Business tax planning strategies work best when they're set before year-end, not after. Most planning comes down to four choices: how the business is taxed, how you pay yourself, what you put into retirement plans, and when income and expenses land. Here's how each one works, in plain terms.

What are the core business tax planning strategies?

Entity choice, owner compensation, retirement contributions and timing. On the deduction side, many owners of sole proprietorships, partnerships and S corporations may deduct up to 20 percent of qualified business income.

In a made-up example, an owner with $200,000 of qualified business income would see a deduction of up to $40,000 at 20%, before the limits that depend on income and business type.

How much should an S corp owner pay themselves?

Enough to count as reasonable compensation. The IRS says S corporations must pay reasonable compensation to a shareholder-employee for services before non-wage distributions are made.

The IRS looks at factors such as training and experience, duties, time and effort, and what comparable businesses pay for similar services.

Setting it too low invites reclassification. In a made-up example, an owner who takes $20,000 in wages and $180,000 in distributions from a business that runs on their own work risks having the IRS reclassify distributions as wages, which are subject to employment taxes, plus penalties. We document the number and the reasoning.

How do retirement plans lower a business owner's tax?

Pre-tax contributions reduce taxable income, so plan limits set your ceiling. For 2026 the 401(k) employee deferral limit is $24,500.

In a made-up example, an owner in the 37% bracket who defers the full amount postpones tax at that top rate on up to $24,500 of income to later years.

Plan design and any rules about covering employees matter, so we review them before you adopt a plan. See retirement tax planning strategies for the limits.

How does timing change your tax bill?

Income and deductions land in the year you control when they are paid, purchased or elected. Two common examples for owners are the pass-through entity election covered in our SALT pass-through entity post, and depreciation on real estate.

For entity choice, see our comparison of LLC vs. S corp taxes.

Should you plan before a sale?

Yes, and early. Exit and liquidity planning is its own subject, and the earlier you start, the more options you have.

It is covered on our advanced tax strategies page.

If you'd like to see how this applies to your situation, book your tax strategy call or call 702-852-2577. For how we approach the bigger picture, see our advanced tax strategies page.

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About the author: D. Lenny Whiting, Esq., CPA, MS is the Managing Partner of CPA Attorney, LLC in Las Vegas. He is a Nevada attorney and a Nevada CPA. More about Lenny.

This article is general information, not legal or tax advice for your situation. Tax rules change, and results depend on your facts.

CPA Attorney, LLC, 10155 W. Twain Ave., Ste. 100, Las Vegas, NV 89147. Attorney responsible for this content: D. Lenny Whiting.