As we approach the final quarter of 2025, successful small business owners are already thinking ahead to 2026. The key to maximizing your tax savings and positioning your business for growth isn’t waiting until tax season—it’s implementing strategic planning now. With recent IRS updates and evolving tax regulations, having a well-laid plan can mean the difference between paying unnecessary taxes and keeping more money in your business.
At TriStar Tax and Business Solutions, we help small business owners navigate these complexities with confidence. Here are the essential tax strategies every business owner should consider as we head into 2026.
What you’ll find in this article:
- Maximize year-end deductions with equipment, R&D, and bonus depreciation.
- Optimize your Qualified Business Income (QBI) deduction.
- Clean up books to capture all eligible deductions.
- Stay audit-ready with tax payments, records, and compliance.
1. Maximize Immediate Deductions Before Year-End
Section 179 Deduction: Your Equipment Investment Advantage
One of the most powerful tools in your tax strategy toolkit is the Section 179 deduction. For 2025, you can deduct up to $1,220,000 in qualifying equipment purchases, with a phase-out threshold beginning at $3,050,000 in total equipment purchases. This means if you’ve been considering new computers, machinery, office furniture, or business vehicles, making these purchases before December 31st can provide immediate tax relief.
Bonus Depreciation: Additional Savings Opportunities
While bonus depreciation has been scaled back in recent years, it still offers valuable benefits for qualifying property. The IRS provides detailed guidance on what qualifies, but generally includes new equipment, software, and certain improvements to business property.
Research and Development (R&D) Deduction Changes
Starting in 2022, the Tax Cuts and Jobs Act requires R&D expenses to be amortized over five years rather than deducted immediately. However, businesses can still benefit from these deductions through proper planning. If your business invests in product development, software creation, or process improvements, working with a tax professional ensures you’re capturing these benefits correctly.
2. Optimize Your Qualified Business Income (QBI) Deduction
The QBI deduction remains one of the most significant tax benefits for small business owners, allowing eligible businesses to deduct up to 20% of qualified business income. However, the rules are complex and income thresholds matter significantly.
For 2025, the QBI deduction begins to phase out at $191,950 for single filers and $383,900 for married filing jointly. Understanding these thresholds is crucial for tax planning. If your income approaches these limits, strategic timing of income and expenses can help you stay within the optimal range.
Certain service businesses face additional restrictions, making proper classification and planning even more critical. The IRS QBI regulations outline specific requirements that vary by business type and income level.
3. Clean Up Your Books Before Filing Season Begins
Organize Financial Records for Maximum Deductions
The foundation of effective tax planning is accurate bookkeeping. Before filing season begins, conduct a thorough review of your financial records. Ensure all business expenses are properly categorized, receipts are documented, and personal expenses are clearly separated from business costs.
Common overlooked deductions include:
- Home office expenses for remote work arrangements
- Professional development and training costs
- Business-related travel and meals
- Software subscriptions and professional memberships
- Equipment maintenance and repairs
Reconcile All Business Accounts
Accurate account reconciliation helps identify discrepancies early and ensures your tax return reflects your true financial position. This process also helps you identify potential audit risks and address them proactively.
TriStar’s bookkeeping services can help streamline this process, ensuring your records are audit-ready and optimized for tax planning throughout the year.
4. Prepare for Compliance and Audit Readiness
Estimated Tax Payment Review
As we close out 2025, review your estimated tax payments to avoid penalties. The IRS requires businesses to pay taxes as income is earned throughout the year. If your business experienced significant growth or changes in revenue patterns, you may need to adjust your final quarterly payment.
Document Retention Best Practices
Proper documentation is your best defense in case of an audit. The IRS generally recommends keeping tax records for at least three years, but certain situations may require longer retention periods. Digital storage solutions can help organize receipts, contracts, and financial statements efficiently.
Employee Classification Compliance
With increased IRS scrutiny on worker classification, ensure your independent contractors truly qualify for 1099 status versus W-2 employee classification. Misclassification can result in significant penalties and back-tax obligations.
5. Strategic Year-End Tax Moves
Income and Expense Timing
Depending on your current year income and projected 2026 earnings, you may benefit from accelerating certain deductions into 2025 or deferring income until 2026. This strategy works particularly well for cash-basis businesses with flexibility in billing and payment timing.
Retirement Plan Contributions
Contributing to SEP-IRAs, Solo 401(k)s, or other qualified retirement plans can provide immediate tax deductions while building long-term wealth. Business owners often have higher contribution limits than traditional employees, making this a powerful tax strategy.
TriStar’s tax planning services can help you identify the optimal retirement contribution strategy based on your specific business structure and income levels.
Why Professional Tax Planning Makes the Difference
While these strategies provide a foundation for tax optimization, every business situation is unique. Factors like your business structure, industry, growth trajectory, and personal financial goals all influence the most effective tax strategies for your situation.
The recent changes in tax law, combined with evolving IRS enforcement priorities, make professional guidance more valuable than ever. A comprehensive tax plan considers not just the current year, but positions your business for sustained success and growth.
Start Your 2026 Tax Strategy Today
Don’t wait until tax season to discover missed opportunities. The most successful small business owners treat tax planning as an ongoing strategic process, not a once-a-year scramble.
Schedule a consultation with TriStar Tax and Business Solutions today. Our experienced team will review your specific situation, identify opportunities for tax savings, and develop a customized plan that supports your business goals for 2026 and beyond.
TriStar Tax & Business Solutions is Middle Tennessee’s Premier Tax and Business Solutions Expert
TriStar is a full-service business and accounting firm offering essential financial services for small businesses, from bookkeeping assistance to tax planning and tax preparation to new business formation and part-time CFO services.
TriStar Tax & Business Solutions is locally owned and family-operated, with five locations in Nashville, Hendersonville, Brentwood, Murfreesboro, and Germantown-Memphis. With our experienced accounting professionals, you’ll receive true expertise for all your small business needs with personalized attention and affordable rates.
Your initial consultation is free—contact TriStar Tax & Business Solutions to get started today!
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