Why Tax Season Is the Worst Time to “Start” Tax Planning

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Business owner reviewing finances early in the year, illustrating why tax season is the worst time to start tax planning
Tax season focuses on reporting the past — proactive tax planning happens before deadlines arrive.

Tax planning timing matters more than most business owners realize. Tax season is when many people start thinking about strategy, but it’s also when most tax-saving opportunities are already gone.

By the time January through April arrives, the decisions that could have made the biggest difference for the prior year have already been locked in. That’s why tax season is often the worst time to start tax planning, even though it feels like the most logical moment to ask questions.

Why Doesn’t Tax Season Allow Real Planning?

During this period, the focus shifts to reporting what already happened.

Once the calendar year ends, your CPA’s role shifts from strategic advisor to compliance specialist. The work becomes about accurately documenting the past, not shaping the future.

During tax season, the focus is on:

  • Accurately reporting income and expenses
  • Filing required federal and state tax returns
  • Applying any elections that are still available
  • Ensuring IRS and state compliance

At that point, your tax return is a historical document, not a planning tool.

What Tax Decisions Are Usually Locked In After December 31?

Most high-impact tax decisions must be made before the year ends.

After December 31, many of the strategies that could significantly reduce your taxes are no longer on the table.

Common examples include:

  • S-Corporation salary levels
  • Timing of income and expenses
  • Bonus depreciation and Section 179 elections
  • Retirement contribution structure
  • Accountable plan reimbursements
  • Health insurance handling for owners

Because of this, waiting until tax season often means reviewing missed opportunities rather than creating new ones.

What Is January Actually Good For?

January is ideal for reviewing results and preparing for proactive planning — not fixing the past.

While tax season limits what you can change about the prior year, it provides valuable insight for the year ahead.

January is best used to:

  • Review the prior year objectively
  • Identify planning opportunities that were missed
  • Set payroll and entity strategy correctly for the new year
  • Adjust estimates before issues compound
  • Build a proactive tax plan early

Smart business owners use January to prepare for planning, not to undo last year.

This is why proactive tax planning timing early in the year makes such a difference.

What’s the Difference Between Tax Filing Season and Tax Planning Season?

Tax filing and tax planning serve very different purposes.

Filing Season

  • Looks backward
  • Emphasizes accuracy and compliance
  • Offers limited ability to change results
  • Often results in surprise balances due

Planning Season

  • Looks forward
  • Shapes outcomes intentionally
  • Happens throughout the year
  • Improves cash flow and predictability

The biggest tax savings are created before tax season — not during it.

Who Should Be Thinking About Tax Planning Early?

Tax planning matters most when your situation involves decisions, not just reporting.

January planning is especially valuable for:

  • S-Corporation owners
  • Business owners with growing profits
  • Service-based businesses and consultants
  • Real estate investors
  • Anyone earning $150,000 or more

If your tax situation includes strategy, structure, or timing, waiting until filing season puts you behind.

Need help with tax preparation this season? Filing is easier when it supports a bigger plan.

What Do Proactive Business Owners Do Differently?

Proactive business owners treat tax planning as a process, not an annual event.

Instead of waiting for a finished tax return, they:

  • Review income projections early
  • Set reasonable S-Corp salaries intentionally
  • Coordinate retirement contributions with payroll
  • Plan deductions throughout the year
  • Adjust estimates before surprises arise

These decisions tie directly into ongoing tax planning, not just tax preparation.

The Bottom Line

Tax planning timing determines whether your tax return reflects strategy or missed opportunity.

If tax season is the first time strategy comes up, opportunities have already been missed. The best outcomes happen when planning starts early and continues throughout the year.

Frequently Asked Questions

Why isn’t tax season the best time to start tax planning?

Because most high-impact tax decisions must be made before the year ends. Tax season is primarily about reporting and compliance, not creating new savings opportunities.

Can a CPA still help reduce taxes during tax season?

A CPA can ensure accuracy and apply limited elections, but major strategies are usually no longer available. Most meaningful savings come from decisions made earlier.

Is January too late to do tax planning?

No, January is ideal for reviewing results and planning for the current year. It’s just too late to change many outcomes for the prior year.

Do small business owners really need year-round tax planning?

