As tax season picks up, small business owners have a prime opportunity to reduce their tax liability through smart use of available deductions and credits. While there are dozens of potential tax-saving options out there, focusing on the most impactful—and often underutilized—can help business owners stay both compliant and financially strategic.
One of the most valuable tools available is the Section 179 deduction, which allows businesses to immediately deduct the full purchase price of qualifying equipment or software rather than depreciating those costs over time. In 2025, the deduction cap remains substantial, making it a great option for companies that invested in machinery, technology upgrades, or even business vehicles. This incentive is especially important for businesses that made capital investments in the past year or plan to do so before the tax deadline.
Another key area of focus is bonus depreciation, which, while beginning to phase out, still offers a 40% deduction on eligible purchases made in 2025. This is particularly relevant for businesses looking to lower their taxable income quickly. Unlike Section 179, bonus depreciation applies to both new and used equipment and does not have a spending cap, making it attractive for larger purchases.
In addition to equipment-related write-offs, the Qualified Business Income (QBI) deduction continues to be a powerful tax benefit for pass-through entities like S corporations, partnerships, and sole proprietorships. This provision allows eligible businesses to deduct up to 20% of qualified business income, subject to income thresholds and limitations. For many small business owners, it can make a substantial difference in overall tax obligations—especially when paired with smart entity structuring and income planning.
Beyond these deductions, small businesses should also consider credits that support growth and hiring. For example, the Work Opportunity Tax Credit (WOTC) provides a financial incentive for hiring individuals from certain target groups who have historically faced employment barriers. The credit can range from $1,200 to $9,600 per qualified employee, depending on the category and employment duration, which can add up quickly for growing teams.
Lastly, businesses that invested in energy efficiency or sustainability improvements—such as switching to solar, upgrading insulation, or improving HVAC systems—may qualify for federal tax incentives under the Inflation Reduction Act. In some cases, credits of up to 30% of the cost of qualifying improvements are available, helping businesses lower both their tax burden and long-term operating costs.
The bottom line? Focusing on a few high-impact strategies can go a long way in improving your business’s tax position in 2025. Prioritize areas where you’ve made investments, improved operations, or expanded your team. And remember, documentation is key: well-kept records, invoices, and proof of payment are essential to substantiate claims in the event of an audit.
Need Guidance Navigating These Options?
At Baldwin CPAs, we specialize in helping small and mid-sized businesses understand and leverage the tax code to their advantage. From planning to preparation, our team can ensure you’re filing confidently and accurately. Click here to learn more.
