Tax Day Countdown: 4 Tax Deductions for Entrepreneurs To Save You Thousands

Cynthia Measom

Sun, Apr 13, 2025, 8:01 AM 4 min read

Filing your taxes can be a killer if you are an entrepreneur, especially considering every profit, loss and all the tax implications in between fall upon your shoulders. Fortunately, deductions are a great way to reduce tax liability or hopefully your overall tax bill in general.

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However, knowing what you’re eligible for can be tricky whether you are filing your returns through tax software or working with a professional accountant. Instead of combing through endless pages of information on the Internal Revenue Service (IRS) website, it’s easier to lean on the knowledge of experts.

Check out these four tax deductions that can save you and your business big money come tax time.

“For example, in a sole proprietorship, you will pay self-employment taxes (Social Security and Medicare) on the entire net income, which can be high if the business is profitable,” said John Adams, certified public accountant (CPA), firm owner, tax planning and fractional CFO expert at Bridgewater Tax and Financial Consulting in Jupiter, Florida.

“Self-employment tax has a combined Rate: 15.3% on net earnings up to $176,100 (12.4% Social Security + 2.9% Medicare). Earnings above $176,100 are subject only to the 2.9% Medicare tax, plus the additional 0.9% Medicare tax on earnings exceeding the specified thresholds.”

Adams said that if a business is an S-corporation, the entrepreneur must avoid the double taxation of a C-corporation because profits are taxed at the shareholder level, not the corporate level.

“Also, you may benefit because you may benefit from self-employment tax savings,” he continued. “Shareholders can take a reasonable salary and distributions. Only the salary is subject to self-employment tax, while distributions are not.

“This means if reasonable compensation is $100,000 and you made $176,100, then you can realize a tax benefit on the $76,100 that would not be subject to self-employment tax. This would give you a tax benefit of $11,643 in self-employment taxes saved.”

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Using the example above, Adams said that if you save 10% of your $100,000 in a traditional 401(k), you would be in a 24% tax bracket.

“You would pay tax without a 401(k) of $24,000 and Tax with a 401(k) of $21,600 — a tax savings of $2,400,” he explained.

Adams said that if you take advantage of the home office deduction, you may receive deductions for mortgage interest, property taxes, utilities and maintenance.