Yes, especially if income fluctuates or decisions affect payroll, deductions, or cash flow. One-time planning rarely produces optimal results.

What’s the difference between tax preparation and tax planning?

Tax preparation reports what happened, while tax planning shapes what happens next. Both are important, but they serve different roles.

How Madsen and Company Can Help

At Madsen and Company, we help business owners move beyond reactive tax season thinking and into proactive, year-round tax strategy.

That includes:

  • Strategic tax planning throughout the year
  • Coordinated business and personal tax preparation
  • Clear guidance before deadlines pass

Need tax preparation this season? We ensure your returns are accurate, compliant, and aligned with your overall strategy.

Want to reduce future tax surprises? A proactive tax planning review can help you start the year intentionally — not reactively.

👉 Schedule a Proactive Tax Planning Review

Maximizing Tax Savings for S-Corporation Owners: Proactive Strategies That Work

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Header image showing S-Corporation tax documents, calculator, coins, and chart representing proactive tax savings strategies.
Proactive S-Corporation tax planning strategies can reduce taxable income and improve cash flow when implemented during the year.

S-Corporation owners can legally reduce taxes by combining reasonable salary planning, strategic distributions, and depreciation deductions.
However, the biggest tax savings opportunities happen during the year—not at filing time.
As a result, proactive S-Corporation tax planning is the difference between compliance and optimization.

What tax advantages does an S-Corporation provide?

In general, an S-Corporation allows business owners to reduce overall taxes by separating compensation into salary and distributions.

By comparison, S-Corporation income flows through the owner’s personal return while allowing payroll tax flexibility. When structured properly, this can significantly lower self-employment tax exposure.

In practice, the primary tax benefits include:

  • Pass-through taxation with no entity-level federal income tax
  • Ability to pay owner income partially as distributions not subject to payroll tax
  • More planning flexibility for retirement contributions and deductions
  • Opportunities to time income and expenses strategically

However, these benefits only work when paired with proactive planning and proper documentation.

Because of this, salary and distribution planning becomes the next critical step.

How should S-Corporation owners structure salary and distributions?

To comply with IRS rules, owners who actively work in the business must receive W-2 wages that reflect market compensation.

In practice, effective salary and distribution strategies involve:

  • First, evaluating job duties, experience, and time spent in the business
  • Next, comparing industry compensation benchmarks
  • Finally, coordinating distributions with cash flow and estimated taxes

At the same time, too little salary increases audit risk, while too much salary increases unnecessary payroll taxes. The goal is defensible balance, not extremes.

Beyond compensation strategy, depreciation deductions offer another powerful way to reduce taxable income.

How do depreciation deductions reduce taxable income?

Specifically, depreciation deductions lower taxable income by allowing businesses to expense qualifying assets over time—or accelerate those deductions when tax law allows.

For example, S-Corporations commonly depreciate:

  • Vehicles used for business purposes
  • Equipment and machinery
  • Computers and technology
  • Furniture and office improvements

As part of a broader tax strategy, strategic depreciation planning may include:

  • Section 179 expensing for immediate write-offs
  • Bonus depreciation when applicable
  • Proper asset classification to avoid errors

Because depreciation elections are time-sensitive, planning before purchases occur is critical.

Why does timing matter in S-Corporation tax planning?

The timing of business decisions determines tax savings—not the filing of the return.

Once the year ends

  • Payroll amounts cannot be retroactively changed
  • Businesses often lose missed depreciation elections once the year closes.
  • Owners may already exceed their shareholder basis through distributions.

By contrast, proactive planning allows:

  • Income and deductions to be matched intentionally
  • Estimated taxes to be calculated accurately
  • Cash flow to remain predictable throughout the year

As a result, tax planning becomes a financial strategy rather than a compliance exercise.

What are the most common S-Corporation tax mistakes?

Most S-Corporation tax problems stem from lack of planning, not aggressive behavior.

For this reason, many S-Corporation owners encounter tax problems even when they are trying to do the right thing.

Common issues include:

  • Paying no salary or an unreasonably low salary
  • Taking distributions without tracking shareholder basis
  • Misclassifying personal expenses as business deductions
  • Waiting until tax season to ask planning questions

These mistakes often result in higher taxes, penalties, or missed deductions that cannot be corrected later.

