Five Tax Tools Every Business Owner Should Know About (But Some Don’t)

If you're a business owner, you probably feel the same way most owners do about tax season: you send the numbers to your CPA, cross your fingers, and hope the bill isn’t as bad as last year.

The internet is full of tax “hacks”—complex trusts, obscure deductions, entity gymnastics. Most require very specific circumstances and significant professional fees.

Most businesses don’t need that.

A handful of simple, high-impact tools could possibly move thousands of dollars a year from the IRS column to your net-worth column—if you plan ahead.

Here are five tools every business owner should at least understand.

1. Tax-Smart Retirement Plans for Owners

Retirement plans are not just about “saving for later.” For business owners, they’re one of the strongest legal ways to reduce taxable income today, protect assets from future creditors, and build wealth towards financial freedom

Depending on your profit and headcount, you can use:

• Solo 401(k) – If it’s just you (and maybe a spouse on payroll). You can contribute both as “employee” and “employer,” often sheltering tens of thousands per year. 
• Traditional 401(k) with safe harbor and cross-tested designs – If you have a growing team. The design can legally tilt more of the total benefit toward owners and key staff while still taking care of employees. 
• SEP IRA – Simple to administer and ideal for owners with few or no employees. Allows large employer contributions (up to 25% of compensation), though employees must generally receive the same percentage as the owner.

Many retirement accounts (especially ERISA-covered plans like most 401(k)s) also offer strong creditor protection under federal and/or state law.

Every contribution is working double duty—cutting your tax liability now and building long-term wealth that compounds over time.

Key point: These plans usually must be set up before year-end. April is too late, and waiting often means leaving both tax savings and asset-protection benefits on the table.

2. S-Corp Structure and How You Pay Yourself

How your business is structured can be a costly thing to ignore.

Many owners start as sole proprietors or single-member LLCs and never revisit that decision, even as profits grow and payroll changes. 

For many profitable businesses, electing to be taxed as an S-Corporation can reduce self-employment taxes:

• You pay yourself a reasonable W-2 salary (subject to payroll taxes), and 
• Take remaining profit as distributions (not subject to self-employment tax).

A well-designed S-Corp strategy can free up cash that can then be directed into those tax-advantaged, asset-protected retirement accounts—stacking multiple benefits on the same dollars.

The right planning can be valuable when coordinated early and done correctly.  Done poorly (for example, using an unrealistically low salary), it can trigger IRS scrutiny. The right CPA and financial professionals help you coordinate, a defensible salary, maximize retirement limits, and the Qualified Business Income (QBI) deduction.

3. Pass-Through Entity (PTE) Tax Elections

High-income owners in many states run into the federal SALT cap, which limits how much state tax you can deduct on your federal return.

A growing number of states offer a Pass-Through Entity (PTE) tax election as a workaround. In simple terms:

• The business pays the state income tax, 
• The business deducts it as an expense, and 
• The benefit flows through to you as the owner.

This doesn’t change what you owe the state; it changes who writes the check and how it’s treated for federal tax. In the right state and income range, a PTE election can reclaim a valuable deduction—again improving the cash flow you can redirect into growth, debt reduction, or retirement funding.

P.S. From 2025–2029, the individual SALT cap is temporarily higher (up to $40,000 for many filers, with phaseouts at higher incomes) before effectively dropping back toward $10,000 for top earners and after 2029.

4. Cost Segregation for Commercial Real Estate

If you own commercial real estate inside or alongside your business, a cost segregation study can accelerate depreciation.

Instead of treating the whole building as one 39-year asset, an engineering-based study breaks it into components—fixtures, flooring, certain electrical and plumbing items—that qualify for shorter depreciation lives or even bonus depreciation.

That can allow you to:

• Take larger deductions in the early years 
• Lower current taxable income 
• Free up cash for reinvestment or debt reduction

You’re not dodging tax—you’re changing when you pay it. For owners with solid profits today, cost segregation can turn slow deductions into large upfront deductions, freeing up cash you can redirect into your business, or tax-advantaged investments. Results are highly situation-dependent, including when the property was placed into service and current depreciation rules.

5. Timing Income and Expenses (Cash-Basis Planning)

Even without real estate, timing matters—especially for cash-basis businesses.

Because you recognize income when you receive cash, and deduct expenses when you pay them, you have some control over which year items fall into:

• Delay sending certain invoices until early January 
• Prepay key expenses (rent, insurance, supplies) in December 
• Time big purchases (within the rules) to take advantage of Section 179 or bonus depreciation

Used thoughtfully, income and expense timing can help you:

• Stay under key tax brackets and phaseout thresholds 
• Smooth out year-to-year swings in taxable income 
• Coordinate with other planning moves like Roth conversions, stock sales, or business exits

Importantly, these moves have to be made before year-end. If you only send the numbers to your CPA in April and hope for the best, you’re settling for whatever the tax code gives you instead of using it to your advantage.

Bringing It All Together

Most business owners don’t need exotic tax shelters or complicated structures. You need a short list of simple, high-impact tools you actually use:

• A retirement plan that cuts current tax and builds protected assets 
• The right business structure and pay strategy (like an S-Corp where it fits) 
• PTE elections to retain a lost deduction (state dependent) 
• Cost segregation when you own qualifying real estate 
• Thoughtful timing of income and expenses before year-end

These aren’t loopholes—they’re normal parts of the tax code.

The difference is whether you’re reacting in April… or planning ahead in throughout the year.

Ready to put these strategies to work?

If you're a business owner and any of these ideas apply to you, you shouldn’t have to figure them out alone. The right planning can help reduce taxes, only if it’s coordinated early and done correctly.

Our team of experienced advisors at JT Stratford specialize in helping business owners reduce taxes, grow wealth, and build long-term financial freedom. Reach out to your JT Stratford advisor today to review your situation and see if these strategies are the right fit for you.