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Tax Intelligence › Client Playbooks › CPA / Accountant IRC §162 • §199A(d) • §1362 • §280A Client Playbook — Accounting Professional Updated April 2026

Tax Planning Playbook for CPAs, Accountants, and Bookkeepers: SSTB QBI Phase-Out, Practice Entity Structure, Retirement Plans, and the Strategies That Self-Employed Accounting Professionals Most Often Overlook in Their Own Tax Planning

CPAs, enrolled agents, bookkeepers, and accounting professionals who operate their own practices are among the most undertaxed self-employed professionals — not because they lack knowledge, but because they are too busy planning for clients to plan for themselves. The most critical issue for accounting professionals is the SSTB classification under IRC §199A(d): accounting is explicitly listed as a Specified Service Trade or Business, which means the 23% QBI deduction (OBBBA increased from 20%) phases out for practitioners above the income threshold. Understanding how to structure around the SSTB limitation, maximize retirement plan contributions, and use the Augusta Rule and hire-your-children strategies is the foundation of every accounting professional’s tax plan. This playbook covers every strategy for accounting professionals — written by a practitioner, for practitioners.

$197,300
2026 SSTB QBI deduction phase-out begins (single filer) — accounting professionals above this threshold see their 23% QBI deduction (OBBBA increased from 20%) phased out; the deduction is fully eliminated at $247,300 single / $494,600 MFJ
$72,000
2026 SEP-IRA maximum — the fastest retirement plan to set up for a solo practitioner; maximizing this contribution is the single most effective way to reduce taxable income below the SSTB phase-out threshold
SSTB
Accounting is explicitly listed as an SSTB under IRC §199A(d)(1)(A) — unlike mortgage brokerage or real estate, there is no ambiguity; the QBI deduction phases out for accounting professionals above the income threshold
$50,000
Estimated tax savings from a combination of SEP-IRA maximization, S-Corp election, and Augusta Rule for a solo CPA earning $250,000 in net practice income — strategies that many practitioners know but fail to implement for themselves
✓ Accounting SSTB Classification Confirmed (IRC §199A(d)(1)(A); Treas. Reg. §1.199A-5(b)(2)(ii)) ✓ 2026 SSTB Phase-Out Threshold Confirmed: $197,300 single / $394,600 MFJ (Rev. Proc. 2025-32) ✓ 2026 SEP-IRA Limit Confirmed: $72,000 (IR-2025-111) ✓ Augusta Rule 14-Day Limit Confirmed (IRC §280A(g)) ✓ S-Corp Reasonable Salary Guidance Confirmed (Rev. Rul. 74-44)
SSTB ClassificationIRC §199A(d)(1)(A)
SSTB RegulationsTreas. Reg. §1.199A-5(b)(2)(ii)
S-Corp ElectionIRC §1362
Augusta RuleIRC §280A(g)
Hire Your ChildrenIRC §73 • §3121(b)(3)
Business DeductionsIRC §162

The SSTB Problem: How Accounting Professionals Lose the QBI Deduction — and How to Fight Back

Accounting is explicitly listed as a Specified Service Trade or Business (SSTB) under IRC §199A(d)(1)(A) and Treas. Reg. §1.199A-5(b)(2)(ii). This means that for accounting professionals with taxable income above the phase-out threshold, the 23% QBI deduction (OBBBA increased from 20%) is progressively eliminated. For 2026, the phase-out begins at $197,300 (single) / $394,600 (MFJ) and is fully eliminated at $247,300 (single) / $494,600 (MFJ). A solo CPA with $250,000 in net practice income filing as single has their QBI deduction completely eliminated — losing a $50,000 deduction that would have saved $18,500 in federal income tax.