Bottom Line

Ultimately, S-Corporation tax savings depend on proactive planning, not last-minute filing.
Reasonable salary, strategic distributions, and depreciation deductions work best when coordinated.
Business owners who plan during the year consistently pay less tax than those who only prepare returns.

With these strategies in mind, professional guidance becomes essential to implement them correctly.

How Madsen and Company Can Help

At Madsen and Company, we work with S-Corporation owners year-round—not just at tax time. Our approach focuses on proactive tax planning that aligns with your business goals while staying fully compliant.

We help S-Corporation owners with:

  • Reasonable salary analysis and documentation
  • Distribution and basis planning
  • Depreciation strategy and asset timing
  • Ongoing tax projections and estimated payments
  • Business and individual tax preparation

Whether you need tax preparation for S-Corporations or proactive tax planning, the goal is simple: pay the tax you legally owe—and not more.

Frequently Asked Questions (FAQ)

Do S-Corporation owners have to pay themselves a salary?

Yes. If the owner performs services for the business, the IRS requires a reasonable salary before distributions are taken.

Are S-Corporation distributions subject to payroll tax?

No. Distributions are not subject to Social Security or Medicare taxes, provided a reasonable salary has already been paid.

Can depreciation create tax losses in an S-Corporation?

Yes. Depreciation deductions can reduce or eliminate taxable income, but losses may be limited by shareholder basis and other rules.

Is S-Corporation tax planning only for high-income businesses?

No. While higher profits increase the impact, many S-Corporations benefit once annual profits exceed approximately $50,000–$75,000.

When should S-Corporation tax planning start?

Ideally at the beginning of the year and revisited quarterly, especially before major purchases or income changes.

Ready to Take the Next Step?

If you own an S-Corporation and want clarity instead of surprises at tax time, proactive planning is the next move.

Schedule a tax planning conversation or get help with your S-Corporation tax preparation today.
A clear strategy now can prevent unnecessary taxes later—and that’s where real peace of mind begins.

The S-Corp Deadline Is Closer Than You Think: 5 Things to Do Before March 15

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March 15 business tax deadline for S-Corporation owners
S-Corporation owners must file by March 15 to avoid IRS penalties and delays.

The March 15 tax deadline is one of the most important — and most misunderstood — deadlines for S-Corporation owners and partnerships.

But for S-Corporations and partnerships, March 15 is often the most important and most misunderstood tax deadline.

Each year, business owners are caught off guard by March 15, assuming they still have time or that filing an extension means nothing is due. That misunderstanding can lead to penalties, rushed decisions, and avoidable stress.

What Is Due on the March 15 Business Tax Deadline?

March 15 is the federal filing deadline for S-Corporations and partnerships, regardless of income or tax owed.

S-Corporations (Form 1120-S)

Partnerships (Form 1065)

This deadline applies whether:

  • you have one owner or multiple owners
  • the business made money or not
  • you ultimately owe tax or not

If your business is required to file, the deadline applies.

The Hidden Cost of Missing March 15

Missing the March 15 business tax deadline can trigger IRS penalties even if no income tax is owed.

One of the biggest misconceptions is that penalties only apply if tax is owed.

For S-Corporations, that’s not true.

If an S-Corp return is late and no extension is filed, the IRS can assess penalties of approximately $245 per shareholder, per month, up to 12 months—even if the business itself owes no income tax.

That means a “harmless delay” can quietly turn into thousands of dollars in penalties.

Filing an Extension Doesn’t Mean Doing Nothing

An extension:

  • gives you more time to file, not more time to plan
  • does not delay taxes owed or required estimated payments
  • still requires reasonable estimates and coordination with personal returns

Waiting until after March 15 to think about the business return often limits your options and forces reactive decisions instead of intentional ones.

What Smart Business Owners Do Before March 15

Proactive business owners use the weeks leading up to March 15 to:

  • Confirm the correct business structure is still working
  • Review profit levels before returns are finalized
  • Ensure S-Corp payroll is reasonable and defensible
  • Coordinate business results with personal tax planning
  • Decide whether filing now or extending makes the most sense

Many of these decisions tie directly into ongoing tax planning, not just tax preparation.

Unsure whether to file or extend? A short planning review before March 15 can clarify your next steps.

