Table of Contents

• 1. Maximize Deductible Expenses With an Accountable Plan
  • What Qualifies as a Deductible Business Expense
• 2. Claim the QBI Deduction to Lower Taxable Income
  • How the Phase-In Works Above the Threshold
• 3. How to Reduce Self Employment Taxes Through Entity Structure
• 4. Use IRS Section 179 Deduction Limits for Equipment Purchases
  • Section 179 vs. Bonus Depreciation
• 5. Fund Retirement Contributions to Cut Tax Liability
• 6. Deduct Health Insurance Premiums and Track Travel Expenses
• 7. Build Year-Round Tax Planning Into Your Financial Record-Keeping
  • State Tax Credits and Remote Work Considerations
• Conclusion
• Frequently Asked Questions

Last Updated: September 30, 2026

1. Maximize Deductible Expenses With an Accountable Plan

The fastest way to reduce business tax liability is to stop paying for business costs with after-tax dollars. An accountable plan is an IRS-approved arrangement that lets you reimburse yourself for business expenses without that money counting as taxable income.

Here is how the IRS defines it. An accountable plan is a reimbursement arrangement where employees or owners document business expenses, and the employer repays them tax-free. Three rules apply: the expense must have a business connection, you must account for it within a reasonable time, and you must return any excess reimbursement.

What most owners miss is the paperwork timing. Reimbursements made under an accountable plan within 60 days of the expense are generally treated as timely.

What Qualifies as a Deductible Business Expense

Common deductible expenses include:

• Home office costs (portion used regularly and exclusively for business)
• Business mileage at the IRS standard rate
• Cell phone and internet (business-use percentage)
• Professional development and continuing education
• Business insurance premiums
• Software and subscriptions

Keep receipts. The IRS requires substantiation for every deduction you claim. Without records, a legitimate expense becomes a disallowed one.

2. Claim the QBI Deduction to Lower Taxable Income

The Qualified Business Income deduction lives in IRC Section 199A. It lets many pass-through owners deduct up to 20% of qualified business income, and it is one of the few deductions that reduces taxable income without changing how you operate.

For 2025, the Section 199A taxable income thresholds are $197,300 for single filers and $394,600 for married filing jointly. For 2026, the thresholds rise to $201,775 for single filers and $403,550 for married filing jointly. Below those lines, most pass-through owners get the full 20%. Above them, the rules split by business type.

How the Phase-In Works Above the Threshold

Once taxable income crosses the threshold, two things happen:

• Specified service trades or businesses (SSTBs) phase out the deduction entirely over a $50,000 range for single filers and a $100,000 range for joint filers. SSTBs include law, accounting, consulting, health, financial services, brokerage, and performing arts.
• All other businesses keep the deduction but face a wage and capital limitation. The deduction is capped at the greater of 50% of W-2 wages paid, or 25% of W-2 wages plus 2.5% of the unadjusted basis of qualified property.

Two levers control your result: your taxable income and your entity type. Moving income into a retirement plan or a health savings account can pull you under a phase-out threshold, which preserves more of the deduction. Converting to an S-corporation and paying yourself a reasonable W-2 salary can raise the wage limit that caps the deduction for non-SSTBs.

IRS Section 199A qualified business income deduction

3. How to Reduce Self Employment Taxes Through Entity Structure

Learning how to reduce self employment taxes starts with one question: are you paying payroll tax on profit you never took home?

A sole proprietor pays self-employment tax on all net profit. That covers both the employee and employer halves of Social Security and Medicare. An S-corporation changes the math. You pay yourself a reasonable salary, and only that salary carries payroll tax. The remaining profit flows through as a distribution.

The catch is the word “reasonable.” The IRS expects a salary that reflects what you would pay someone to do your job.

4. Use IRS Section 179 Deduction Limits for Equipment Purchases

IRC Section 179 lets you deduct the full cost of qualifying equipment in the year you buy it, rather than spreading the deduction across its useful life. For 2025, the Section 179 limit is $1,250,000, with a phase-out that begins once total qualifying purchases exceed $3,130,000. For 2026, the limit rises to $1,290,000 with a phase-out threshold of $3,230,000. Both figures are indexed for inflation, so confirm the current number on the IRS site before you plan a purchase.

Section 179 vs. Bonus Depreciation

These two rules overlap, and owners often confuse them.

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• Section 179 requires the property to be used more than 50% for business and cannot create or increase a business loss. The deduction is capped at the annual limit above.
• Bonus depreciation under IRC Section 168(k) has no active-business-income limit and no business-use percentage cap of the same kind. The percentage allowed has stepped down in recent years: 80% for property placed in service in 2023, 60% in 2024, 40% in 2025, and 20% in 2026.
• Both can apply to the same asset, and you can choose which to use. Many owners use Section 179 first to absorb income, then bonus depreciation for anything above the Section 179 cap.

Time your purchases. Buying equipment in December instead of January moves the entire deduction into the current tax year. If you are close to the phase-out threshold, splitting a purchase across two tax years can preserve more of the Section 179 deduction.

IRS Section 179 deduction

5. Fund Retirement Contributions to Cut Tax Liability

Retirement accounts are the most reliable way to reduce business tax. Every dollar you contribute to a qualified plan lowers taxable income today while building long-term savings.

Options for business owners include:

• SEP IRA: Simple to run, high contribution ceiling
• Solo 401(k): Allows both employee and employer contributions
• Defined benefit plan: Best for very high, stable income
• Traditional IRA: Lower limit, but easy to open

6. Deduct Health Insurance Premiums and Track Travel Expenses

Self-employed owners can often deduct health insurance premiums for themselves, a spouse, and dependents. The deduction is limited to net profit from the business, and it does not apply in any month where you were eligible for a subsidized employer plan through a spouse.

• Standard mileage rate: Track business miles with a log. Note the date, destination, and purpose.
• Actual expense method: Track gas, insurance, repairs, and depreciation, then apply your business-use percentage.

7. Build Year-Round Tax Planning Into Your Financial Record-Keeping

Tax planning is a calendar habit, not an April event. Owners who review their position every quarter make better decisions about equipment timing, retirement funding, and estimated payments.

Set a quarterly routine:

• Reconcile bank and credit card statements
• Review profit and loss against projections
• Check estimated tax payments against liability
• Confirm receipts are filed for every deduction claimed
• Review entity structure against current income

State Tax Credits and Remote Work Considerations

Two gaps trip up owners that generic guides skip.

State credits. Many states offer credits for hiring, training, research, and investment in certain areas. These credits are separate from federal deductions and often go unclaimed because owners never look. Check your state revenue department’s list of available credits each year.

Conclusion

The seven strategies above only work when they run on a schedule, not a scramble. Structure, timing, and records decide your outcome long before your return is filed. Simonsgroup helps owners build that structure with proactive multi-year tax strategy, entity structuring, organized bookkeeping, and professional IRS representation when notices arrive. Book a Complimentary 15-minute Call with Simonsgroup and find out where your current setup is leaving money on the table.

This is not tax advice. Consult your tax advisor for guidance on your specific situation.