LedgerLinx 5 Key Tax Benefits Every Small Business Owner Should Know
December 10, 2025
1. Qualified Business Income (QBI) Deduction — Section 199A
If you operate a pass-through business (sole proprietorship, partnership, S-Corp, or LLC), you may qualify for a deduction of up to 20% of your qualified business income.
Key Details
- Available to individuals with QBI from a qualified trade or business
- Income limits: The deduction begins to phase out at $191,950 (single) or $383,900 (married filing jointly) for 2025
- Below these thresholds, most businesses qualify for the full 20% deduction
- Specified service trades (law, health, consulting, etc.) face additional restrictions above the phase-out thresholds
Example
A sole proprietor with $80,000 in net business income could deduct up to $16,000 (20%) from their taxable income, saving roughly $3,520 in taxes at the 22% bracket.
2. Business Expense Deductions
Ordinary and necessary business expenses are fully deductible. Common deductions include:
- Office supplies and equipment
- Business insurance
- Professional services (accounting, legal fees)
- Marketing and advertising
- Business travel and meals (meals are 50% deductible)
- Vehicle expenses (standard mileage rate: 70 cents per mile for 2025)
- Software and subscriptions
Section 179 Expensing
Instead of depreciating equipment over several years, you can deduct the full cost of qualifying assets in the year of purchase:
- 2025 limit: Up to $1,250,000
- Applies to equipment, furniture, vehicles (with limits), and certain improvements
- Phase-out begins at $3,130,000 in total asset purchases
3. Retirement Plan Contributions
Small business retirement plans offer both tax savings and wealth building:
| Plan Type | Employee Contribution | Total Contribution |
|---|---|---|
| SEP-IRA | Employer only | Up to 25% of compensation (max $70,000) |
| Solo 401(k) | Up to $23,500 | Up to $70,000 (including employer match) |
| SIMPLE IRA | Up to $16,500 | Up to $30,000 (with employer match) |
Catch-up contributions are available for those aged 50 and over.
4. Health Insurance Premium Deduction
Self-employed individuals can deduct 100% of health insurance premiums for themselves, their spouse, and dependents. This is an above-the-line deduction, meaning it reduces your AGI directly.
This applies to:
- Medical insurance
- Dental insurance
- Vision insurance
- Long-term care insurance (age-based limits apply)
5. Home Office Deduction
If you use part of your home exclusively and regularly for business, you can claim either:
- Simplified method: $5 per square foot, up to 300 sq ft ($1,500 max)
- Regular method: Actual expenses proportional to business use percentage
This deduction applies only to self-employed individuals, not W-2 employees.
Taking advantage of these deductions requires proper documentation and record-keeping throughout the year. A proactive approach to tax planning can result in significant savings.