The goal isn’t just to meet a deadline—it’s to file returns that reflect deliberate strategy, not last-minute scrambling.

Why March 15 Impacts Your Personal Taxes Too

Business returns don’t exist in a vacuum.

For S-Corp owners and partners, the business return directly affects:

  • personal taxable income
  • estimated tax requirements
  • retirement planning
  • cash flow planning for the year ahead

Rushing the business return often creates downstream issues on the personal side—including surprises in April.

The Bottom Line

March 15 isn’t just a filing date—it’s a decision point.

When business tax returns are treated as a formality instead of part of a broader plan, opportunities get missed and risks increase.

The best outcomes happen when:

  • the business return is handled intentionally
  • deadlines are used strategically
  • and planning happens before options disappear

FAQs

What business tax returns are due on March 15?

March 15 is the federal filing deadline for S-Corporations (Form 1120-S) and partnerships (Form 1065). This deadline applies even if the business has only one owner or did not generate taxable income.

What happens if an S-Corp misses the March 15 deadline?

Missing the March 15 deadline can trigger IRS penalties even if no tax is owed. The IRS may assess penalties of approximately $245 per shareholder, per month, up to 12 months, if no extension is filed.

Does filing an extension delay taxes owed?

No, filing an extension only delays the deadline to file the return, not to pay taxes. Any tax owed must still be paid by the original due date to avoid penalties and interest.

Do single-member S-Corps still have to file by March 15?

Yes, single-shareholder S-Corporations are subject to the same March 15 deadline as multi-owner S-Corps. The filing requirement and penalty structure apply regardless of the number of shareholders.

Can I still make tax planning decisions after March 15?

Most high-impact tax planning decisions must be made before the year ends, not after March 15. While some elections may still be available, key items like payroll levels, income timing, and certain deductions are usually already locked in

Is it better to file or extend an S-Corp return?

Whether to file or extend depends on your business’s income, documentation readiness, and coordination with personal taxes. The best choice is an intentional one based on planning, not a default reaction to timing pressure.

Why does the March 15 deadline affect my personal tax return?

S-Corporation and partnership income flows directly into the owner’s personal tax return. Delays or rushed filings at the business level can create surprises in personal tax liability, estimates, and cash flow planning.

How Madsen and Company Can Help

At Madsen and Company, we help business owners approach the March 15 deadline with clarity—not panic.

That means:

  • understanding what decisions still matter
  • coordinating business and personal tax strategy
  • and ensuring filings support long-term goals, not just compliance

👉 Want to know what decisions matter most right now?

Unsure whether to file or extend? A short planning review before March 15 can clarify next steps.
Schedule a Proactive Tax Planning Review.

Small Business Tax Planning: Strategies to Reduce Taxes Legally

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Small business tax planning strategies to reduce taxes legally for business owners and real estate investors
Proactive tax planning helps small business owners lower taxes, improve cash flow, and avoid filing-season surprises.

Most business owners focus entirely on tax filing. However, the real savings are not found in April. They are created through strategic small business tax planning done well before the year ends.

If you own a small business, an S-Corporation, or rental property, proactive planning is the difference between writing a large check to the IRS and keeping more of your cash to reinvest in your business and future.

Tax Planning vs. Tax Preparation: What’s the Difference?

It is a common misconception that tax planning and tax preparation are the same thing.

Tax preparation is historical. It reports what has already happened.

By the time you are “doing your taxes,” most opportunities to change the outcome are gone.

By contrast, tax planning is forward-looking. It focuses on shaping financial decisions today to legally reduce what you owe tomorrow.

As a result, effective planning allows you to:

  • Legally lower taxable income through smart deductions
  • Improve cash flow so you are not hit with an unexpected bill
  • Align business growth with current tax strategies
  • Reduce filing-season surprises

Learn how tax preparation fits into the process and how proactive planning works

Optimize Your Business Structure

First, your business structure is the foundation of your tax bill. Whether you operate as a sole proprietor, LLC, partnership, or S-Corporation affects how much tax you pay.

For many profitable businesses, the S-Corporation remains a powerful tool for reducing self-employment taxes. By paying a reasonable salary and taking the remaining profit as distributions, many owners can save thousands.