The primary strategy for fighting back against the SSTB phase-out is reducing taxable income below the phase-out threshold through retirement plan contributions, above-the-line deductions, and other income reduction strategies. Here is the math for a solo CPA with $250,000 in net practice income (single filer, 2026):

StrategyDeduction AmountTaxable Income AfterQBI Deduction Restored
Starting position (no planning)—$250,000$0 (fully phased out)
SEP-IRA maximization (25% of net SE income)~$46,500~$203,500Partial (~$1,300)
SEP-IRA + Solo 401(k) employee contribution~$71,000~$179,000Full ($35,800)
SEP-IRA + Solo 401(k) + self-employed health insurance~$85,000~$165,000Full ($33,000)

The key insight: a solo CPA who maximizes their Solo 401(k) contributions (employee + employer) and deducts self-employed health insurance can reduce their taxable income below the $197,300 phase-out threshold, restoring the full 23% QBI deduction (OBBBA increased from 20%). The retirement plan contributions themselves generate a tax deduction, and restoring the QBI deduction generates an additional deduction — a compounding benefit.

Frequently Asked Questions

My CPA client has a bookkeeping side business separate from their CPA practice. Is the bookkeeping income also subject to the SSTB limitation?›

Yes — bookkeeping is included in the accounting SSTB category under Treas. Reg. §1.199A-5(b)(2)(ii), which defines the accounting SSTB as “the performance of services in the field of accounting or actuarial science, including services performed by accountants, enrolled agents, return preparers, financial auditors, and similar professionals performing services in their capacity as such.” Bookkeeping is a service performed in the field of accounting, so it falls within the SSTB definition. However, if the bookkeeping business is operated as a separate entity from the CPA practice, the practitioner must analyze whether the two businesses are treated as a single SSTB or as separate businesses. Under Treas. Reg. §1.199A-4, commonly controlled businesses (same owner with 50%+ ownership) can be aggregated for QBI purposes, but they cannot be disaggregated to avoid the SSTB classification. If both the CPA practice and the bookkeeping business are owned by the same individual, they are both SSTBs and the combined QBI from both businesses is subject to the phase-out. The only way to avoid the SSTB classification for a portion of the income is if the bookkeeping business has a genuinely separate business purpose and is not operated as an extension of the accounting practice — which is rarely the case when both are owned by the same CPA.

Can a CPA use the Augusta Rule to rent their home office to their S-Corp practice for client meetings?›

Yes, but the practitioner must be careful about the interaction between the Augusta Rule (IRC §280A(g)) and the home office deduction (IRC §280A(c)). The Augusta Rule allows a homeowner to rent their home to their S-Corp for up to 14 days per year and exclude the rental income from gross income. The S-Corp deducts the rent as a business expense (IRC §162), reducing the S-Corp’s taxable income and the shareholder’s W-2 income. However, if the CPA is already claiming a home office deduction for the same space under IRC §280A(c), there is a potential conflict: the home office deduction requires the space to be used “regularly and exclusively” for business, while the Augusta Rule applies to a space used for “rental” to the business. The IRS has not issued definitive guidance on whether a CPA can simultaneously claim a home office deduction and use the Augusta Rule for the same space. The conservative approach is to use the Augusta Rule for a different space than the one claimed as a home office — for example, renting the dining room or living room for client meetings (not the dedicated home office). The S-Corp should document the meetings with meeting agendas, attendee lists, and business purpose documentation. The rental rate should be set at fair market value for comparable meeting space in the area (comparable to a conference room rental). For a CPA in a major metro area, a fair market rate of $500–$1,000 per day for 14 days = $7,000–$14,000 per year in tax-free rental income to the CPA and a deductible expense for the S-Corp.

