If you’re running a business and feeling like you’re paying more than your fair share in taxes, you’re probably right; but not for the reason you think.
TL;DR: You can cut your 2026 tax bill significantly by maxing out retirement contributions, timing big purchases strategically, and actually claiming the deductions you’re already entitled to. Most business owners just don’t know they exist!
Tax Deductions You’re Probably Missing
Home Office Expenses for Business Owners
Still working from your dining room table or spare bedroom? Claim it. The IRS simplified method is $5 per square foot up to 300 square feet. That’s potentially $1,500 you’re leaving on the table just for having a workspace at home.
And no, you don’t need a separate entrance or a door (though having dedicated space helps). Just needs to be used regularly and exclusively for business.
Deducting Vehicle Costs (Mileage, Parking, Etc.)
Here’s where people get lazy. Some people occasionally track mileage, but the vast majority of business owners forget about parking fees, tolls, and that EZPass bill that’s half business driving.
You can either do standard mileage (in 2025, standard mileage rates for self-employed and businesses is 70 cents per mile, but it will likely increase in 2026), or actual expenses if you keep good records. Run both calculations. Sometimes actual expenses win, especially if you drive something that guzzles gas or needs frequent repairs.
Subscriptions and Professional Development Deductions
That $50/month software you can’t live without? Deductible. The conference you flew to in Denver? Deductible. Even books are deductible if they’re helping you run your business better.
How do Retirement Accounts Factor into 2026 Tax Planning?
This is honestly one of our favorite strategies because you’re not just lowering taxes, you’re actually building wealth at the same time.
SEP-IRA for the Self-Employed
In 2025, you can sock away up to 25% of your net earnings or $69,000 (2024), but this may increase as we head into the new year! That comes straight off your taxable income. So if you’re making $200K and contribute $50K, you’re only taxed on $150K.
Solo 401(k) if You Want Maximum Flexibility
These are ridiculously underused. You contribute as both employee and employer, which means you can shelter significantly more than a SEP. The 2025 max contribution is $69,000 (plus $7,500 if 50+), combining employee and employer contributions.
Talk to an advisor who understands business retirement plans. Seriously. This stuff gets complicated fast, and the setup matters.
When Should I Make Big Purchases?
Timing is everything; or at least it’s worth a few thousand bucks.
Section 179 Deduction Window
Need equipment, furniture, or qualifying vehicles? Section 179 lets you expense the full amount in the year you buy it (up to $1.25 million and a $3.13M phase-out threshold, with the deduction fully eliminated once purchases exceed $4.38M). But you’ve got to purchase it AND put it into service before December 31st to claim it on that year’s taxes.
Planning to buy something in January 2026? Pull it into late December 2025 if you need the deduction now.
Bonus Depreciation is Shrinking
The new One Big Beautiful Bill made 100% bonus depreciation permanent for qualifying assets acquired after January 19, 2025. Before this, the deduction was phasing out under the 2017 tax law (40% in 2025). If you’re planning major equipment or property purchases, this change means bigger upfront deductions and better cash flow opportunities.
Should I Change My Business Entity Structure?
It really depends where you are revenue-wise.
S-corporations can slash self-employment taxes once you’re pulling in consistent profit. But they require payroll, which means more admin and potentially higher accounting costs. There’s a break-even point, and it’s different for everyone.
Work with an accounting professional who gets your industry. Cookie-cutter advice doesn’t work here.
What Do I Need to Know About Estimated Payments?
Don’t skip them. The underpayment penalties are annoying, and you’ll kick yourself in April when you’re scrambling for cash instead of filing calmly knowing you’re already square.
If you’re operating single-member LLC, paying your estimated taxes takes less than 5 minutes. Here’s a step-by-step article on how to pay estimated taxes.
How Xero Can Help
If you want to make all this easier, Xero can help you reconcile and track your spending automatically, making sure your deductions don’t slip through the cracks.
It connects directly with your bank accounts and cards, categorizes expenses, and lets you see where your money’s going in real time. You can even tag transactions by project or client, which makes year-end tax prep (and working with your accountant) far smoother.
From mileage tracking to invoicing and cash flow reports, Xero keeps your financial data organized, so when tax season hits, you don’t have to go digging through months of statements or guess at totals.
Our Thoughts
Here’s the thing: tax strategy for business owners in 2026 isn’t about loopholes or sketchy maneuvers. It’s about using the legal tools that already exist… tools designed to encourage business investment, retirement savings, and growth. Most people just don’t know they’re sitting there. Now you do.
Need help figuring out which strategies actually make sense for your business? JBS works with business owners across the country to build tax plans that are smart, legal, and tailored to where you actually are, not where a generic article thinks you should be. Let’s talk about lowering your taxes without the guesswork.
