Tax season brings a familiar pattern. Many business owners wait until March or early April, gather their documents, file their returns, and then breathe a sigh of relief until next year.
However, some business owners approach taxes differently. They recognize that tax strategies aren't typically implemented in March, they're planned throughout the year and executed before the calendar flips.
If you're reading this before April 15, you may still have time to evaluate certain moves that could potentially help manage your tax liability. Let me walk you through tax strategies that business owners with $3.5 million or more in assets sometimes use to help manage their tax situation while building retirement security.
Strategy 1: Maximizing Retirement Account Contributions
Many business owners contribute to their retirement accounts but don't maximize what's actually available to them. For 2026, if you're 50 or older, you can contribute up to $23,500 to a 401(k), plus an additional $7,500 catch-up contribution.
This is where business owners have an advantage: profit-sharing contributions. Depending on your plan structure, your company may be able to contribute more on your behalf. For self-employed individuals or small business owners, SEP-IRAs allow contributions up to 25% of compensation or $69,000 for 2026, whichever is less.
The deadline for making these contributions varies by plan type. Traditional 401(k) contributions must be made by December 31, but SEP-IRA contributions can be made up until your tax filing deadline, including extensions.
Strategy 2: Bunching Charitable Contributions
If you give to charity regularly, bunching multiple years of contributions into one tax year may be an option to consider. This strategy sometimes works well when combined with a donor-advised fund.
What this looks like: Instead of giving $10,000 annually to various charities, you might consider contributing $50,000 to a donor-advised fund in one year, taking the deduction that year, and then distributing the funds to charities over the next five years.
This approach can make sense when it might push you above the standard deduction threshold or in years when your income is higher than usual.
Strategy 3: Qualified Charitable Distributions from IRAs
If you're 70½ or older, qualified charitable distributions (QCDs) can offer one approach to charitable giving. You can transfer up to $105,000 in 2026 directly from your IRA to qualified charities without counting it as taxable income.
This strategy can become valuable once required minimum distributions begin at age 73. The QCD counts toward your RMD but doesn't increase your adjusted gross income, which can help with Medicare premium calculations and taxation of Social Security benefits.
What you see is what you get with QCDs. The money must go directly from your IRA custodian to the charity. You don't get a charitable deduction, but you also don't pay taxes on the distribution, which in some situations can result in tax treatment different from the standard charitable deduction route.
Strategy 4: Tax-Loss Harvesting in Taxable Accounts
Market volatility may create opportunities for tax-loss harvesting, where you sell investments at a loss to offset capital gains. This strategy becomes more sophisticated when you understand the wash-sale rule and coordinate it across your entire portfolio.
The basic approach: If you've realized gains during the year, look for positions in your taxable accounts that are showing losses. You might consider selling those positions to generate losses that could offset your gains. You can then reinvest in similar but not substantially identical securities to maintain your market exposure.
For business owners, this strategy can offset up to $3,000 of ordinary income per year, with carryforward of excess losses. The IRS provides guidance on how these rules work.
Strategy 5: Evaluating Roth Conversions
Roth conversions can deserve consideration, especially in years when your business income is lower than usual or during market downturns when account values are temporarily depressed.
The strategy involves converting traditional IRA funds to a Roth IRA, paying taxes now to potentially enjoy tax-free growth and withdrawals later. This can make sense for business owners who expect to be in higher tax brackets during retirement or want to help manage future required minimum distributions. Keep in mind, withdrawals from Roth IRAs are tax-free only if holding-periods and qualifications rules are met.
Timing matters here. You have until December 31 to execute a Roth conversion for the current tax year. There's no deadline extension like with some retirement contributions. We keep our finger on the pulse for our clients and their tax situation throughout the year to help identify potential conversion windows.
Strategy 6: Accelerating or Deferring Income
Business owners sometimes have more control over income timing than W-2 employees. If you're on the cash basis of accounting, you might consider accelerating collections into the current year or delaying them until January, depending on your tax situation.
Similarly, you might consider prepaying certain deductible business expenses before year-end or delaying them, depending on whether you might benefit more from deductions this year or next. This strategy generally requires projecting your income for both years and careful documentation to determine a potentially appropriate approach.
According to DePaul University, strategic income timing can be one approach business owners use to help manage their tax brackets.
Strategy 7: Reviewing Entity Structure
Your business entity structure impacts your tax liability. As your business grows or your financial situation changes, the entity structure that made sense five years ago might not be optimal today.
S-corporations, C-corporations, partnerships, and LLCs have different tax treatments. The qualified business income deduction available to pass-through entities can provide up to a 20% deduction on business income, but it comes with income limitations and complexity.
This isn't something to change before April 15, but it can be worth reviewing now. Changes for next year often need to be implemented before year-end, so starting the conversation in March or April provides time to model different scenarios.
The Planning Mindset
These seven strategies represent a starting point. Tax planning can be effective when we coordinate our approaches within your comprehensive financial plan.
Tax laws change regularly. Strategies that worked last year might not be available this year, and new opportunities can emerge. Staying current requires ongoing attention throughout the year, not just in March.
If you haven't implemented any of these strategies yet, you're not alone. Business owners are focused on running their businesses, and tax planning can get pushed aside until tax season arrives. However, once you shift from reactive filing to proactive planning, there can be potential benefits year after year.
Feel free to reach out to discuss how these strategies might apply to your situation. We explain things clearly so you understand exactly how each strategy works and why it might make sense for your family.
This information is for educational purposes only and is not intended as investment, tax, or legal advice. Consult with qualified tax professionals regarding your specific situation. Past performance is not indicative of future results. Investment advisory services offered through Summit Financial, LLC, a SEC Registered Investment Advisor.Third-party links are provided for convenience; we do not control or endorse, and are not responsible for their content. 8770637.1.
