Business owners can use these strategies to effectively lower their future tax liabilities.

In July, the enactment of a new tax and spending bill has prompted many small-business owners to adopt long-term strategies aimed at reducing corporate tax liabilities. The legislation introduced significant tax incentives and made several provisions permanent, fostering an environment conducive to growth and investment for small enterprises.

One of the key features of the new tax law is its enhancement of deductions for capital equipment, particularly benefiting manufacturers. The law has established a permanent “bonus depreciation” deduction, allowing businesses to immediately write off the costs associated with qualifying property, including computer systems, software, office furniture, certain vehicles, and qualified improvement property. This immediate expensing can greatly improve cash flow and reduce taxable income for businesses pursuing expansions or improvements.

Scott Jillard, a consultant for Jillard & Associates, emphasizes the necessity for clients to explore new capital investments, which can help maximize the advantages of available federal tax credit programs. The legislation now offers a full 100% deduction for qualified production property, enabling manufacturers to deduct the entire cost of new facilities used for production activities. These facilities must meet specific criteria, including being newly constructed and U.S. based.

Tax experts are also advising businesses to consider cost segregation— a strategy designed to enhance tax benefits from commercial property purchases. This involves reclassifying components of a building to accelerate depreciation deductions, allowing certain items to be written off over shorter timeframes. This can lead to significant reductions in tax liabilities and improved cash flow.

The business structure is another area that warrants reconsideration, especially as the “pass-through” deduction for certain entities has been made permanent. This change allows businesses to deduct up to 20% of their profits prior to individual taxation, alongside a fixed corporate tax rate of 21%. Business owners are encouraged to evaluate whether their current corporate structure aligns with their financial goals, as switching to a different type might appeal to investors or offer tax advantages.

In addition, the new tax law reinstates the ability for businesses to fully deduct research and development expenses in the year incurred. This provision particularly benefits small businesses, allowing them to retroactively apply full expensing to previous tax years by amending returns before the July 2026 deadline.

Lastly, aspiring entrepreneurs are encouraged to consider establishing a Qualified Small Business under Section 1202 of the tax code. This designation, applicable to certain U.S. C corporations engaged in qualified trades, allows investors to exclude substantial capital gains based on their holding period, making it an appealing option for both founders and investors.

The revised tax landscape presents a myriad of opportunities for small businesses to enhance their growth and sustainability while optimizing tax liabilities. Business owners are advised to assess these strategies meticulously to fully capitalize on the benefits afforded by the recent tax reforms.

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