Navigating the complexities of the Qualified Business Income Deduction (QBID) can be challenging, especially for those in specified service trades or businesses (SSTBs). IRS Form 8995-A, particularly Schedule A, plays a crucial role in determining eligibility for this deduction when your income falls within certain thresholds. This article breaks down what Schedule A is, who needs it, how to complete it, and more, helping you optimize your tax strategy for the 2025 tax year.
What Is IRS Form 8995-A and Its Purpose?
Form 8995-A is used to calculate the QBID under Section 199A of the Internal Revenue Code. This deduction allows eligible taxpayers—such as owners of sole proprietorships, partnerships, S corporations, trusts, and estates—to deduct up to 20% of their qualified business income (QBI), plus 20% of qualified real estate investment trust (REIT) dividends and qualified publicly traded partnership (PTP) income. Unlike the simplified Form 8995, Form 8995-A is required for more complex situations, including when your taxable income exceeds certain limits or involves SSTBs, aggregations, loss carryforwards, or cooperative patronage.
Schedule A specifically addresses SSTBs, which are generally excluded from qualifying for the full QBID if your income is above the phase-in range. However, if your taxable income is within the phase-in range, a portion of your SSTB may still qualify, and that’s where Schedule A comes in.
Defining Specified Service Trades or Businesses (SSTBs)
An SSTB is any trade or business that provides services in specific fields where the performance of services is the primary activity. According to IRS guidelines, these include:
- Health: Services by physicians, pharmacists, nurses, dentists, veterinarians, physical therapists, psychologists, and other health professionals.
- Law: Services by lawyers, paralegals, arbitrators, and mediators.
- Accounting: Services by accountants, auditors, bookkeepers, and tax preparers.
- Actuarial Science: Services by actuaries and similar professionals.
- Performing Arts: Services by actors, singers, musicians, entertainers, directors, and producers.
- Consulting: Providing advice or counsel to assist in achieving goals, including lobbying.
- Athletics: Services by athletes, coaches, team managers, and trainers.
- Financial Services: Managing wealth, developing retirement plans, or providing financial planning.
- Brokerage Services: Arranging transactions between buyers and sellers for a commission.
- Investing and Investment Management: Managing investments for profit.
- Trading: Buying and selling securities, commodities, or partnership interests.
- Dealing in Securities: Similar to trading but focused on securities.
- Reputation or Skill-Based Businesses: Where the principal asset is the reputation or skill of owners/employees, such as endorsing products, licensing likeness, or media appearances.
There are de minimis exceptions: If your business’s gross receipts are $25 million or less and less than 10% come from SSTB activities, it’s not considered an SSTB. For businesses over $25 million, the threshold drops to less than 5%. Additionally, if your business provides property or services to an SSTB with 50% or more common ownership, that portion is treated as a separate SSTB.
Who Needs to File Schedule A of Form 8995-A?
You must complete Schedule A if:
- Your trade or business is an SSTB.
- Your 2025 taxable income before the QBID is more than $197,300 (or $394,600 if married filing jointly) but not exceeding $247,300 (or $494,600 if married filing jointly). This is the phase-in range where only a portion of your SSTB qualifies.
If your income is at or below the threshold ($197,300 single/$394,600 MFJ), your SSTB is fully treated as a qualified trade or business—no need for Schedule A; use Form 8995 instead. If above the phase-in range ($247,300 single/$494,600 MFJ), SSTBs are entirely excluded from the deduction.
Patrons of agricultural or horticultural cooperatives may also need to attach Schedule D, and estates/trusts should allocate items based on distributable net income (DNI).
| Filing Status | Income Threshold | Phase-In Range End |
|---|---|---|
| Single, Head of Household, Qualifying Surviving Spouse, or Married Filing Separately | $197,300 | $247,300 |
| Married Filing Jointly | $394,600 | $494,600 |
How to Complete IRS Form 8995-A Schedule A: Step-by-Step?
Schedule A consists of parts focused on identifying your businesses and adjusting QBI based on the phase-in.
Part I: Trade, Business, and Aggregation Information
- List each SSTB or aggregation.
- Enter the business name, EIN/SSN/ITIN.
- If aggregated (via Schedule B), use the group name.
Part II: Determine Your Adjusted Qualified Business Income (for PTP SSTBs)
- Line 2: Enter qualified PTP income for each SSTB.
- Line 5: Enter your taxable income before QBID.
- Line 8: Calculate the applicable percentage (see below).
- Line 9: Multiply Line 2 by Line 8.
- Line 11: Applicable percentage for PTP (same as Line 8 if in phase-in; 0% otherwise).
- Line 12: Multiply qualified PTP income by Line 11.
- Line 13: Subtract Line 12 from Line 9 (enter 0 if negative).
For non-PTP SSTBs, use a similar structure in Part I, adjusting QBI accordingly.
Before starting, complete any required Schedules B (aggregation), C (loss netting), or D (cooperatives).
Key Calculations: The Phase-In Applicable Percentage
The core of Schedule A is the applicable percentage, which determines how much of your SSTB QBI qualifies:
- Formula: 100% – [(Taxable income – Threshold) / Phase-in range × 100%]
- Phase-in range: $50,000 (single) or $100,000 (MFJ).
Example: A single filer with $220,000 taxable income (excess: $220,000 – $197,300 = $22,700). Reduction: ($22,700 / $50,000) × 100% = 45.4%. Applicable percentage: 54.6%. If QBI is $100,000, qualified QBI = $54,600.
Another Example: Married filing jointly with $430,000 income (excess: $35,400). Reduction: 35.4%. Applicable: 64.6%. For $100,000 QBI, qualified = $64,600.
Download IRS Form 8995-A Schedule A
To get started, download the official PDF directly from the IRS website: https://www.irs.gov/pub/irs-pdf/f8995aa.pdf. Always use the latest version for accuracy.
Final Thoughts on SSTBs and QBID
Understanding Schedule A can significantly impact your tax savings if you’re in an SSTB and within the phase-in range. However, tax laws are intricate—consult a tax professional to ensure compliance and maximize your deduction. Stay updated with IRS resources for any changes beyond 2025.