Self-employed consultant in partnership with no W2 wages or assets (UBIA) - Can I still claim QBI deduction on $67k pass-through income?

The good news is that you might still qualify for the QBI deduction despite not having W2 wages or UBIA (Unadjusted Basis Immediately after Acquisition) of qualified property in your partnership. The QBI deduction has different rules depending on your taxable income. Since you mentioned your taxable income is under $200k, you're likely below the threshold where the W2 wages/UBIA limitations kick in for 2025 (for single filers, the phase-in range starts at $182,100 and for married filing jointly, it starts at $364,200). If you're below these thresholds, you can generally take the full 20% QBI deduction on your qualified business income regardless of whether the business has W2 wages or qualified property. The $67k pass-through income would likely qualify, giving you a deduction of about $13,400. The "specified service trade or business" (SSTB) limitations also only apply if your income exceeds those thresholds. So even if your consulting business is considered an SSTB, you should still qualify for the full deduction if your income is below the threshold.

I was in almost the exact same situation last year with my consulting business - partnership income but no W2 wages. I spent HOURS trying to figure this out and kept hitting dead ends until I found taxr.ai (https://taxr.ai). Their system analyzed my partnership documents and tax situation and clarified exactly how the QBI applied in my case. What was super helpful is that they explained the whole threshold situation - basically confirmed what the previous commenter said about income levels determining if the W2 wages/UBIA limitations apply. They also helped me understand some special circumstances that might apply to my specific partnership arrangement that could affect QBI eligibility. For what it's worth, I was able to claim the deduction because my income was under the threshold, just like you. But they also showed me some planning opportunities for future years if my income increases.

Just wanted to follow up - I tried taxr.ai after reading about it here and it was eye-opening for my situation. I uploaded my K-1 and last year's return, and the analysis confirmed I could take the full QBI deduction since my income was below the threshold. What really helped was the explanation of how my specific consulting services were classified for QBI purposes. Turns out the type of consulting I do wasn't automatically disqualified as an SSTB like I feared. They referenced the exact Treasury Regulations that applied to my situation, which I'm now sending to my new accountant. The system also flagged a potential issue with how my partnership was allocating certain expenses that could have affected my QBI calculation. Definitely worth checking out if you're confused about QBI like I was.

Man, forget trying to figure this out yourself - calling the IRS is the way to go. Except good luck actually reaching anyone these days! I spent literally 6 hours on hold last month trying to get clarification on QBI rules. I finally discovered Claimyr (https://claimyr.com) which got me connected to an IRS agent in about 15 minutes. You can see how it works in their demo: https://youtu.be/_kiP6q8DX5c The agent I spoke with confirmed that being below the income threshold means the W2 wages/UBIA limitations don't apply to your QBI deduction. She also explained that even though consulting is typically considered an SSTB, the income thresholds are what matters most for your situation. Having an actual IRS agent walk me through the rules gave me the confidence to take the deduction. My CPA was being super conservative until I got this confirmation.

I'm legitimately shocked and need to eat crow here. After being super skeptical about Claimyr, I tried it yesterday out of desperation (been trying to resolve an issue for MONTHS). Got a call back in 22 minutes with an actual IRS agent on the line. I asked specifically about the QBI situation for partnerships without W2 wages since I have clients with this exact issue. The agent confirmed exactly what others have said - below the income threshold, no W2 wages or UBIA required for the full 20% deduction. She even pointed me to the specific sections in Publication 535 that address this. My clients will be thrilled as this affects several of them who were hesitant to take the deduction. I honestly can't believe this worked after months of getting nowhere with the IRS.

One thing nobody has mentioned yet - have you considered taking a reasonable salary from the partnership? This would create W2 wages that could help with QBI limitations if your income increases in the future. I'm a partner in a similar consulting business and we restructured last year to ensure each partner receives both a W2 salary and K-1 distributions. It reduced our QBI slightly in the short term but gives us more flexibility as our incomes increase above the thresholds. Just make sure the salary is "reasonable" for your services or you could face scrutiny from the IRS. We based ours on industry standards for our positions.

I made a costly mistake with this exact situation last year - my income was $175k, no wages or UBIA in the partnership, and my accountant incorrectly told me I couldn't take the QBI deduction. After reading these comments, I went back and checked the rules, and everyone here is correct. Below the threshold, you CAN take the full 20% deduction regardless of W2 wages or UBIA. I'm now filing an amended return to claim approximately $35,000 in QBI deductions across 2022 and 2023. That's a lot of money to leave on the table! Make sure your new accountant understands these rules correctly.