10 Best Small Business Tax Strategies to Save You Money

Want to keep more of your business income in 2025? As a business owner, you have a lot of things to do on a daily basis. One moment you are handling a human resource matter and the next moment you are handling a client issue. Being a small business owner is a big deal as every dollar you invest matters a lot.

Do you know that having a lot of things to do makes it difficult for you to pay attention to other important aspects, such as taxes?  Business owners do not know that effective small business tax strategies minimise their taxes and accelerate business growth.  In this blog, we will discover small business tax tips for 2025 and how does tax planning works. If you’re just starting or want to grow the business, these tax saving strategies will make a big difference.

10 Small Business Tax Strategies That Grow Your Profit in 2025

Here are the most efficient tax planning strategies that can boost your profit and business growth: 

1. Be Strategic with Your Tax Elections

It is one of the excellent tax saving strategies if you expect your investment to push you into higher tax bands. In 2018, the Tax Cuts and Jobs Act (TCJA) allowed large equipment deductions, but in 2025, the rules have changed. You can deduct up to $1,250,000 of company equipment and machinery you bought or financed in 2025 under the Section 179 Deduction. 

For Example: You purchase a business delivery van valued at $30,000. Under Section 179 you qualify to receive a total tax break of $30,000 this year rather than spreading tax deductions over five years.

Here’s how you can implement this one of the most effective small business tax tips 2025:

• You should acquire eligible business equipment together with eligible software products during the year-end period.
• The business asset must serve business needs in excess of 50% during its use.
• Carry out deductions of up to $1,250,000 for 2025.
• Confirm your eligibility through professional tax help.

2. Look for Ways to Reduce Your Adjusted Gross Income (AGI)

If you have a pass-through business, you need to report your income on your personal tax return. If you have wages, the income is taxable. Your tax rate largely depends on your adjusted gross income (AGI).
 

For Example: Your contribution of $7,500 to a SEP IRA represents one of your business expenses. The tax deduction results in lower business income which directly leads to reduced taxable income and a decreased tax rate.

You can reduce your AGI by the following these small business tax tips: 

• You may invest the funds in a retirement plan to delay paying taxes.
• Utilise itemized deductions if they are greater than your standard deduction.
• Invest in a health savings account (HSA)

3. Establish Fringe Benefit Plans for Employees

The cost of employment tax increases with the rise in salaries. You can create effective fringe benefit plans for your employees to benefit both parties. 

For Example: As a different option to traditional salary increases you would give $3,000 worth of annual travel benefits instead of the 3,000 dollar raise. The benefit reduces payroll taxes and simultaneously boosts employee contentment.

You can offer the following benefits to your employees:

• Medical and dental insurance
• Long-term care insurance
• Disability insurance
• Group term life insurance
• Childcare assistance
• Travel allowance 
• Employee daily meals

4. Take a Tax-Free Loan from Your Business

Businesses need to go for advanced small business tax strategies 2025 to avoid overpayment and save money. Many business owners don’t know that their company can give them a loan with little or no interest. 

For Example: You obtain a $20,000 business loan using 1.5% interest to fulfill personal costs. The gradual payment method lets you prevent payroll or dividend tax while continuing to pay back the amount.

You can review the Applicable Federal Rates set by the IRS to make sure you’re following the rules. The IRS updates rates every month, so you should talk to your lawyer about this plan before you use it.

Here’s how you can do it right:

• Create a clear loan agreement. 
• Charge a minimum rate which equals to the IRS’s Applicable Federal Rate (AFR) levels
• Set transparent repayment schedules.

5. Never Ignore Carryover Deductions

It is one of the most effective tax planning strategies. Certain forms of deductions have limits on their use. The same goes for tax credits. The deductions and tax credits require active use during the present tax year. Some deductible items have the flexibility to be used in the following tax years. 

For Example: Your non-profit donation worth $10,000 yielded only a $6,000 tax deduction for this year. The $4,000 remaining sum will be available for future tax deductions in the following fiscal year.  

Here’s how you can do it:

• Keep records of all unused deductions with particular attention given to NOLs (net operating losses)
• Your unused charitable donations together with capital losses can be applied for tax deductions in the following fiscal year.
• Cooperate with your accountant to oversee how records extend across multiple fiscal years

6. Take Advantage of the QBI Deduction

Taking benefits of the QBI deduction is one of the most important small business tax strategies. Through the Qualified Business Income deduction, any owner of pass-through entities, including sole proprietors and S corporations and partnerships can subtract 20% of their qualified business earnings. The Qualified Business Income deduction functions as a strong income reduction tool with specific earnings restrictions and business exclusion requirements. 

For Example: The QBI rules allow business owners to deduct $20,000 from their $100,000 of qualified income generated through their consulting activities.

