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What Business Owners Can Still Do to Lower Their 2025 Taxes

For many business owners, the stretch between year-end and filing is seen as a planning window for the year ahead. But there are still ways to lower your 2025 tax bill before filing by April 15, 2026.

You can’t magically rewrite last year, but you do have insights you didn’t have in December: clearer numbers. Profit is less of a guess. Payroll totals are known. Cash flow is easier to evaluate. And that clarity can make a big difference in what still may be worth doing before you file.

Correct Capital Wealth Management helps business owners align tax strategy, retirement planning, and long-term wealth decisions so each year’s profits support a bigger financial plan. While we are not tax preparers, we can coordinate with your tax professional to develop a holistic strategy to lower your 2025 taxes.

If you haven’t finalized your 2025 return, now is the time to review your options and make sure your next move is intentional. You can contact us online, call us at (877) 930-4015, or schedule an introductory meeting with a member of our advisory team.

The “before you file” advantage most owners miss

Tax planning is often seen as something that needs to happen in the year you’re filing taxes for. That’s true for plenty of things. Income has to be earned in 2025 to count in 2025, assets must be placed in service during 2025 to affect 2025 depreciation, and so on.

But for business owners, filing season offers extra time to make tax decisions, given that:

  • You know what the business can realistically contribute to retirement plans without straining cash flow.
  • You can choose how to treat certain purchases from a depreciation/expensing standpoint.
  • You can evaluate whether this year is a good time to intentionally show higher income (for lending/valuation purposes) or lower income (for tax purposes).
  • You can decide whether taking an extension creates flexibility.

Retirement Plan Contributions

Retirement plans are one of the few areas where business owners can still take meaningful action for the 2025 tax year in early 2026. If you haven’t filed yet, there may still be an opportunity to fund certain retirement contributions that count toward 2025 and reduce your taxable income.

SEP IRA

If you use a SEP IRA, the contribution amount is based on your 2025 business profit. Many owners wait until their books are finalized before deciding how much to contribute, because the real profit number often isn’t clear until filing season.

Now that you know what the business actually earned in 2025, you can decide how much to contribute before the return is filed. In some cases, owners realize they could contribute more than they originally planned. In others, they want to make sure the contribution doesn’t leave the business tight on working capital.

Because SEP contributions for 2025 can generally be made in early 2026 before the filing deadline, this is often one of the most straightforward ways to lower your 2025 tax bill.

Solo 401(k)

If you already have a Solo 401(k), the opportunity usually comes down to using the full capacity available to you. Unlike an IRA, a Solo 401(k) may allow higher annual contributions, depending on your income, business structure, and plan design.

A Solo 401(k) allows contributions in two ways: as the employee and as the employer. For S-Corp owners in particular, the amount you paid yourself in W-2 wages directly affects how much the business can contribute on the employer side. Once final payroll and profit numbers are in, it’s common to discover that the employer contribution could be higher than originally estimated.

Before filing, you may want to review whether both portions of the plan were fully funded for 2025 and whether your final numbers allow you to contribute more. Many owners believe they “maxed it out,” but once the year is closed and the math is clear, there is often still room to adjust.

For owners over the age of 50, catch-up contributions can further increase the amount set aside for 2025.

Mega Backdoor Roth under a Solo 401(k)

For higher-income owners who are already contributing the standard employee and employer amounts, there may be another layer to consider.

If your Solo 401(k) plan allows after-tax contributions and Roth conversions, you may be able to move additional dollars into a Roth account beyond the usual limits. This is often referred to as a “Mega Backdoor Roth.”

In simple terms, it means contributing after-tax dollars to the plan and then converting those dollars to Roth so future growth can potentially be tax-free. It’s important to understand that a Roth 401(k) contribution is not the same thing as an “after-tax” contribution.

Choosing Roth simply means your regular employee contribution goes in after taxes instead of pre-tax, and it still counts toward your normal annual limit.

