Small Business

Small Business Tax Planning: Strategies to Reduce Taxes Legally

by

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

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

by

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?

Tax Preparation vs. Tax Planning: Why Filing Your Return Is the Most Expensive Time to Get Advice

by

https://www.smecpa.com/wp-content/uploads/2023/02/SME-CPA-June-2022-066.jpg

Most taxpayers think their CPA’s job starts in February.

In reality, by the time your tax return is being prepared, the most important tax decisions for the year have already been made—and locked in.

This is where many business owners unknowingly overpay taxes year after year.

The confusion usually comes from not understanding the difference between tax preparation and tax planning. They sound similar, but they serve very different purposes—and timing is everything.

What Tax Preparation Actually Is

Tax preparation is compliance work.

Its purpose is to accurately report what already happened and file the required forms with the IRS and state agencies.

Tax preparation generally includes:

  • Preparing and filing tax returns
  • Reporting income and deductions based on past activity
  • Applying elections that are still available at filing time
  • Ensuring accuracy and compliance

Tax preparation is essential—but it is historical. It looks backward.

By the time your CPA is preparing your return, they are limited to reporting decisions that were already made, whether intentional or not.

What Tax Preparation Is Not

This is where expectations often break down.

Tax preparation does not:

  • Change how much salary you paid yourself
  • Restructure your entity after the year ends
  • Retroactively time income or expenses
  • Redesign depreciation strategies
  • Fix missed retirement or health planning opportunities

Once the calendar year closes, most high-impact tax strategies are no longer available.

What Tax Planning Actually Does

Tax planning is strategic and proactive.

It happens before and during the year—not after it ends.

Tax planning focuses on shaping your tax outcome intentionally, rather than reporting it after the fact.

https://wcginc.com/wp-content/uploads/SCorpSavingsChart.png
https://images.saasant.info/str_13_b7538b745d.webp
https://www.excelsiorgp.com/wp-content/uploads/2024/02/Tax-Planning-For-Real-Estate-Investors-Infographic.jpg

4

Tax planning may include:

  • Entity structure optimization
  • S-corporation salary vs. distribution analysis
  • Timing of income and expenses
  • Depreciation and asset strategy
  • Retirement contribution planning
  • Health insurance and reimbursement strategy
  • Multi-year tax projections

Good tax planning doesn’t rely on loopholes. It relies on timing, structure, and informed decision-making.

Tax Preparation vs. Tax Planning (Side-by-Side)

Tax PreparationTax Planning
Looks backwardLooks forward
Reports resultsShapes results
Compliance-focusedStrategy-focused
Happens once a yearHappens year-round
Limited savings potentialOften five-figure savings
ReactiveProactive

This difference is why planning fees often feel higher—but result in substantially lower taxes.

Who Tax Planning Is Best For

Tax planning is not necessary for everyone. It delivers the most value when income and decisions are complex.

Tax planning is typically ideal for:

If your tax situation involves decisions—not just reporting—planning usually pays for itself many times over.

Who Probably Does Not Need Tax Planning

We believe clarity builds trust.

Tax planning may not be a good fit if:

  • Your income is strictly W-2
  • You do not own a business or rental property
  • Your tax situation rarely changes year to year
  • You are mainly focused on filing accurately at the lowest cost

In those cases, high-quality tax preparation alone may be sufficient.

Why Timing Matters More Than Most People Realize

The biggest tax mistake we see is waiting too long to ask questions.

Many high-impact strategies must be decided before December 31, including:

  • S-corp salary decisions
  • Bonus depreciation elections
  • Retirement contributions
  • Accountable plan reimbursements
  • Income acceleration or deferral

Once the year ends, the tax return simply documents what already happened.

That’s why trying to “fix it on the tax return” is often impossible.

The Bottom Line

Tax preparation tells you what you owe.
Tax planning helps determine what you should owe.

If you only speak with your CPA once a year, you are likely making tax decisions unintentionally—and paying more than necessary as a result.

Tax planning isn’t about aggressive tactics.
It’s about making informed decisions before it’s too late.

Want to Know If Tax Planning Makes Sense for You?

If you own a business, real estate, or have rising income, proactive tax planning may be one of the highest-ROI decisions you can make.

The right strategy doesn’t start with a tax return—it starts with a conversation.

Frequently Asked Questions

What is the main difference between tax preparation and tax planning?

Tax preparation focuses on accurately filing tax returns based on what already happened during the year. Tax planning focuses on making proactive decisions before and during the year to legally reduce taxes. In short, tax preparation reports results, while tax planning shapes them.

Is tax planning worth the cost for small business owners?

For many small business owners, yes. Tax planning often identifies savings opportunities related to entity structure, payroll strategy, depreciation, retirement contributions, and timing of income and expenses. When income exceeds a certain level or involves a business or rental activity, the tax savings from planning frequently exceed the cost of the service.

Can my CPA still help me reduce taxes if it’s already tax season?

Once the year has ended, most major tax-saving opportunities are no longer available. During tax season, a CPA can ensure accurate reporting and apply any remaining elections, but they generally cannot change key decisions such as salary levels, entity structure, or timing of income. That’s why proactive planning before year-end is critical.

