Architect (Private Practice) Tax Playbook

SSTB Analysis: Architecture is NOT SSTB

Architecture is specifically excluded from the list of specified service trades or businesses (SSTBs) under §199A. This means that architects in private practice can claim the full 20% QBI deduction on their net consulting income, regardless of their income level, as long as they meet the W-2 wage test (if applicable). This is a significant advantage over other professional service providers (attorneys, consultants, financial advisors) who are classified as SSTBs.

Architects who also provide interior design, project management, or construction management services should analyze whether those services are separately classified as SSTBs. Interior design is not specifically excluded from the SSTB list, so architects who derive significant revenue from interior design services should consider whether to segregate that revenue into a separate entity.

S-Corp Election and Salary Planning

Architects with net consulting income above $80,000 should strongly consider the S-Corp election. A reasonable salary for an architect S-Corp owner is typically $85,000–$140,000, depending on experience, geographic market, and hours worked. The IRS uses BLS Occupational Employment Statistics and AIA compensation surveys to benchmark reasonable compensation for architecture S-Corps.

R&D Tax Credit for Architecture Firms

Architecture firms may qualify for the §41 R&D tax credit for qualifying research activities. Qualifying activities for architecture firms include: design and analysis of new or improved building systems, development of proprietary design software or tools, testing and evaluation of new materials or construction methods, and feasibility studies for novel architectural solutions. The R&D credit is a dollar-for-dollar reduction in tax liability.

The R&D credit for architecture firms is typically calculated using the Alternative Simplified Credit (ASC) method: 14% of qualifying research expenses (QREs) in excess of 50% of the average QREs for the three preceding years. Common qualifying expenses include wages paid to architects for qualifying design activities, contractor costs for qualifying research, and computer and software costs used in qualifying research.

Retirement Planning

Architects in private consulting practice can implement a Solo 401(k) through their S-Corp, contributing up to $23,500 as an employee deferral (plus $7,500 catch-up if age 50+) and up to 25% of W-2 salary as an employer profit-sharing contribution. Architects with net income above $200,000 should consider adding a cash balance plan to contribute an additional $100,000–$200,000+ in pre-tax dollars annually.

Architects who have employees in their firm should evaluate the SEP-IRA vs. SIMPLE IRA vs. 401(k) tradeoffs based on the number of employees and the desired contribution level. A 401(k) with a safe harbor provision allows the architect-owner to maximize their own contributions while minimizing the required employer contribution for employees.

Home Office and Equipment Deductions

Architects who work from a home office can deduct the home office under §280A. The home office deduction requires exclusive and regular use of a specific area of the home for business. Architecture equipment (computers, plotters, monitors, design software subscriptions like AutoCAD, Revit, SketchUp) qualifies for §179 expensing and bonus depreciation. Architects should also deduct professional development costs (AIA continuing education, licensing fees, professional association dues) as ordinary business expenses under §162.

Frequently Asked Questions