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Dec. 15, 2025-
Effective business-owner tax strategies for 2025 involve maximizing deductions through accelerated asset expensing and retirement contributions, leveraging available tax credits, and optimizing your business’s legal entity structure.
Tax law changes have made some of these provisions permanent or more generous.
Key 2025 Tax Law Changes (One Big Beautiful Bill Act – OBBBA)
The OBBBA, signed into law on July 4, 2025, introduced several significant, often permanent, changes beneficial for small-business tax planning:
- 100 percent Bonus Depreciation: Permanently restored for qualifying assets (new or used tangible property, certain software, qualified production property) acquired and placed in service after January 19, 2025.
- Expanded Section 179 Expensing: The maximum deduction increases to $2.5 million (indexed for inflation after 2025), with a phase-out threshold starting at $4 million.
- Immediate R&E Deduction: Domestic research and experimental (R&E) expenditures can be fully deducted in the year they are paid or incurred starting in 2025, reversing prior amortization rules.
- Permanent QBI Deduction: The 20 percent Qualified Business Income (QBI) deduction for eligible pass-through entities is now permanent, with expanded income phase-out ranges.
- Enhanced QSBS Exclusions: Qualified Small Business Stock (QSBS) issued after July 4, 2025, has tiered gain exclusion holding periods: 50 percent after 3 years, 75 percent after 4 years, and 100 percent after 5 years.
- More Generous Business Interest Rules: The limitation on business interest deductions is eased by reverting the adjusted taxable income calculation to an “EBITDA” (earnings before interest, taxes, depreciation, and amortization) basis, effective retroactively to January 1, 2025.
- Optimize Business Entity Structure: An S-Corporation election can save on self-employment taxes by allowing owners to pay a “reasonable salary” (subject to FICA taxes) and take remaining profits as dividends (not subject to self-employment tax).
- Maximize Business Expense Deductions: Diligently track and deduct all “ordinary and necessary” business expenses, including home office costs, professional services (legal, accounting), advertising, and vehicle use (using either standard mileage or actual expenses).
- Leverage Retirement Plans: Contribute the maximum allowable amounts to tax-advantaged retirement plans like a SEP-IRA, Solo 401(k), or SIMPLE IRA. Contributions are often pre-tax, reducing your current taxable income. For 2025, employer contributions can bring total plan funding over $70,000 in some cases.
- Time Income and Expenses: Use cash-basis accounting to strategically manage when you recognize income and expenses. Accelerate deductible expenses (e.g., prepaying rent or insurance) into a high-income year and defer invoicing until the next year to push income into a potentially lower-tax period.
- Employ Family Members: Pay a reasonable wage to family members (e.g., children for social media management or office work) for legitimate business work. This converts a personal expense into a deductible business expense, shifting income to a potentially lower tax bracket within the family unit.
- Utilize Tax Credits: In addition to deductions, apply for valuable dollar-for-dollar tax credits such as the Research & Development (R&D) tax credit, the Work Opportunity Tax Credit (WOTC), and credits for offering employee retirement plans or energy-efficient building upgrades.
- Plan for Long-Term Succession: Implement estate and succession planning early to minimize future estate tax burdens through strategies like gifting minority interests in the business or using trusts to transfer ownership efficiently.
As always, check with your tax advisor.
From the Coach’s Corner, see these business strategies:
Entrepreneurship: How to Succeed in Business-Life Stages — In the life cycle of a business, each stage presents unique challenges and opportunities that require different strategic planning and operational adjustments.
How Legendary Investor Warren Buffett Grew His Wealth — Despite his immense wealth — a net worth of over $150 billion — he consistently opts for a modest, simple lifestyle over extravagant spending. Here’s why.
Finance — Develop Strategic Insights for High Profits — To develop strategic insights, finance staff can identify strategic opportunities by asking probing questions. Here are sample questions.
Finance: Shift from Numbers-Focused to Forward-Looking — Strategic thinking by your finance team is crucial — it involves shifting from a reactive, numbers-focused mindset to a proactive, forward-looking one. Here’s how.
Finance: Shift from Numbers-Focused to Forward-Looking — Strategic thinking by your finance team is crucial — it involves shifting from a reactive, numbers-focused mindset to a proactive, forward-looking one. Here’s how.
“The reward of energy, enterprise and thrift – is taxes.”
-William Feather
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