If you’re feeling like you’re being ripped off by the government, you’re not alone. Did you know that the U.S. tax code is optimized for business owners and real estate investors? Doesn’t that put a lot of things into perspective? If you’re only earning a W2 income, you’re likely paying significantly more in taxes than you should be. That’s precisely why starting a small business, even a side hustle, can be one of the smartest financial moves you can make.
Business owners pay taxes after expenses, meaning they can legally reduce their taxable income through deductions. W2 earners, on the other hand, are taxed first, before they even see their paycheck.
If you’re looking for ways to lower your tax burden and improve your overall financial situation, here are seven business tax and credit hacks you should know about.
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1. Pay Your Taxes With a Credit Card for Reward Points
Did you know you can pay your yearly taxes with a credit card? While the IRS charges a small processing fee, the rewards you earn, whether in points, miles, or cash back, can more than make up for it. Once you’ve accumulated points, transfer them out of your credit card’s internal portal to an airline partner to maximize value (often saving 70% of points compared to booking through the bank’s travel portal).
2. Own Real Estate Through Your Business for Major Tax Breaks
If you own a business and rent office space, consider buying the building instead. Business-owned real estate allows you to use depreciation to offset 20-30% of the purchase price as a business loss, reducing your taxable income. This can lead to significant tax savings while building equity in a valuable asset.
3. Use a Solo 401(k) to Shelter Up to $69,000 in Income
If you own a business with no employees (or only a spouse), you can set up a Solo 401(k). This powerful retirement account allows you to contribute up to $69,000 per year (as of 2025). Plus, you can borrow against your Solo 401(k) balance tax-free if you need capital for your business.
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Find Your Card4. Take Advantage of Section 179 for Big Upfront Deductions
Section 179 lets businesses deduct the full cost of qualifying equipment and property in the year it’s purchased, rather than depreciating it over time. This can result in massive tax savings, especially if you’re upgrading computers, machinery, office equipment, or vehicles. Here’s what qualifies:
- Tangible business property (e.g., computers, office furniture, machinery)
- Certain building improvements (e.g., HVAC, roofing, security systems)
- Vehicles over 6,000 pounds (like certain trucks and SUVs)
- Software used for business operations
Keep in mind, the bonus depreciation under Section 179 is being phased out. It was 60% last year, now it’s down to 40%, and it’s expected to continue dropping by 10% each year.
5. Buy a Business Vehicle Over 6,000 Pounds for Huge Write-Offs
Speaking of Section 179, vehicles over 6,000 pounds qualify for a significant depreciation deduction. If you need a work vehicle, this tax break allows you to write off a large portion of the cost immediately. Here’s a list of qualifying vehicles.
6. Stack Section 179 and Bonus Depreciation in the Same Year
Many business owners don’t realize that you can combine Section 179 and bonus depreciation in the same year to maximize deductions. This can be especially useful when purchasing expensive equipment or vehicles, allowing you to reduce taxable income substantially.
7. Build Business Credit to Access High-Limit Credit Cards & Loans
If your business is generating $30,000+ per month and you have $100,000 in liquid assets, depositing that money into a bank like Chase or Bank of America can help you get assigned a Business Relationship Manager (BRM). This makes it easier to qualify for high-limit credit cards (up to $55,000) and business lines of credit (BLOC) as high as $230,000. Strong business credit opens up opportunities for expansion and increased cash flow.
Final Thoughts: Business Tax and Credit Hacks
The tax code favors business owners, and understanding these hacks can save you thousands of dollars per year. If you’re currently a W2 earner, it may be time to consider launching a side hustle or small business to take advantage of these benefits.
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Subscribe NowFAQs
1. What are the tax benefits of owning a business?
Business owners can deduct expenses before paying taxes, lowering their taxable income. They can also leverage deductions like Section 179, depreciation, and retirement contributions to reduce tax liability.
2. How does Section 179 work for small businesses?
Section 179 allows businesses to deduct the full cost of qualifying assets, such as equipment, vehicles, and software, in the year of purchase instead of depreciating over time.
3. Can I use business credit for personal expenses?
No, business credit should only be used for business-related expenses. Mixing personal and business expenses can lead to accounting issues and potential tax problems.
4. What is the advantage of a Solo 401(k) over other retirement plans?
A Solo 401(k) allows higher contribution limits than traditional IRAs and provides the ability to take tax-free loans against the account balance.
5. How can I improve my business credit score?
To build business credit, ensure you pay vendors and lenders on time, open business credit accounts, maintain low credit utilization, and establish relationships with banks that offer business financing.
