No, they don’t apply to you. This is genuinely good news for architecture and engineering firms. The tax code specifically carves out architects and engineers from the rules that limit the qualified business income deduction for high-earning service businesses.

Here’s the background. The Section 199A deduction allows pass-through business owners to deduct up to 20 percent of their qualified business income. But for what the IRS calls “specified service trades or businesses,” the deduction phases out and eventually disappears once taxable income exceeds certain thresholds. Doctors, lawyers, accountants, financial advisors, and consultants all fall into this category. Once their income rises above the threshold, they lose part or all of the deduction.

Architecture and engineering are explicitly excluded from that definition. Even if your income is well above the phase-out thresholds, you still qualify for the full 20 percent QBI deduction. The IRS treats you the same as a manufacturing or retail business for purposes of this rule.

There is one limit to keep in mind. Above certain income levels, the deduction becomes capped by either your W-2 wages or a combination of wages and the unadjusted basis of your depreciable property. For a firm with employees and office equipment, this usually isn’t a barrier. But if you’re a solo practitioner with no employees, the wage limit could reduce your deduction. How you structure compensation and whether you have qualifying property can affect the calculation.

Compare your situation to an accounting firm or law practice at the same income level. Those owners face a hard ceiling on the deduction once income passes the threshold. You keep it in full, subject only to the wage and property limits. That difference can mean tens of thousands of dollars in tax savings each year.

This creates a real planning opportunity worth capturing. Proactive tax strategy helps you structure wages, compensation, and property in a way that maximizes the deduction. The calculation flows through to your personal return, so accurate books are essential. If your firm’s numbers aren’t right, you could be leaving money on the table or creating problems if the IRS takes a closer look.

If you run an architecture or engineering firm and want to make sure you’re capturing this deduction fully, reach out for a consultation. Simona is a CPA and Enrolled Agent who provides small business bookkeeping services and tax planning for professional service firms across New England and nationwide.