More Tax Planning FAQs

How does the S-Corp election reduce self-employment tax?
An S-Corp election allows the owner to split income between a reasonable salary (subject to 15.3% FICA on the first $176,100 in 2026) and distributions (not subject to FICA). For a business owner with $200,000 in net profit paying an $80,000 salary, the annual SE tax savings are approximately $15,500–$18,500. The S-Corp must file Form 2553 within 75 days of formation.
What is the Section 199A QBI deduction and how does it apply?
The §199A deduction allows pass-through business owners to deduct up to 23% of qualified business income (QBI) from taxable income (increased from 20% under OBBBA). For taxpayers above $403,500 (MFJ) in 2026, the deduction is limited to the greater of 50% of W-2 wages or 25% of W-2 wages plus 2.5% of qualified property. Specified Service Trades or Businesses (SSTBs) phase out above this threshold.
What retirement plan options are available for self-employed professionals?
Self-employed professionals can establish a Solo 401(k) (up to $70,000 in 2026), a SEP-IRA (25% of net self-employment income up to $70,000), a SIMPLE IRA ($16,500 + $3,500 catch-up), or a Defined Benefit Plan (up to $280,000+ depending on age). The Solo 401(k) is the best option for most self-employed professionals because it allows the highest contributions relative to income.
How does the home office deduction work for self-employed professionals?
Self-employed professionals who use a dedicated home office space exclusively and regularly for business qualify for the home office deduction under §280A. The deduction is calculated as a percentage of home expenses (mortgage interest, utilities, insurance, depreciation) equal to the office square footage divided by total home square footage. The simplified method allows $5/sq ft up to 300 sq ft ($1,500 maximum).
What vehicle deductions are available for self-employed professionals?
Self-employed professionals can deduct vehicle expenses using either the standard mileage rate (70 cents/mile in 2026) or actual expenses. Vehicles with a GVWR over 6,000 lbs qualify for §179 expensing (up to $30,500 for heavy SUVs) and bonus depreciation without luxury auto limits. A mileage log must be maintained for either method. The vehicle must be used more than 50% for business to qualify for accelerated depreciation.
What is the Augusta Rule and how can it benefit business owners?
The Augusta Rule (§280A(g)) allows homeowners to rent their primary or secondary residence to their business for up to 14 days per year. The rental income is completely tax-free to the homeowner, and the business deducts the rent as a business expense. At $2,000–$3,000/day for 14 days, this strategy generates $28,000–$42,000 of tax-free income while the business deducts the same amount.
How does cost segregation apply to business owners who own real estate?
Cost segregation reclassifies building components into shorter depreciation categories eligible for bonus depreciation. For a $1M commercial property, cost segregation typically identifies $150,000–$250,000 of accelerated depreciation, generating $60,000–$100,000 in first-year deductions at the 100% bonus depreciation (restored by OBBBA for property placed in service after Jan 19, 2025) rate in 2026. A cost segregation study costs $5,000–$15,000 and typically has a 10:1+ ROI.
What is the difference between a sole proprietor and an S-Corp for tax purposes?
A sole proprietor pays self-employment tax (15.3%) on all net profit. An S-Corp owner pays FICA only on their reasonable salary, saving SE tax on distributions. For a business with $200,000 in net profit, the S-Corp saves $15,000–$20,000/year in SE tax. The S-Corp has additional costs (payroll, bookkeeping, tax preparation) of $2,000–$4,000/year, making the break-even point approximately $40,000–$50,000 in net profit.
How should a self-employed professional handle estimated tax payments?
Self-employed professionals must make quarterly estimated tax payments by April 15, June 15, September 15, and January 15. The safe harbor is 100% of prior year tax (110% if prior year AGI exceeded $150,000). Failure to pay sufficient estimated taxes results in an underpayment penalty under §6654. S-Corp owners should adjust their payroll withholding to cover their estimated tax liability.
What business expenses are deductible for self-employed professionals?
Ordinary and necessary business expenses under §162 include: professional licenses and continuing education, professional liability insurance, office supplies and equipment, software subscriptions, marketing and advertising, professional association dues, business travel (flights, hotels, 50% of meals), and home office expenses. Personal expenses are not deductible even if they have some business connection.
What is the self-employed health insurance deduction?
Self-employed professionals can deduct 100% of health insurance premiums (for themselves, their spouse, and dependents) as an above-the-line deduction under §162(l). This deduction reduces AGI and is available even if the taxpayer does not itemize. The deduction is not available if the taxpayer is eligible for employer-sponsored health insurance through a spouse’s employer. S-Corp owners must include premiums in W-2 wages before claiming the deduction.
How should a CPA set up payroll for an S-Corp shareholder-employee to ensure compliance with FICA requirements?
