Advanced Tax Strategies for Entrepreneurs: Keep More, Grow Faster

Choose the Right Entity, Shape the Right Tax Outcome

Pass-throughs can avoid double taxation and enable loss flow-through, but may limit reinvestment when profits climb. C-corps can reinvest at corporate rates, support QSBS opportunities, and professionalize cap tables. Choose based on growth pace, investors, and planned distributions, not just today’s tax bill.

Choose the Right Entity, Shape the Right Tax Outcome

An S-corp can trim self-employment taxes by splitting owner pay between reasonable salary and distributions. The salary must reflect market rates and duties to withstand scrutiny. Build a defensible framework using comparable data, role descriptions, and documentation before payroll runs.

Master the 20% QBI Deduction (Section 199A)

Know the Thresholds and Phase-Outs

The deduction phases out for certain service businesses as taxable income rises, while others face wage and asset tests. Planning around thresholds—like timing income, retirement contributions, or entity adjustments—can restore eligibility. Build projections early, not in April, to leave room for action.

W-2 Wages and UBIA as Key Levers

When limits apply, the deduction may hinge on W-2 wages paid and the unadjusted basis of qualified property. Dialing in payroll or capital investments can unlock value. Coordinate hiring plans and depreciation choices so your operational moves also maximize the calculation.

Aggregation and Activity Separation

Properly grouping or separating activities may strengthen your deduction by aligning wages, assets, and profits. It requires consistent, well-documented positions. Map your revenue streams, contracts, and staffing to decide whether aggregation or separation creates the most favorable profile.

Time It Right: Income Deferral and Expense Acceleration

Accounting Methods and Change Opportunities

Cash vs. accrual, inventory rules, and method changes can reframe when you recognize income and deductions. Formal method changes may require filings but can produce durable benefits. Model scenarios across quarters to smooth cash flow and avoid spikes that trigger higher marginal rates.

Bonus Depreciation and Section 179

Immediate expensing can accelerate deductions for equipment and certain improvements. Bonus depreciation is phasing down in coming years, while Section 179 remains elective with limits. Coordinate purchases, placed-in-service timing, and financing so your deductions align with revenue cycles and tax thresholds.

Retirement Plans as Timing Tools

Solo 401(k)s, SEP-IRAs, and defined benefit plans can reduce taxable income while building long-term wealth. Contribution deadlines and plan documents matter. Map contributions to your projected profits, and set reminders so year-end doesn’t close before you capture the full deduction.

Whether you’re refining software, prototypes, or processes, qualified research expenses can generate valuable credits. Substantiation is vital: time tracking, technical narratives, and cost mapping. Align engineering sprints with documentation habits so your innovation diary becomes your credit defense.

Credits You Might Be Leaving on the Table

Designing an Accountable Plan

With an accountable plan, employee expense reimbursements can be tax-free and deductible when validated. Set clear categories, documentation standards, and submission timelines. Train managers to enforce rules consistently so audits become routine confirmations, not costly surprises.

Health and Welfare Benefits That Work

Consider HSAs, HRAs, and QSEHRAs to tailor coverage while managing taxes. Pair benefits with education so employees actually use them. Model employer costs, payroll tax impacts, and affordability to craft a package that retains talent without triggering unintended tax consequences.

Family Employment the Right Way

Hiring family can be legitimate and tax-efficient when the work is real, pay is reasonable, and payroll is administered correctly. Document job duties, track hours, and run actual payroll. The goal is clean savings through compliance, not shortcuts that invite scrutiny.

Multi-State and Cross-Border Growth Without Tax Whiplash

Economic nexus can trigger income and sales tax obligations far from your headquarters. Many states offer pass-through entity tax elections that can bypass federal SALT caps for owners. Evaluate eligibility, filing mechanics, and owner consents before year-end to capture benefits.

Plan the Exit: QSBS and Deal-Ready Books

Qualified Small Business Stock under Section 1202 can exclude significant gains if requirements are met, including original issue C-corp stock and a five-year hold. Track share issuances, cap table details, and business activities closely, and watch for state conformity differences.