How a Cash Balance Plan Can Help Law Firm Partners Requalify for the QBI Deduction

Many high-income law firm partners are told they no longer qualify for the Qualified Business Income (QBI) deduction. Their CPA looks at the numbers, sees income over the limit, and says: “You’re phased out.”

That advice may be technically correct but misses the strategy that matters. What often gets missed is that QBI eligibility isn’t fixed. It isn’t about what your firm earns on paper; it’s about how your income is structured and reported for tax purposes. Most partners think once they cross the threshold, the deduction disappears for good. In reality, it’s buried under your adjusted gross income (AGI).

This is where income design comes in. Instead of accepting phase-outs as inevitable, you can intentionally shape your taxable income with IRS-approved strategies. When done well, this doesn’t just keep more money in your pocket today; it aligns your tax position with long-term wealth building.

One of the most powerful tools for achieving this is a cash balance plan. By making significant, tax-deductible contributions, you can lower your AGI enough to reopen the QBI deduction, effectively reclaiming a tax break that many partners are told they’ve lost. The result: five-figure savings now, plus retirement capital that compounds for the future. (Your AGI is the number on your tax return that determines QBI limits).

What Is the QBI Deduction & Why Does It Matter?

The Qualified Business Income (QBI) deduction, created under Section 199A of the tax code, allows certain owners of pass-through entities to deduct up to 20% of their qualified business income. For law firm partners, that means a portion of the income flowing directly from your practice could be excluded from tax. On the right side of the thresholds, this deduction can be worth tens of thousands of dollars each year.

But there’s a complication: law firms fall into a category the IRS calls specified service trades or businesses (SSTBs). Professional practices like law, medicine, or accounting that face stricter limits. Once your taxable income (after deductions and adjustments) rises above the federal thresholds, the QBI deduction doesn’t taper off slowly; it disappears entirely.

For 2025, here’s where the lines are drawn:

If your taxable income falls in between those numbers, the deduction phases out. Above the top of the range, it’s eliminated.

That’s where most high-earning law firm partners land. With incomes of $400,000 or more, you’ve likely been told there’s no way to access QBI.

However, that conclusion only examines the limits, not how taxable income can be effectively managed. And that’s the key: QBI isn’t determined by what your firm grosses, it’s determined by what your return shows as taxable income. That distinction is what opens the door to strategy.

Why Income Phase-Out Doesn’t Mean You’re Out of Options

When most law firm partners hear ‘you’re phased out’, they take it as final. Their CPA saw income above the cutoff and assumed QBI was off the table. But that’s only half the story.

Here’s the nuance: QBI eligibility isn’t based on the size of your practice or the gross income it generates; it’s based on taxable income. That means the right deductions can shift where you land relative to the thresholds.

Think of it this way: if your taxable income is sitting at $450,000, you’re above the QBI limit. But if you make a strategic deduction that reduces that income to $350,000, suddenly you’ve crossed back into eligible territory. The business hasn’t changed. Your practice is the same size. The only difference is how your income is structured.

Most CPAs don’t talk about this. Not because they’re wrong, but because they’re focused on reporting what already happened, not redesigning income for future advantage. That’s the gap. Tax compliance looks backward. Tax strategy looks forward.

So how do you translate that into action? This is where a Cash Balance Plan can transform the equation. It can help you not just save for retirement, but help you reclaim deductions and reduce today’s tax bill.

How a Cash Balance Plan Can Unlock the QBI Deduction

A cash balance plan is technically a type of defined benefit plan; however, for law firm partners, it serves as a powerful income design tool. Unlike a 401(k) or SEP IRA, which caps annual contributions at around $69,000, a cash balance plan can allow deductible contributions of $100,000 to $300,000 or more each year, depending on age, income, and plan design.

Those contributions are treated as a business expense, which means they reduce your firm’s net income and your personal taxable income dollar for dollar. For high earners, that shift doesn’t just shrink your tax bill today. It can also drop your AGI below the QBI threshold, unlocking a deduction you may have been told was out of reach.

Here’s what that looks like in practice:

Result: By contributing $150,000 into a cash balance plan, the partner not only secures a six-figure retirement contribution but also reopens eligibility for the QBI deduction. That “double dip” can translate into five-figure tax savings in the current year, plus the long-term compounding of retirement assets.

This is what makes CB plans unique: they’re not just about saving for the future. They’re about reshaping today’s income in a way that the IRS allows and rewards. 

Real Talk: Why CPAs Rarely Bring This Up

If a CB plan can make such a dramatic difference, why hasn’t your CPA already suggested it? The answer usually comes down to focus.

Most CPAs do excellent work, but their job is compliance-driven: prepare the return, apply the deductions they manage directly, and keep you out of trouble with the IRS. Their tools tend to begin and end with what they’re accustomed to: 401(k)s, SEPs, and standard write-offs.

A CB plan requires a different kind of thinking. A CB plan flips the process—it’s about adjusting your income before filing so that the tax code works for you, not against you. That means actuarial calculations, essentially, formulas that determine how much each partner can contribute based on age and compensation, and IRS compliance are beyond the scope of most generalist firms.

So it’s not that your CPA is wrong when they say you’re “phased out.” They’re simply not digging into the full range of strategies available to high-earning partners. That’s where specialists step in: by bringing tax bracket awareness, retirement plan expertise, and law firm-specific experience to the table.

The bottom line: your CPA files your taxes. A CB plan strategist helps you reshape your taxes. While both roles are important, only one brings the QBI deduction back within reach.

Who This Works Best For

A CB plan isn’t a fit for every practice, but for the right partners, it can be one of the most effective tax and retirement tools available. Based on our work with law firms, here’s where the strategy tends to create the most value: 

• High-earning partners — typically $400,000+ in taxable income.
• Boutique firms with small teams — usually five or fewer partners and fewer than ten total staff.
• Partners already maxing out a 401(k) or SEP — but still looking for additional deductions.
• Consistent, predictable income — so contributions can be funded year after year without straining cash flow
• Professionals in higher tax brackets (32% and above) — where the combined impact of cash balance contributions and the QBI deduction delivers meaningful, repeatable savings.

If this sounds like your practice, the opportunity is straightforward: you can use a qualified retirement plan not only to accelerate retirement savings, but also to requalify for a deduction you were told was off the table.

The Smarter Path to QBI and Retirement Growth

Being told you’re ‘phased out’ of the QBI deduction can feel like hitting a wall. But the truth is, high-earning law firm partners aren’t out of options; they’re simply missing the right structure. The QBI deduction isn’t gone; it’s hidden under your adjusted gross income.

A cash balance plan does more than accelerate your retirement savings. It reshapes your taxable income in a way that can requalify you for deductions most CPAs write off as unavailable. That’s the difference between filing reactively and planning strategically.

If your income has exceeded the QBI thresholds, now is the time to revisit the conversation. With the right design, you can reduce what you send to the IRS, reclaim a deduction you thought was lost, and build long-term wealth for yourself and your practice.