Tax Strategies Every Small Business Should Know (Before April)
Tax planning isn't about cheating — it's about understanding the rules well enough to use them in your favor. The tax code is full of legal deductions that most small business owners miss.
The home office deduction: if you use part of your home exclusively for business, you can deduct a portion of rent, mortgage interest, utilities, and insurance. The simplified method gives you $5 per square foot up to 300 sq ft ($1,500 max). Easy money.
The QBI deduction (Qualified Business Income) lets pass-through entities (LLCs, S-Corps, sole proprietors) deduct up to 20% of business income. If you make $100K, that's $20K you don't pay taxes on. Limitations apply above $182K single / $364K married.
S-Corp election can save self-employment tax. As a sole proprietor, you pay 15.3% SE tax on all profits. As an S-Corp, you pay yourself a reasonable salary (SE tax applies) and take the rest as distributions (no SE tax). On $150K profit, this can save $10K+.
Retirement contributions are tax-deductible. A Solo 401(k) lets you contribute up to $66K per year (2026). A SEP IRA allows up to 25% of net self-employment income. This reduces your taxable income dollar-for-dollar.
Section 179 lets you deduct the full cost of business equipment in the year you buy it, up to $1.16M. Computer, furniture, vehicle (with limits), software — instead of depreciating over years, you deduct it all now.
Estimated taxes: pay quarterly or face penalties. Due dates are April 15, June 15, September 15, and January 15. Set aside 25-30% of every payment you receive in a separate savings account. Your future self will be grateful.
Hire your kids if they're old enough. You can pay a child under 18 up to $13,850 (standard deduction) tax-free, and the payment is a business deduction. It's legal, it teaches them responsibility, and it saves you taxes.
Keep records of everything. The IRS can audit you for three years (six if they suspect fraud). Digital records count — use apps to photograph receipts and categorize expenses throughout the year.