As we close the books on 2024, resolve to stop missing opportunities in 2025
As we enter 2025, small business owners are more focused than ever on finding ways to save money on their taxes. With inflation still affecting costs, supply chain challenges, and potential changes in tax laws, many are looking for ways to reduce their financial burden. With the IRS set to adjust tax brackets and other regulations, it’s crucial for small business owners to stay ahead of the game and take advantage of every opportunity to lower their tax bills. In this post, we’ll highlight some of the best tax breaks available in 2025 that can help small businesses keep more of their hard-earned money.
1. Work Opportunity Tax Credit (WOTC)
One of the most valuable tax breaks available to small businesses is the Work Opportunity Tax Credit. WOTC encourages businesses to hire individuals from certain groups of disadvantaged job seekers, like veterans, ex-felons, or people who have been unemployed for a long time. If you hire someone from one of these groups, you could qualify for a tax credit of up to $9,600 per person, depending on the specific group they belong to.
To get the credit, all you need to do is get certification from your state workforce agency that the person you hired is eligible. It’s a great way to save money while also helping to provide opportunities for people who may face challenges finding work.
The best part? With Arvo’s risk-free, industry-leading WOTC tools, claiming WOTC has never been easier.
2. Section 179 deduction
If you’ve bought new equipment, machinery, or even office furniture for your business, the Section 179 deduction can save you a lot of money. Normally, when you buy property for your business, you have to spread out the cost over several years through depreciation. But with Section 179, you can deduct the full cost of the equipment in the year you purchase it, instead of spreading it out.
In 2025, you can deduct up to $1.2 million for qualifying equipment purchases, with a phase-out limit of $2.5 million. So, if you’re planning to invest in new computers, machinery, or other big-ticket items for your business, this deduction can help reduce your taxable income right away, allowing you to reinvest the savings back into your business.
3. Research and Development (R&D) tax credit
Do you work on developing new products, improving your business processes, or creating new technology? If so, you might be eligible for the R&D tax credit. While this credit is often associated with big tech companies, small businesses can qualify as well, especially if they’re involved in innovation, even in ways that aren’t directly related to high-tech industries.
The credit is based on a percentage of your eligible research expenses, like wages, materials, and contract costs. For small businesses that spend time and money on improving their products or services, this credit can help offset some of those expenses. Even if you don’t think of your business as “high-tech,” you might still qualify for this credit, so it’s worth looking into.
4. Self-employed health insurance deduction
If you’re a small business owner who is self-employed, paying for your own health insurance can be expensive. Fortunately, you can deduct the cost of your premiums from your taxable income. This includes not just your own premiums, but also premiums for your spouse and dependents.
In 2025, this deduction still offers big savings for self-employed individuals, whether you get your health insurance through the marketplace or through another plan. It’s a great way to reduce your taxable income while covering your health insurance costs.
5. Qualified Business Income (QBI) deduction
The QBI deduction is a great way to reduce your taxes if you run a small business. If you have a pass-through business (like a sole proprietorship, partnership, or S-corporation), you could be eligible to deduct up to 20% of your business income from your taxes.
In 2025, this deduction is still in effect, but it does have some rules depending on how much money you make and the type of business you run. Service-based businesses, like law firms or accounting firms, might face some limits if their income exceeds a certain amount. But if your business qualifies, the QBI deduction is one of the easiest ways to lower your tax bill without having to spend a lot of extra time or effort.
6. Depreciation deductions for business property
If you buy business property like office buildings, equipment, or vehicles, you can usually deduct the cost of those items over time through depreciation. But with bonus depreciation, you can deduct a large portion of the cost in the first year you buy the property.
In 2025, you can still take advantage of 100% bonus depreciation, meaning you can immediately deduct the full cost of qualified property. This can be a huge benefit for small businesses that are investing in new equipment, vehicles, or even property, helping you save big on your taxes in the year you make the purchase.
Work smarter in 2025
Tax season doesn’t have to be overwhelming for small business owners. We recently worked with a client who had a lot of big ideas for how to cut down on their tax bill. They were considering everything—from upgrading equipment for Section 179 deductions to diving into complex credits for R&D. But after talking with us, they realized that they qualified for a significant amount of WOTC—and they could claim it without all the extra effort they had planned to invest in other strategies for saving.
It was a game-changer for them, and it reminded us that sometimes, the best tax strategy is the one that requires the least amount of work on your part.
Make 2025 your most profitable year yet. Start by scheduling a call with us today.