Good news: freelance graphic designers, photographers, and similar creatives generally do qualify for the full 20 percent QBI deduction. The IRS clarified the rules in a way that works in your favor.

The worry comes from the list of “specified service trades or businesses” (SSTBs) that face limits on the deduction. That list includes health, law, accounting, consulting, and a catch-all category for businesses where the principal asset is the reputation or skill of the owner. When the law first passed, that catch-all language seemed broad enough to sweep in almost any service business, including designers and other creative services providers.

The IRS narrowed that catch-all significantly in the final regulations. It now applies mainly to income from endorsements, licensing your name and likeness, or receiving fees for appearances. Think celebrity endorsement deals or athletes getting paid for commercials. A freelance designer getting paid for actual design work does not fall into that category.

So if you are doing graphic design, web design, photography, video production, or similar creative work, you are generally not an SSTB. You can claim the 20 percent deduction on your qualified business income, subject to the normal rules around taxable income thresholds and W-2 wage limitations at higher income levels.

The normal rules still matter. If your taxable income is below certain thresholds ($182,100 single or $364,200 married filing jointly for 2024), you get the full deduction regardless of business type. Above those thresholds, the W-2 wage and property basis limitations start to phase in, but again, you are not in the restricted SSTB category as a designer.

This is exactly the kind of detail that makes proactive bookkeeping and tax services worth investing in before year-end. Knowing you qualify for the QBI deduction lets you think about timing, retirement contributions, and other strategies to maximize the benefit. A CPA who understands how these pieces fit together can help you get more from the deduction.

If you want to confirm how the QBI deduction applies to your specific situation, reach out for a consultation. Every business is different, and the rules have enough moving parts that personalized guidance is worth it.