However, this strategy requires proper payroll compliance. If your business income has increased, it may be time to review whether your current structure still makes sense.

Learn more about S-Corporation planning

Strategic Timing of Income & Expenses

Next, the timing of income and expenses can be just as important as how much you earn.

Common strategies include:

  • Accelerating expenses before year-end
  • Deferring income into the next tax year when appropriate
  • Making retirement contributions before December 31
  • Planning equipment purchases for depreciation benefits

These decisions must be made before the year ends to be effective.

Meanwhile, large purchases such as vehicles, equipment, and technology should not be made without considering their tax impact.

Leverage Depreciation & Asset Planning

Strategic planning allows you to:

  • Use Section 179 and bonus depreciation when appropriate
  • Match deductions to higher-income years
  • Avoid wasting deductions in low-profit years

Depreciation is not just an accounting concept. It is a powerful tax planning tool when used intentionally.

Maximize Retirement & Health Benefits

Furthermore, planning is not only about business deductions. It also plays a major role in personal wealth building.

Common strategies include:

  • Solo 401(k) or SEP IRA contributions
  • Health Savings Accounts (HSAs)
  • Owner-only retirement plans for S-Corporation owners

These tools reduce taxable income while helping you prepare for the future.

Likewise, real estate investors face a separate set of planning considerations.

Real Estate Tax Strategy

Real estate investors operate under a different set of tax rules than operating businesses.

Key planning areas include:

  • Cost segregation and depreciation strategies
  • Repairs versus improvements classification
  • Short-term rental tax treatment
  • Passive activity rules
  • Timing of property sales

With proper planning, rental income can be taxed far more efficiently.

Click here to learn more about real estate tax strategy

For this reason, waiting until tax season often leads to missed opportunities.

Why Waiting Until April Costs You Money

By the time tax season arrives, your CPA becomes a historian.

They can:

  • Report what happened
  • Apply limited remaining elections
  • Ensure compliance

But they cannot undo past decisions. The best tax results come from decisions made during the year, not during filing season.

The Bottom Line: You work too hard for your money to give away more than is legally required.

Frequently Asked Questions

Below are answers to common questions business owners have about tax planning.

How often should I do tax planning?

Most growing businesses benefit from a mid-year review and a final fourth-quarter strategy session.

Is this only for large corporations?

No. Small businesses often see the greatest percentage savings because they have more flexibility in how they pay owners and time expenses.

Can tax planning reduce my audit risk?

YYes. High-quality planning improves documentation, consistency, and reporting accuracy, which reduces audit risk.

Take Control of Your Tax Future

Stop guessing what your tax bill will be.

Madsen and Company provides specialized tax planning for S-Corp owners, real estate investors, and small businesses nationwide.

Schedule Your Strategy Consultation Today
Learn More About Our Business Tax Service

Business Tax Preparation vs Tax Planning: What’s the Difference (and Why It Costs You Money)

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CPA explaining the difference between tax preparation and tax planning to a small business owner
Understanding the difference between tax preparation and tax planning helps business owners make smarter financial decisions.

Most business owners assume tax preparation and tax planning are the same thing. In reality, they serve very different purposes — and confusing the two is one of the main reasons small business owners overpay in taxes.

On one hand, tax preparation focuses on reporting what already happened. On the other hand, tax planning focuses on shaping what will happen next.

Because these two services work at different stages of the year, understanding the distinction can save thousands of dollars and prevent costly surprises.

What Is Business Tax Preparation?

In simple terms, business tax preparation is the process of:

Tax preparation looks backward. It records income, expenses, and deductions for a year that has already ended.

Common examples of tax preparation include:

  • Filing Form 1120-S for an S-Corporation
  • Filing Schedule C for a sole proprietor
  • Filing partnership returns
  • Preparing W-2s and 1099s
  • Submitting extensions

Tax preparation answers the question:
“What do I owe based on what already happened?”

What Is Business Tax Planning?

By contrast, tax planning is the process of making intentional financial and business decisions to reduce future tax liability.

It focuses on:

  • Structuring income and expenses
  • Choosing the right business entity
  • Timing deductions and purchases
  • Managing payroll and owner compensation
  • Coordinating retirement and benefit strategies

Tax planning looks forward. It influences future tax results before the year is over.

