When’s the best time to lower your tax bill?
Hint: It’s not April. It’s right now.
2025’s One Big Beautiful Bill brought significant business tax changes, opening up several strategies worth reviewing before year-end. And the sooner you plan, the more you might be able to save.
Consider setting up a tax-favored retirement plan.
Contributions to the right plan can generate substantial deductions while helping you and your employees build long-term savings.
For self-employed individuals, a SEP IRA allows contributions of up to 20% of net self-employment income, with a 2026 maximum of $72,000. If you’re employed by your own corporation, contributions of up to 25% of salary are allowed, also capped at $72,000.
Other options include the solo 401(k), defined benefit pension plan and SIMPLE IRA. Under the SECURE 2.0 Act, SIMPLE plans have become more attractive for small employers. For businesses with 25 or fewer qualifying employees, the 2026 salary deferral limit is $18,000, with a $4,000 catch-up contribution for employees age 50 and older. Employers with 26 to 100 employees may also access the higher limits under certain conditions.
Make the most of the qualified business income deduction.
The deduction for qualified business income (QBI) — which allows eligible pass-through entity owners to deduct up to 20% of their QBI — was made permanent by the new law. Beginning with tax years after December 31, 2025, there’s also a guaranteed minimum $400 deduction available to taxpayers with at least $1,000 of qualifying income. In addition, the phase-out ranges for certain QBI limitations have been widened: $75,000 for single filers and $150,000 for joint filers.
The QBI deduction applies to income from sole proprietorships, partnerships, S corporations and LLCs treated as pass-throughs, as well as qualifying REIT dividends and income from publicly traded partnerships.
Time your income and deductions strategically.
If you expect to be in the same or a lower tax bracket in 2027, deferring income and accelerating deductions this year can push part of your tax bill into the future. If you expect a higher bracket next year, the reverse applies — pull income forward and delay deductions, which could mean electing out of bonus depreciation or taking a smaller Section 179 deduction to preserve savings for a higher-rate year.
Take advantage of expanded depreciation rules.
Here are some opportunities to save:
- Section 179 deductions. For qualifying property placed in service in tax years beginning in 2026, the Section 179 deduction limit has been raised to $2.56 million, with a phase-out beginning at $4.09 million of total property. Most business personal property qualifies, including off-the-shelf software and certain qualified improvement property (QIP) expenditures.
- 100% bonus depreciation. The new law makes 100% bonus depreciation permanent for eligible business property acquired after January 19, 2025. That means you may be able to write off the full cost of qualifying new or used equipment, machinery, furniture or computers placed in service this year.
- New 100% depreciation for certain production facilities. A new provision allows a 100% depreciation election for qualified production property, generally non-residential real property used in manufacturing, production or refining. Construction must begin after January 19, 2025, and before January 1, 2030, and the property must be placed in service before January 1, 2031.
Watch the excess business loss limitation.
For tax years beginning after December 31, 2026, the excess business loss limitation for non-corporate taxpayers becomes permanent. Under this rule, business losses that exceed $256,000 for single filers or $512,000 for married joint filers are disallowed and carried forward under net operating loss rules.
This limitation can affect sole proprietors, partners, LLC members and S corporation owners, especially those claiming large depreciation deductions, facing a down year or incurring significant start-up costs.
Deduct research and experimental costs, including retroactively.
The new law restores the ability to fully deduct domestic research and experimental (R&E) expenditures in the year they are paid. Qualifying costs include labor, materials, supplies, depreciation on research property, certain overhead and related travel.
Importantly, a small business election allows retroactive application of these rules by filing an amended return for prior years, which could generate a refund for previously capitalized amounts. However, the window to file amended return refund claims for the 2022, 2023 and 2024 tax years closes on July 6, 2026.
Explore the expanded qualified small business stock exclusion.
Owners and founders of qualifying C corporations should be aware of expanded benefits for Qualified Small Business Stock (QSBS). For stock issued after July 4, 2025, the gain exclusion percentages are now:
- 50% for stock held at least three years
- 75% for stock held at least four years
- 100% for stock held at least five years
The per-issuer gain exclusion limit has also been raised to $15 million ($7.5 million for married taxpayers filing separately), and the aggregate gross asset limit for the issuing corporation has been increased to $75 million.
Review your corporate charitable giving.
For tax years beginning after December 31, 2025, corporations are subject to a new 1% floor on charitable contribution deductions. A corporation will not receive a current deduction unless its charitable contributions exceed 1% of taxable income. The existing 10%-of-taxable-income ceiling still applies as well. Contributions that are disallowed under either limit can generally be carried forward for five years.
Prepare for updated information reporting thresholds.
Two notable changes affect your reporting obligations going forward:
- The general Form 1099 reporting threshold for certain business payments, including payments to independent contractors reportable on Forms 1099-NEC and 1099-MISC, has increased from $600 to $2,000 for payments made after December 31, 2025. This amount will be adjusted for inflation. While this may reduce the number of forms some businesses need to file, it doesn’t eliminate the need to collect W-9s and maintain thorough payment records.
- For third-party settlement organizations (such as payment apps and online platforms), the Form 1099-K threshold has been reinstated at more than $20,000 in payments and more than 200 transactions, retroactively effective back to 2021.
Don’t overlook the paid family and medical leave credit.
The employer credit for paid family and medical leave was made permanent for tax years beginning after December 31, 2025. The new law also gives employers more flexibility in how the credit applies, including for policies provided through insurance arrangements. If you currently offer paid leave or are considering it, contact us to evaluate whether your business qualifies and whether any adjustments to your written leave policy could improve the tax outcome.
Bring a family member on payroll.
Hiring a family member can shift income and reduce your overall tax burden. Wages paid to an employee-family member are generally deductible as a business expense and taxed at the employee’s lower rate rather than yours.
There are additional advantages when hiring your own child under age 18 in a sole proprietorship or certain partnerships: wages are not subject to federal employment taxes, are deductible at your marginal rate and can be offset by the child’s standard deduction — up to $16,100 in 2026.
The key is ensuring the arrangement is legitimate. Your family member must perform actual work and be compensated at a reasonable rate. You should also keep proper records, including time sheets, payroll filings and W-2s.
Planning starts now
Every business situation is different, and the best planning approach depends on your specific circumstances. At Magone & Company, our Advisory Services are designed for proactive business owners who have a clear vision for the future and see the value in a collaborative strategic partnership. Call us at (973) 301-2300 to get started.