S-Corporation Tax Planning: 7 Strategies Small Business Owners Miss (and How to Fix Them)

by

S corporation tax planning strategies for small business owner

If you own an S-Corporation, tax planning is not optional — it’s one of the biggest levers you have to keep more of what you earn.


Yet many profitable S-corp owners unknowingly overpay thousands in taxes each year because planning happens after the year ends.

Below are 7 overlooked S-Corporation tax strategies, why they matter, and what proactive business owners should do instead.

What Is S-Corporation Tax Planning?

S-corporation tax planning involves proactively structuring payroll, distributions, deductions, and timing decisions throughout the year to legally reduce income and payroll taxes for business owners.

1. Reasonable Salary Is Not a Guess — It’s a Strategy

One of the most common S-corp mistakes is setting payroll without documentation or logic.

Why it matters

Your salary determines:

  • Social Security and Medicare taxes
  • IRS audit exposure
  • Whether distributions remain tax-advantaged

What to do instead

A reasonable salary should be based on:

  • Role performed
  • Time spent in the business
  • Comparable market wages
  • Business profitability

👉 Fix: Document your salary annually and adjust it as profits change — especially after growth years.

Reasonable salary determinations must be supported by documentation and facts specific to each business and owner role.

2. Distributions Without Planning Can Backfire

Yes, S-corp distributions avoid payroll tax — but only after reasonable salary rules are met.

Common mistake

Owners take distributions without reviewing:

  • Year-to-date profits
  • Payroll timing
  • Estimated tax obligations

Smarter approach

Distributions should be coordinated with:

  • Payroll planning
  • Quarterly estimates
  • Cash flow forecasts

👉 Fix: Treat distributions as part of a tax plan, not just cash withdrawals.

3. Retirement Contributions Are Often Timed Wrong

Many S-corp owners miss out on tens of thousands in deductions simply due to poor timing.

Examples

  • Solo 401(k) employee vs employer contributions
  • W-2 wages set too low to support employer contributions
  • Contributions made from the wrong account

👉 Fix: Coordinate payroll, W-2 wages, and retirement planning before December 31 — not after.

4. Health Insurance Is Frequently Deducted Incorrectly

S-corp health insurance rules are very specific.

Common issues

  • Premiums paid personally instead of through payroll
  • Incorrect W-2 reporting
  • Missed above-the-line deductions

👉 Fix: Ensure premiums are properly reimbursed or paid by the S-corp and reported correctly on your W-2.

5. Home Office Deductions Are Often Handled the Wrong Way

Many owners either:

  • Skip the deduction entirely, or
  • Take it incorrectly as a Schedule C deduction

Better method

For S-corps, the accountable plan reimbursement is often superior:

  • IRS-compliant
  • Cleaner documentation
  • No payroll tax impact

👉 Fix: Use a formal accountable plan with documented calculations.

6. Vehicle Deductions Are Frequently Overstated or Underdocumented

Vehicles are a high-audit-risk area when done incorrectly.

Common problems

  • No mileage logs
  • Business use overstated
  • Wrong depreciation method

👉 Fix: Decide annually between:

  • Mileage reimbursement, or
  • Actual expense reimbursement
    —and document business usage consistently.

7. No One Is Looking Ahead to Next Year’s Taxes

The biggest issue?
Most S-corp owners only look backward.

True tax planning means:

  • Reviewing current-year projections
  • Adjusting payroll and estimates mid-year
  • Planning deductions intentionally

👉 Fix: Meet with your CPA before year-end to run projections and adjust strategy.

Who S-Corporation Tax Planning Is Most Valuable For

Proactive S-corp planning delivers the greatest benefit for:

  • Owners earning $150,000+ annually
  • Businesses with consistent or growing profits
  • Service-based businesses and consultants
  • Owners paying themselves W-2 wages
  • Multi-entity or real estate–adjacent businesses

Why Proactive S-Corporation Tax Planning Matters

S-corps don’t fail tax-wise because of complexity — they fail because decisions are made too late.

At Madsen and Company, we specialize in:

S-Corporation Tax Planning FAQs

Do S-corporation owners really need tax planning?
Yes. Many S-corp tax benefits depend on decisions made during the year, not at filing time.

Can tax planning still help if my S-corp is already profitable?
Often yes. Payroll optimization, retirement planning, and timing strategies can significantly reduce taxes even for established businesses.

When should S-corp owners start tax planning?
Ideally early in the year, with check-ins before mid-year and year-end to adjust strategy.

Want to Know What You’re Missing?

If you own an S-Corporation and want clarity on:

  • Reasonable salary
  • Distributions
  • Retirement planning
  • Reducing unnecessary payroll and income taxes

👉 Schedule a proactive tax planning review and find out where opportunities may exist before the year ends.

Do S-corporation owners really need tax planning?

Yes. Many tax benefits depend on decisions made during the year, not at filing time.

About Madsen and Company

Madsen and Company helps small business owners turn complex tax rules into clear, proactive strategies — so taxes stop being a surprise and start becoming a plan.