Common examples of tax planning include:

  • Setting reasonable S-Corporation salary levels
  • Planning retirement contributions
  • Timing equipment purchases
  • Structuring health insurance benefits
  • Using accountable plans
  • Managing income timing

Tax planning answers the question:
“What should I do now to legally reduce my taxes later?”

Why Tax Season Is the Worst Time to Start Tax Planning

By the time tax season arrives, many important financial decisions have already been made.

For example, income has already been earned, payroll choices are locked in, and most deductions are limited. In addition, entity structures and benefit elections are usually fixed by year-end.

At that stage, your CPA can still report results, apply limited elections, and ensure compliance. But business owners must implement most major tax-saving strategies before the year ends. Once December 31 passes, many planning opportunities disappear.

That is why tax season is often the most expensive time to ask tax planning questions..

How Business Owners End Up Overpaying in Taxes

Business owners often overpay when they treat tax preparation as tax planning.

For instance, many meet with a CPA only once per year, make financial decisions without tax guidance, or wait until filing time to ask questions. As a result, opportunities to reduce taxes are frequently missed.

Without proactive planning, income is taxed inefficiently, deductions are overlooked, and entity structures go unreviewed. Over time, this leads to reduced cash flow and more tax surprises.

Although filing a tax return ensures compliance, it does not automatically minimize taxes.t automatically minimize taxes.

Why Smart Business Owners Use Both

In practice, tax preparation and tax planning work best when they are used together.

First, tax preparation ensures accuracy, maintains compliance, and files the required forms. In contrast, tax planning reduces future tax liability, supports business decisions, improves cash flow, and creates predictability.

Rather than replacing tax preparation, tax planning builds on it. In other words, filing the return becomes part of a larger strategy instead of a one-time event..

Which One Do You Need Right Now?

Generally, you likely need tax preparation if you:

  • Have not filed your return yet
  • Need help meeting IRS deadlines
  • Own a business that must file this season

You likely need tax planning if you:

  • Want to reduce next year’s taxes
  • Own an S-Corporation
  • Own rental or short-term rental property
  • Expect income growth
  • Want fewer tax surprises

Most business owners start with tax preparation and later realize tax planning would have helped earlier.

Our Approach

At Madsen and Company, we view tax preparation as the execution phase of a larger plan.

We help business owners:

  • File accurate returns
  • Understand their financial results
  • Identify planning opportunities
  • Make informed tax decisions going forward

Our goal is not just to file your return.
Our goal is to help you stop overpaying in future years.

Frequently Asked Questions

Q1: Is tax preparation the same as tax planning?

No. Tax preparation reports past results. Tax planning helps shape future tax outcomes.

Q2: Can a CPA do tax planning during tax season?

Limited planning can be done, but most major strategies must be implemented before year-end.

Q3: Do I need tax planning if I already file a tax return?

Filing a return does not reduce taxes. Planning is what reduces future tax liability.

Q4: Is tax planning only for large businesses?

No. Small business owners and S-Corporation owners often benefit the most.

Q5: When should I start tax planning?

Tax planning should be done throughout the year, not just during tax season.

Ready to Get Started?

If you need help filing your business return, we can help you get compliant and meet your deadlines.

If you want to reduce what you pay in future years, we can help you build a proactive tax strategy.

Schedule a Tax Preparation Consultation
Learn About Our Tax Planning Services

Why 2026 is the Year to Upgrade: Leveraging the New $2.56 Million Section 179 Deduction in South Jordan

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Small business owner reviewing equipment upgrade and tax planning strategy related to the 2026 Section 179 deduction in South Jordan, Utah
Proactive Section 179 tax planning helps South Jordan business owners upgrade equipment while maximizing 2026 tax deductions.

What Is the Section 179 Deduction?

The Section 179 deduction is a U.S. tax provision that allows businesses to deduct the full cost of qualifying equipment, software, and certain vehicle purchases in the year the asset is placed in service, rather than depreciating it over several years.

For 2026, the Section 179 deduction limit increases to $2,560,000, making it one of the most powerful tax planning tools available to small and mid-sized businesses.