To set up payroll for an S-Corp shareholder-employee, the CPA must first determine a reasonable salary based on industry standards and the shareholder's role, as required under Subchapter S and IRS guidance. Payroll should be processed through a formal payroll system that withholds federal income tax, Social Security tax up to the 2026 wage ceiling of $184,500, and Medicare tax, including the 0.9% additional Medicare tax for income exceeding $200,000 for single filers. Timely deposit of withheld taxes using Forms 941 and 940 is essential to avoid penalties. Proper documentation and periodic review of compensation levels help maintain compliance and defend against IRS scrutiny.
What steps must be taken to timely file an S-Corp election using Form 2553?
To timely elect S-Corp status, Form 2553 must be filed no later than two months and 15 days after the beginning of the tax year the election is intended to take effect, per §1362(b)(1). The form requires signatures from all shareholders and must specify the tax year and effective date. Late elections may be accepted if reasonable cause is shown under IRS Revenue Procedure 2013-30. Filing must be coordinated with the entity’s tax advisor to ensure all eligibility requirements are met and to avoid defaulting to C-Corp taxation.
What documentation should CPAs maintain to support the reasonableness of S-Corp shareholder-employee salaries during an IRS audit?
CPAs should retain contemporaneous documentation including compensation studies, industry salary surveys, job descriptions, time records, and any board or shareholder meeting minutes authorizing the salary. The IRS evaluates reasonableness based on factors such as training, duties, and comparable salaries per IRS Fact Sheet 2008-25. Maintaining a consistent methodology year over year strengthens the defense. Proper documentation mitigates risk of reclassification of distributions to wages, which could trigger back payroll taxes, interest, and penalties.
What triggers IRS audit attention regarding low shareholder-employee salaries in S-Corps?
Audit triggers include shareholder salaries significantly below industry norms, especially when distributions are disproportionately high, as this suggests underpayment of payroll taxes. Sudden changes in compensation without business justification, repeated losses offset by distributions, and whistleblower tips can also prompt audits. The IRS uses a facts-and-circumstances test per §3121(d) to assess if wages are reasonable, and an unreasonably low salary may lead to reclassification. Maintaining defensible salary levels and thorough documentation reduces audit risk.
How does combining retirement contributions between an S-Corp and a sole proprietorship client affect overall tax planning?
When a client operates both an S-Corp and a sole proprietorship, retirement contributions must be coordinated because limits under §401(k) and §408 apply on an aggregate basis across all businesses. For 2026, elective deferrals are capped at $22,500 with a $7,500 catch-up for those over 50. Earnings from the S-Corp salary and the sole proprietorship’s net self-employment income must be considered to avoid exceeding contribution limits. Careful planning ensures maximization of tax-advantaged savings without triggering excess contribution penalties.
Can an S-Corp shareholder combine distributions and salary to minimize overall tax liability, and what are the risks?
S-Corp shareholders often attempt to minimize payroll taxes by taking low salaries and high distributions; however, per IRS rules, salary must be reasonable compensation for services rendered under §3121(d). While distributions are not subject to FICA, unreasonably low salaries risk IRS reclassification, leading to back payroll taxes, interest, and penalties. Balancing salary and distributions requires careful analysis of industry standards and business profitability. The goal is to optimize tax savings while maintaining compliance and minimizing audit exposure.
What key questions should I ask my clients to explain the implications of S-Corp salary versus distributions?
I advise asking clients about their role and time commitment to the business, industry compensation norms, and cash flow needs. Clarify their understanding of payroll taxes, including the 15.3% combined FICA rate up to $184,500 in 2026, and the risks of IRS scrutiny if salaries are unreasonably low. Discuss how salary affects retirement plan contributions and Social Security benefits. These questions help clients grasp the necessity of a reasonable salary and the strategic balance between compensation and distributions for tax efficiency.

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Professional Disclaimer

The information on this page is intended for licensed tax professionals (CPAs, EAs, and tax attorneys) and is provided for educational and research purposes only. Tax law is complex and fact-specific — all strategies discussed are subject to limitations, phase-outs, and conditions that may not apply to every client situation. Practitioners should independently verify all information against current IRS guidance, Treasury Regulations, and applicable state law before advising clients. This content does not constitute legal or tax advice.

CPAs who plan for clients but not for themselves are leaving $30,000–$70,000 on the table every year

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