The biggest lever most small business owners overlook is entity structure. If you’re operating as a sole proprietor or single-member LLC and earning more than $50,000 to $60,000 in profit, an S-Corp election could save you thousands annually. The reason is self-employment tax. As a sole proprietor, you pay 15.3% on all net income. With an S-Corp, you pay yourself a reasonable salary and take the remaining profit as a distribution that isn’t subject to self-employment tax. The savings on a $120,000 profit can easily be $8,000 or more per year.

Maximizing deductions sounds obvious, but most business owners leave money on the table because they don’t track expenses consistently. Vehicle mileage, home office costs, phone and internet, professional development, software subscriptions, and insurance premiums all add up. The problem is usually not that the deductions don’t exist. It’s that nobody recorded them. Good small business bookkeeping throughout the year is what makes this possible. You can’t deduct what you can’t document.

Retirement contributions are one of the most powerful and underused tools. A SEP IRA lets you contribute up to 25% of your net self-employment income, up to $69,000 for 2024. A Solo 401(k) offers similar limits with more flexibility. These contributions reduce your taxable income dollar for dollar, and you’re building wealth for yourself at the same time.

Section 179 and bonus depreciation allow you to deduct the full cost of qualifying equipment and vehicles in the year you purchase them rather than spreading it over several years. If you need a work truck or new equipment, buying it in a year when your income is high lets you offset that income immediately. Timing matters here. A purchase in December can reduce your tax bill for the entire year.

Speaking of timing, you can accelerate expenses into the current year or defer income into the next year when it makes sense. Prepaying insurance, stocking up on supplies before year-end, or delaying an invoice until January can shift taxable income between years. This works best when you know what your income looks like before December 31, which is why quarterly check-ins with your accountant matter.

Hiring family members is another legitimate strategy. If your spouse or children work in the business, paying them a reasonable wage shifts income to someone in a lower tax bracket. Children under 18 working for a parent’s sole proprietorship are exempt from Social Security and Medicare taxes entirely.

The thread running through all of these strategies is planning. You can’t restructure your entity in April when you’re filing your return. You can’t claim deductions you never tracked. You can’t make retirement contributions you didn’t budget for. The businesses that pay the least in taxes are the ones that think about it all year, not just during tax season.

A tax strategy session before year-end gives you time to act on opportunities that disappear once the calendar flips. Every business is different, and the right combination of strategies depends on your income level, entity type, industry, and goals. But doing nothing and hoping for the best at filing time is the most expensive approach there is.