For small business owners in South Jordan, the landscape of growth just got a significant boost. As we move into 2026, a major shift in tax law has opened a door for companies looking to modernize their operations, expand their fleets, or overhaul their technology.

Under the One Big Beautiful Bill (OBBB), a federal tax law affecting depreciation and expensing rules, the Section 179 deduction —a perennial favorite for tax-smart entrepreneurs—has seen its most substantial increase in history. At Madsen and Company, we’re seeing this as a generational opportunity for Utah businesses to reinvest in themselves while keeping more cash in their pockets.

The Big Number: $2,560,000

For the 2026 tax year, the IRS has raised the Section 179 expensing limit to a staggering $2.56 million.

To put this in perspective, Section 179 allows you to deduct the full purchase price of qualifying equipment and software in the year you buy it, rather than depreciating it over 5 to 7 years. If you buy a $100,000 piece of machinery today, you can potentially subtract that entire $100,000 from your 2026 taxable income.

Key 2026 Limits at a Glance:

Provision2026 Limit
Maximum Deduction$2,560,000
Phase-Out Threshold$4,090,000
Bonus Depreciation100% (Permanent)

Pro-Tip: The “Phase-Out” means that once you spend more than $4.09 million on equipment in a single year, the deduction begins to reduce dollar-for-dollar. This makes the incentive perfectly tailored for the small-to-mid-sized businesses that drive our South Jordan economy.

What Qualifies for the Upgrade?

This isn’t just for heavy industrial manufacturing. The “Section 179 list” is broader than many business owners realize. If you are a contractor in Daybreak or a tech startup near River Front Parkway, these categories likely apply to you:

  • Technology & Software: “Off-the-shelf” software, servers, and computer workstations.
  • Business Vehicles: Heavy SUVs, trucks, and vans over 6,000 lbs (GVWR) often qualify for the full deduction. Light vehicles may be subject to different caps but still offer significant savings.
  • Office Infrastructure: Furniture, security systems, and even certain HVAC upgrades for non-residential buildings.
  • Equipment: Printing presses, medical devices, construction machinery, and specialized tools.

Who Benefits Most From the 2026 Section 179 Increase?

This expanded deduction is especially valuable for:

Businesses with projected taxable income above $150,000 typically see the greatest benefit from proactive Section 179 planning.

Why South Jordan Businesses Should Act Now

The 2026 tax environment is unique because it combines high Section 179 limits with the permanent 100% bonus depreciation established by the OBBB. This “one-two punch” allows for unprecedented flexibility in tax planning.

  1. Offset Higher Revenue: If 2026 is shaping up to be a high-income year, an equipment upgrade is the fastest way to lower your tax bracket.
  2. Modernize Before the Competition: While others are waiting, South Jordan businesses can use tax savings to fund the purchase of AI-integrated tools or more efficient machinery.
  3. Local Expertise: At Madsen and Company, we specialize in helping S-Corps and service-based businesses in Utah navigate these specific rules to ensure you don’t just spend money, but invest it strategically.

The “Placed in Service” Rule

The most important thing to remember is that the equipment must be purchased and placed in service by midnight on December 31, 2026. Simply signing a contract isn’t enough; the gear must be in your office or on your job site, ready to work.

Section 179 Deduction FAQs for 2026

Can I use Section 179 if I finance the equipment?
Yes. Equipment does not need to be paid in full. As long as it is purchased and placed in service during 2026, it may qualify.

Does Section 179 apply to used equipment?
Yes. Both new and used equipment can qualify, provided it is new to your business.

Is there an income limit to use Section 179?
Yes. The deduction cannot exceed your taxable business income, but unused amounts may be carried forward.

How is Section 179 different from bonus depreciation?
Section 179 allows you to choose specific assets to expense, while bonus depreciation applies automatically. Strategic coordination matters.

Do vehicles qualify for Section 179 in 2026?
Certain trucks, vans, and SUVs over 6,000 lbs GVWR may qualify, subject to IRS rules and caps.

How Madsen and Company Can Help

Tax strategy is about more than just filling out forms; it’s about timing. We help South Jordan entrepreneurs look at their projected income and decide exactly how much to invest to hit the “sweet spot” of tax savings.

Are you planning a major purchase this year?

Would you like me to create a personalized tax-saving projection based on your estimated 2026 equipment spend?