless of income. So hypothetically, if I had W-2 employees with substantial wages, would I potentially qualify for more of the deduction even at my income level?

Yes, that's exactly right - the benefit is that you don't lose the deduction completely at higher income levels like an SSTB would. Engineers and architects can still qualify for a partial or even full deduction depending on their wage/property situation. If you had W-2 employees with substantial wages, you absolutely could qualify for more of the deduction even at your current income level. The limitation formula above the threshold essentially becomes the greater of: 50% of W-2 wages OR 25% of W-2 wages plus 2.5% of qualified property. Since you currently have neither, your deduction gets limited more severely as you go above the threshold.

Does this taxr.ai thing work with partnership income too? My engineering firm is structured as a partnership and our CPA keeps telling us different things each year about our QBI limitations. Last year he said we couldn't claim it at all due to our income level, but now I'm wondering if that was incorrect.

I'm curious - did it give you any actionable advice about how to fix the limitation issue? I'm also an engineer (civil) and my accountant just shrugs when I ask if there's any way to optimize the QBI deduction given my income level. I'm skeptical about online tools, but if it actually provided useful strategies I'd be interested.

Yes, it definitely works with partnership income! It can analyze Schedule K-1s and show how the QBI flows through from partnerships. You should definitely check because your CPA might be confusing engineering firms with other professional services that DO get completely eliminated at higher income levels. As for actionable advice, it actually did provide several strategies. The main ones for me were: 1) Considering paying myself or family members as W-2 employees to generate wage base, 2) Investing in qualifying business property that could count toward the limitation formula, and 3) Timing certain business income/expenses to keep taxable income under thresholds in certain years. It was really eye-opening compared to what my regular CPA had told me.

How does this service actually work? I've spent HOURS on hold with the IRS about a similar issue with my engineering partnership's QBI deduction. Do they just call for you or what? And does the IRS actually provide helpful answers about QBI calculations when you reach them?

This sounds like a scam honestly. The IRS phone system is deliberately understaffed - no way some random service can magically get through when millions of people can't. Plus why would they be better than just using a CPA who actually understands the tax code? Why would you trust random IRS phone agents with complex QBI questions?

It's not magic - they use technology to navigate the IRS phone system and wait on hold for you. They call you when they're about to connect with an IRS agent, so you don't waste hours listening to hold music. It literally saved me 2-3 hours of hold time each attempt. As for whether the IRS provides helpful answers - surprisingly, yes! The agent I spoke with was in their business tax division and very knowledgeable about Sec. 199A. They confirmed that architectural services are excluded from the SSTB designation (which my CPA got right), but clarified that I still needed to meet the wage/property test as income increases (which my CPA hadn't explained well). They even emailed me specific IRS guidance documents about architectural firms and QBI.

That's really interesting. I've considered S-Corp before for self-employment tax savings but never connected it to QBI benefits. Do you know if there are any downsides to this approach specifically for engineering practices? And does the "reasonable compensation" requirement create any special challenges for professional service businesses?

For engineering practices specifically, the main consideration is making sure your salary truly meets the "reasonable compensation" standard. The IRS scrutinizes professional service businesses more closely on this point. For someone with your income level, you'd want to research comparable salaries for structural engineers in your area with your experience. You probably need to justify a salary of at least $150-200k to avoid red flags. The downside is you'd pay a bit more in Medicare taxes on the salary portion since you can't avoid the additional 0.9% Medicare on high incomes through S-Corp structuring. Another consideration is that some states (like California) impose additional taxes or fees on S-Corps that might eat into your savings. You'll also have more administrative requirements - separate payroll, more complex bookkeeping, etc. But overall, for most engineers at your income level, the combined SE tax savings and QBI optimization through S-Corp structuring usually outweigh these downsides significantly.

Yes! This was a game-changer for my architecture practice. I had a main design firm (S-Corp with employees) and a separate consulting business (sole prop, no employees). By aggregating them, I was able to apply the W-2 wages from the S-Corp across both businesses for QBI purposes. Just make sure you meet the 50% common ownership requirement and the other tests for aggregation (like having the same tax year). You'll need to file an annual election with your tax return. Form 8995-A has a section specifically for aggregation.

That's super helpful, thanks! Did you need to work with a specialized CPA to get the aggregation right? I'm worried my regular tax guy might not be familiar enough with these specific QBI rules for architects.