Practical Tax Planning Strategies for Tax Season 2025-26

For U.S. business owners, the 2025–26 tax season officially began on January 26, 2026. While you can file your returns till April 15, procrastinating your taxes and leaving tax planning to the last minute only leads to costly mistakes and missed opportunities.

As you near the tax deadline, your focus shifts from tax planning to tax survival. That’s when you miss the little things – the credits, the deductions, and even the opportunities to manage your income and expenses in a way that could save money.

In this blog, we share some practical tax planning tips that you can use to significantly bring down your tax bill.

Why This Tax Season Matters More?

The 2025–26 tax season is especially important because several provisions under the Tax Cuts and Jobs Act (TCJA) have expired or changed after the sunset of 2025, thanks to the One Big Beautiful Bill (OBBB).

These potential changes may affect:

• Individual tax rates
• The Qualified Business Income (QBI) deduction
• Standard vs. itemized deductions

This makes proactive tax planning even more critical. Decisions made now could have a direct impact on how much tax you pay going forward.

Practical Tax Planning Strategies for 2025-26 Tax Season

1. Understand Your Tax Bracket and Know How It Works

2025 Tax Brackets

Source: Internal Revenue Service (IRS)

One of the basic but most important parts of tax planning is understanding your tax bracket.

Most business owners are often confused. They think if they earn one dollar more, their entire income gets taxed at the higher rate. That’s not how it works.

The US follows a progressive system. Here, your income is taxed in layers – not all at once. Only the amount that crosses into the next bracket is taxed at that higher rate.

For example:

If your taxable income is $80,000, you are not paying 22% on the full amount.

Instead:

• The first portion is taxed at 10%
• The next portion at 12%
• Only the income above $48,475 is taxed at 22%

This means a small increase in income does not push all your income into a higher tax rate. Even if it does, you can lower your taxable income through credits and deductions.

Understanding how brackets work helps you decide:

• When to defer income
• When to accelerate expenses
• How to structure compensation and distributions

2. Maximize Your Retirement Contributions

Retirement accounts are powerful tax-saving tools.

• They reduce your taxable income
• Help you grow your retirement savings
• Enable you to build retirement security

Contributions to certain accounts like 401(k), Traditional IRA, SEP IRA, or Solo 401(k) are tax-deductible. They can reduce your taxable income while allowing you to save for the future.

To maximize the benefits:

• Contribute the maximum amount allowed each year
• If self-employed, consider SEP IRAs or Solo 401(k) plans. These often allow higher contribution limits than traditional plans
• Start early, as compound growth always work in your favor

3. Take Advantage of Tax Credits

Tax credits are more powerful than deductions. They directly reduce your tax bill — dollar for dollar and can reduce the overall tax owed, leading to more savings.

Some common credits include:

• Earned Income Tax Credit (EITC)
• Child and Dependent Care Tax Credit
• Education credits
• Energy-efficient home credits

Pro tip: Credits often have eligibility criteria. Make sure you qualify before claiming.

Tax Deductions vs. Tax Credits – Know the Difference

Many taxpayers confuse deductions and credits, but they work very differently.

4. Time Your Income and Expenses

Smart timing can make a big difference. When income is received. When expenses are paid. When purchases are made. Sometimes the difference between a higher or lower tax bill comes down to timing rather than totals.

Accelerating expenses or delaying income, when done correctly, can smooth out tax liability and improve cash flow.

For example:

For individual returns:

• Delay receiving certain income until next tax year if you expect to be in a lower tax bracket next year
• Accelerate deductions into the current tax year (when it benefits you most)

For business returns:

• Accelerate business expenses, such as office supplies or repairs, before year-end to increase deductions
• Defer invoicing or income if you expect your tax rate to be lower next year

While this approach doesn’t change your total income or expenses, it helps you plan your taxes (and sometimes reduce them) much better – in the current as well as upcoming years.

5. Use Business Deductions

Business owners have access to a range of deductions (Itemized as well as Standard) that can significantly reduce taxable income.

Common deductions include:

• Home office expenses
• Vehicle expenses
• Equipment and software
• Travel, meals, and entertainment
• Education and training

The IRS requires clear records to support deductions. Make sure expenses are properly documented and directly linked to business activity.

6. Use Depreciation as a Strategic Lever

Depreciation isn’t just a boring accounting term; it’s a way to save your cash. When you buy something big, like a $10,000 piece of machinery, the IRS usually doesn’t let you deduct the whole cost at once. They want you to spread it out over the years the machine is actually working for you.

Depending on eligibility, you can now write off the entire purchase in year one. This can help you wipe out a huge chunk of your tax bill in one go.

7. Leverage Active vs. Passive Income

It’s also important to understand how different types of income are taxed.

Active income, such as wages or a salary from your work, is treated differently from passive income, like investment returns, rental income, or royalties.

Passive income often comes with its own set of rules and tax rates, so consulting a tax advisor or accountant can help you understand how both types of income impact your overall taxes.

8. Make the Best of Tax-Loss Harvesting

For those with investments that have lost value, tax-loss harvesting can be a valuable strategy.

This involves selling investments that are currently at a loss and using those losses to offset gains from other investments. If your losses exceed your gains, you may be able to deduct a portion against ordinary income and carry the remainder forward to future years. This method can reduce your overall tax burden on investment income if used carefully.

9. Maintain Your Records Real-Time

Whether you’re a business owner or filing personal taxes, keeping records organized throughout the year makes tax planning easier and more effective.

Clean records do three things:

1. They ensure you don’t miss a single deduction.
2. They make an audit a minor annoyance instead of a catastrophe.
3. They actually let you see if you’re making money before the year ends.

10. Plan for Estimated Taxes (If You’re Self-Employed)

Self-employed individuals and business owners usually need to make quarterly estimated tax payments (April, June, September, and January).

Failing to do so can result in penalties, interest charges, and unexpected tax bills at year-end.

To manage this:

• Estimate your tax liability early in the year
• Make quarterly payments on time
• Adjust estimates if your income changes

This keeps cash flow predictable and avoids surprises.

It’s Time to Start Planning & Maximize Your Savings

The 2026 tax season is moving fast. Start your tax planning today or you’ll be left behind. Use our tips and tricks to reduce your tax bill and bring more money back into your business. And don’t worry; you don’t have to do this alone. A good CPA or tax advisor can be your strategic partner and help you save you way more than you think.

So, join hands with an experienced tax support service provider and take the stress out of tax planning this season.