After-tax contributions are a separate bucket that may allow you to put in additional dollars beyond that standard limit, up to the plan’s overall maximum. People refer to this as a “Mega Backdoor Roth” when a plan allows for after-tax dollars to be converted to Roth.

Not every plan allows Mega Backdoor Roth, and it has to be handled correctly, but when available, it may increase long-term Roth savings for business owners with strong cash flow.

Spousal Businesses

If both spouses are active in the business, retirement planning should be looked at at the household level.

In many owner-only businesses, each spouse may be able to contribute. That means you’re potentially funding two different retirement accounts. When the business has had a strong year, this can meaningfully increase total retirement savings for 2025.

Because contributions are tied to compensation and profit, filing season is the right time to confirm that both spouses’ contributions were evaluated and funded appropriately.

Cash Balance Plans

For business owners with consistently strong profitability, a cash balance plan can allow much larger contributions than a 401(k) alone.

This is not something that fits every business. It generally works best for owners with steady income and who want to accelerate their retirement savings.

When the numbers support it, a cash balance plan may allow higher total retirement contributions than a 401(k) alone, and it may reduce current-year taxable income. These plans also entail ongoing funding requirements and administrative costs, so they tend to work best when profitability is consistent.

Filing season is when you can clearly see whether 2025 profit justifies that level of funding and whether projected income supports maintaining the structure going forward.

Cash balance plans require ongoing funding commitments and formal administration, so they work best when profitability is consistent.

Roth Conversions in Lower-Profit Years

Not every year goes as well as you planned. If 2025 income was lower than usual, that can create a planning opportunity.

When taxable income drops, you may be in a lower tax bracket than in prior years. That can make it more attractive to convert a portion of pre-tax retirement funds to Roth, paying tax now at a potentially lower rate in exchange for future tax-free growth.

For business owners with fluctuating income, this approach may create a planning opportunity in lower-income years, depending on your tax bracket and long-term goals.

Technology Purchases and Depreciation

If you bought technology, equipment, or other business assets in 2025, and placed them in service in 2025, your depreciation choices can materially change taxable income.

There are a few ways to think about this:

  • Do you want to accelerate deductions to reduce taxable income now?
  • Or do you want to spread deductions across future years to keep income steadier?
  • How does the answer change if you’re preparing for financing, hiring, or an eventual sale?

For many owners, technology purchases (computers, servers, certain software, operational equipment) are exactly where this shows up. Depending on the size and timing of the purchases, these elections can affect taxable income for 2025.

Recent OBBA-related provisions have also drawn more attention to the first-year expenses of qualifying property. The idea is not “take the biggest deduction because it’s available.” It’s whether the deduction strategy supports the rest of your financial plan.

In practice, we coordinate depreciation strategy with retirement funding decisions.

  • High-Profit Year: You may choose to accelerate deductions while also increasing retirement contributions.
  • Transitional Year: You may prefer to preserve income (for lending or valuation purposes) while still using retirement contributions to manage overall tax exposure.

Exit and Long-Term Planning: Don’t Optimize 2025 at the Expense of the Next 3–5 Years

If you are within a 3–5-year exit horizon, or if you’re starting to think about selling your company, filing season is a natural moment to stress-test the bigger picture. You’re reviewing numbers anyway. And the choices you make now can either support or complicate what happens later.


A 3–5 Year Exit Horizon Stress Test

Before you finalize 2025, some business owners like to pressure-test assumptions:

  • What does your “ideal exit timeline” actually look like?
  • How much personal liquidity do you need if the business is sold—or if it isn’t?
  • Are you building wealth outside the business, or is the business the plan?

A surprising number of owners are “doing great” on paper but are underfunding retirement and taxable investments because all capital is trapped inside the business.

Personal vs. Business Asset Allocation Alignment

From a planning standpoint, a business is often a concentrated asset. That concentration may work in some cases—as long as you acknowledge the risk and build the rest of the household balance sheet appropriately.