Here’s how you can do it:

• Make sure your business entity meets the requirements for being classified under QBI. 
• Review if your earnings meet the stipulations set by the Internal Revenue Service. 
• Maintain detailed records that show all business income together with all business expenses.
• Consult with a CPA to determine the precise amount of QBI deduction. 

7.  Build Retirement Wealth While Reducing Taxes

Business owners can select from different retirement plans such as SEP IRAs SIMPLE IRAs and Solo 401(k)s which let them make large tax-advantaged contributions. Taxable income is reduced through these contributions which also provide a guarantee of future financial stability. Small businesses and entrepreneurs find these financial products extremely adaptable to their needs.

For example: You place $25,000 into your Solo 401(k) thus excluding that amount from tax liability.

To accomplish this one of the best small business tax strategies, you must implement the following tips:

• You should open either Solo 401(k), SEP IRA or SIMPLE IRA to save taxable income.
• Make full permitted contributions before the specified deadline
• Your business earnings should have existing contributions subtracted from them
• Employer contributions and employee contributions are available options.

8. Claim the Home Office and Vehicle Deduction

Business usage of a specific home area that meets both regularity and exclusivity requirements allows homeowners to claim the home deduction. You qualify for this home office deduction by getting reimbursement for parts of your housing payments, in addition to your utility expenses,  maintenance costs, and internet services. This deduction proves advantageous mainly for workers who perform their jobs from home locations or operate their business from private residences. 

For Example: The 200-square-foot area you dedicate for business operations exists within your home’s total 2000 square feet. The actual business use of your home space amounts to 10%, which allows you to claim a deduction on 10% of your home costs.

Here’s how you can do it:

• The designated business area should maintain exclusive business functions
• Determine the total area of your office in your home
• The simplified ($5/sq ft) or actual expense method should be applied for calculating deductions.
• Maintain records which include rent payments alongside utility bills and maintenance costs. 

9. Deduct Business Vehicle Use

Reducing and deducting the use of business vehicles can be one of the best small business tax strategies. Business vehicle owners can use either IRS standard mileage deduction rates or actual expense tracking methods for tax deductions. The deduction covers all transportation activities that directly serve business operations, including site visits to clients and meetings as well as deliveries and business errands. Business owners need to maintain precise records that track either business mileage or business expenses. 

For Example: A typical business taxpayer drives their vehicle 5,000 miles during business operations within 1 year. Your business deductions reach $3,350 under the 2025 IRS mileage rate of $0.67.

What to do:

• Business owners need to monitor all miles related to their business operations either by manual methods or third-party applications.
• Entrepreneurs should select either the standard mileage deduction or the actual cost method.
• When you use actual costs for fuel, insurance and repairs you need to maintain respective records.
• All mileage records should go into different logs depending on personal or business activities. 

10. Claim Business Tax Credits

Tax credits directly decrease taxable debts from your account in a direct manner instead of working through deductions. Organizations can take advantage of three key tax benefit programs including Work Opportunity Tax Credit (WOTC), R&D Tax Credit and employer-provided paid family leave credits. The incentives promote job development as well as business innovation and diversity hiring initiatives. Tax planning for corporations requires claiming these credits in order to avoid huge taxes. 

For Example: The Work Opportunity Tax Credit program lets you receive a $2,400 credit when you employ a qualifying veteran which directly decreases your overall tax responsibility.

Here’s how you can do this by following these tax tips for small businesses:

• Businesses should recruit candidates who belong to WOTC-eligible groups including veterans and individuals who are long-term unemployed.
• Companies can benefit from tax credits that result from providing their qualified research or technical development activities.
• Review the local credits. 
• The filing requires accurate documentation of required IRS forms.

Before applying any tax strategy, a smart business plan will help align your goals. 

Tools & Resources For The Best Small Business Tax Strategies & Planning

The task of planning small business tax strategies does not require small businesses to work independently. The following tools and resources enable smoother compliance procedures and automatic deduction tracking that leads to enhanced savings:

• QuickBooks & Xero

You should use automation to track your expenses and assign business categories along with report generation for filing accuracy. Besides distance tracking features these platforms work with your financial institution.

• Keeper Tax

This tool is specifically designed for freelancers and self-employed workers. The application scans purchase transactions to produce tax reports automatically.

• IRS Resources

Users can access IRS website calculators for free which detect deductions through their finders and provide transparent updates about business tax credits and deadlines.CPAs & 

• Tax Advisors

Professional advisers apply specific business models and local circumstances to develop tax-saving schemes ensuring optimum tax benefits while maintaining complete compliance.

Conclusion

Smart small business tax strategies for 2025 can help your small business grow more quickly. The witty tax tips  for small businesses can save you money like you never thought before. These strategies will allow you to make wise choices.  But for the best results, you need accurate information and expert tips. Look nowhere when Founding Startups is here. We offer the best tax support guidance material tailored to your unique needs. With the right education and information, you can pay less and achieve more. 

For more tax tips and advice, visit Founding Startups. 

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