As with individuals, your small business can benefit from savvy tax planning at the end of the year. Basic strategy: Dig deep in 2025. The One Big Beautiful Bill Act (OBBBA) contains several nuggets for business owners. Of course, every situation is different, but here are seven hidden gems you may discover.
1. Find year-end bargains. If you’re shopping around for new equipment for your business, you might find a good price at the end of the year, especially if tariffs haven’t had an adverse effect.
Strategy: Buy and start using equipment before year-end. If it qualifies for the Section 179 deduction or first-year bonus depreciation, or both, your business may be able to write off all or most of the cost! The Tax Cuts and Jobs Act (TCJA) increased allowable Section 179 deductions for qualified property. It also allowed first-year bonus depreciation subject to a phase-out period. The OBBBA permanently allows Section 179 deductions subject to a maximum of $2.5 million with a phase-out threshold of $4 million for tax years beginning in 2025, with inflation indexing for future years. Plus, the new law permanently restores 100% bonus depreciation for qualified property acquired and placed in service after January 19, 2025. Tip: A business can claim both Section 179 deductions and first-year bonus depreciation deductions.
2. Scope out target workers. Frequently, the holiday season is the busiest time of the year for businesses. Strategy: Hire workers from a designated “target group.” The tax law allows you to claim the Work Opportunity Tax Credit (WOTC) for wages paid to qualified employees. Although the WOTC has been extended multiple times in the past, it is currently scheduled to expire after 2025. Move fast! The basic WOTC equals 40% of the firstyear wages of up to $6,000 per employee, for a maximum credit amount of $2,400. For disabled veterans, the credit can be claimed for the first $24,000 of wages, for a maximum credit of $9,600. There’s no limit on the number of credits your business can claim. Tip: Congress might extend this tax break again. Stay tuned.
3.Inject cash into your company. Does your small business need a cash infusion at yearend? Look no further than your own desk. Strategy: Acquire “qualified small business stock” (QSBS) issued by the company. If certain requirements are met, you can exclude up to 100% of the taxable gain on a future sale of the QSBS. To qualify for this gain exclusion break, you must hold the stock at least five years before you sell. The OBBBA expanded the tax benefits effective for stock issued after July 4, 2025. The new law allows: • A partial gain exclusion for shorter holding periods. The exclusion is 50% for stock held at least three years and 75% for stock held at least four years. The holding period for the 100% exclusion remains five years. • A higher dollar cap. Previously, gain eligible for the exclusion could not exceed the greater of $10 million or 10 times the basis of the stock. The new law increases the dollar cap to $15 million. • A higher gross-assets threshold. The threshold to qualify as a “small business” is raised from $50 million to $75 million. Tip: The taxable portion of a QSBS gain, if any, will qualify as lower taxed long-term capital gain if the shares have been held for more than one year.
4. Get in on the cutting edge. In this competitive environment, your business may have to ramp up its research activities. Strategy: Authorize more research and experimentation (R&E) efforts in 2025. The OBBBA provides more leeway in writing off R&E expenses. Prior to the TCJA, a business could fully deduct R&E expenses in the year in which they were incurred. But the TCJA required costs to be capitalized and amortized over 60 months. The OBBBA restores the prior current write-off, retroactive to Jan. 1, 2025. Alternatively, a business can elect to amortize the expenses over 60 months. The amortization period for foreign R&E expenses remains at 15 years. Tip: Transitional rules apply to expenses incurred in 2022-2024. See your tax pro.
5. Perform a quick fix. If you get more traffic in your regular workplace, you may need to spruce up the business premises. Strategy: Make any minor repairs that are needed. You can currently deduct minor repairs to a business building, like fixing a leak or replacing a broken window. Conversely, the cost of major improvements must be capitalized and depreciated over a number of years. Caution: The IRS may say that the entire cost of work done at the same time, including repairs, constitutes an improvement under a “general betterment plan.” Tip: Separate repairs from major improvements to be safe.
6. Launch a business venture. If you seize the opportunity to fill a business niche, you can take advantage of a special write-off of up to $5,000 for qualified start-up expenses. However, you must legitimately be “open for business” this year to qualify for this tax break on your 2025 return. Strategy: Begin offering goods or services before Jan. 1, 2026, to beat the clock. This write-off includes costs that would normally be deductible by an ongoing business, like certain marketing expenses and wages. Note: If total startup costs are greater than $50,000, the $5,000 deduction is reduced dollar for dollar for any amount of startup expenses over $50,000, until the $5,000 goes to zero. In other words, if startup expenses are greater than $55,000, there is no immediate expensing of any of the startup costs. They must be amortized over 180 months.
7 Stock up on supplies. As usual, prices are expected to go up next year. Strategy: Buy the supplies you need now. The cost is deductible this year if the purchases qualify as “ordinary and necessary” business expenses. The deduction can be claimed for 2025 even if you don’t use up all the supplies before the end of the year. Tip: Coordinate these year-end business strategies to maximize the tax benefits.