If 80–90% of your net worth is tied to the business, your retirement accounts and personal investment strategy matter even more. This is where Roth strategies, tax diversification, and long-term accumulation decisions become part of risk management, not just tax planning.

Pre-Sale Structuring: Asset Sale vs. Stock Sale

The difference between an asset sale and a stock sale can materially affect after-tax proceeds. While the final structure may be negotiated later, planning ahead matters because choices made years earlier—entity setup, compensation strategy, how assets are held—can influence flexibility.

The goal is not to predict the exact exit structure today. The goal is to avoid being boxed in later.

Installment Sale Planning

Installment sale planning is one approach that may spread taxable income over multiple years rather than recognizing it all at once. Whether it’s appropriate depends on deal structure, risk tolerance, and cash flow needs. It’s a great example of why planning early matters. These options are much easier to evaluate before negotiations are final.


Charitable Pre-Sale Planning (DAF/CLAT)

If charitable giving is part of your plan, pre-sale planning can create significant leverage.

“Donating before a liquidity event, for example, through a Donor Advised Fund (DAF) or a structure such as a Charitable Lead Annuity Trust (CLAT), may be more tax-efficient in certain situations while supporting charitable goals.

Other Business-Owner Items to Review Before Filing

Retirement contributions aren’t the only moving pieces. Before you finalize your 2025 return, there are a few other areas that might be worth a quick review.


HSA Contributions (If Eligible)

If you qualified for an HSA in 2025, you can generally still make contributions up until the filing deadline.

For self-employed owners, this can be a simple way to reduce 2025 taxable income while adding to a tax-advantaged account. If you haven’t maxed it out, this is an easy place to look.

Depreciation and Section 179 Decisions

If your business placed equipment, vehicles, or technology into service in 2025, how you treat those purchases affects your taxable income.

You may be able to expense more of the cost upfront under Section 179 or bonus/first-year expensing rather than spreading deductions over several years. Those decisions are typically finalized when the return is prepared.

Under recent OBBA provisions, certain qualifying property placed in service after January 19, 2025 may be eligible for 100% first-year expensing. If 2025 included meaningful capital purchases, this may be worth reviewing before filing.

QBI (Section 199A) Coordination

For pass-through businesses, the QBI deduction can reduce taxable income significantly, however it’s sensitive to income levels and wages paid.

Retirement contributions, compensation decisions, and depreciation elections can all affect the calculation of QBI. A quick review can help avoid optimizing one area while unintentionally limiting another.

Common S-Corp and Self-Employed Oversights

A few operational details can directly affect your 2025 taxable income:

  • Accountable plan reimbursements – Properly reimbursing business expenses through an accountable plan may allow those expenses to be deducted at the business level, potentially reducing taxable income.
  • Home office deduction – If you qualify and don’t claim it, you may be overstating business income for 2025.
  • Reasonable compensation (S-Corps) – The salary you pay yourself affects payroll taxes and determines how much the business can contribute to a Solo 401(k) on the employer side.

These aren’t headline strategies, but overlooking them can affect your final tax numbers.

When an Extension May Provide Additional Flexibility

An extension gives you more time to file — not more time to pay. In some cases, extensions provide additional runway to finalize retirement contributions where permitted.

They can also create space to evaluate whether a higher-level structure, such as adding a cash balance plan, makes sense before locking in the return.

Review Your 2025 Strategy Before You File

If you haven’t finalized your 2025 return, this is the time to step back and make sure you’ve used every lever available to you. Retirement contributions, depreciation decisions, and long-term planning moves can meaningfully affect both your current tax bill and your future financial flexibility.

Correct Capital Wealth Management works with business owners to align tax strategy, retirement planning, and exit planning into one coordinated approach. You can contact us online, call us at (877) 930-4015, or schedule an introductory meeting with a member of our advisory team.

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Correct Capital Wealth Management is a Registered Investment Adviser. This material is for informational purposes only and is not intended as personalized investment, tax, or legal advice. Investment strategies and tax planning approaches should be evaluated based on individual circumstances and in consultation with appropriate professionals.

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