7 Proven Ways to Save Money on Your Business Taxes in 2026

The One Big Beautiful Bill Act signed on July 4, 2025, has fundamentally transformed the business tax landscape, creating unprecedented opportunities for tax savings in 2026. With permanent extensions of critical deductions, enhanced equipment expensing limits, and new temporary benefits, Colorado Springs businesses can significantly reduce their tax burden with proper planning. As CPAs with nearly 40 years serving El Paso County businesses, we've identified seven powerful strategies that could save your business thousands—potentially tens of thousands—in taxes this year.

1. Maximize the Now-Permanent 20% QBI Deduction

The Qualified Business Income (QBI) deduction—originally set to expire after 2025—has been made permanent by the One Big Beautiful Bill Act. This means pass-through entities including sole proprietorships, partnerships, S corporations, and certain trusts can continue deducting up to 20% of their qualified business income indefinitely, effectively reducing the top tax rate on pass-through income from 37% to 29.6%.

Key Changes for 2026

The One Big Beautiful Bill Act introduced several enhancements to the QBI deduction starting in 2026:

• New Minimum Deduction: If your aggregate QBI from all qualified trades or businesses is at least $1,000, you'll receive a minimum deduction of $400 (indexed for inflation after 2026)
• Expanded Phase-in Ranges: The phase-in range for married filing jointly increased from $100,000 to $150,000
• Permanent Status: No more year-to-year uncertainty about the deduction's future

Action Items to Maximize Your QBI Deduction

• Review your business structure—ensure it qualifies for QBI treatment
• Time income and expenses strategically to optimize your QBI calculation
• For high-income taxpayers, navigate wage and property limitations with professional guidance
• Consider grouping multiple businesses under Section 469 if beneficial

2. Leverage Dramatically Enhanced Section 179 Expensing

The Section 179 deduction has received massive enhancements that fundamentally change equipment purchase strategies for 2026. These new limits allow businesses to immediately expense substantial capital investments rather than depreciating them over many years.

*2026 phase-out thresholds pending final IRS guidance

Qualifying Property in Colorado

Section 179 covers a broad range of business assets particularly relevant to Colorado businesses:

• Vehicles: SUVs, trucks, and vans over 6,000 lbs GVWR (popular in Colorado's terrain)
• Equipment: Manufacturing, construction, and agricultural machinery
• Technology: Computers, servers, and off-the-shelf software
• Building Improvements: HVAC systems, roofs, fire protection, and security systems for nonresidential property

3. Stack 100% Bonus Depreciation with Section 179

The restoration of 100% bonus depreciation for qualified property placed in service after January 19, 2025, creates powerful tax-saving opportunities when combined strategically with Section 179. This one-two punch can eliminate most or all of your business's taxable income.

The Optimal Depreciation Strategy

1. Apply Section 179 First: Use up to your business income limit
2. Layer Bonus Depreciation: Apply to remaining qualified purchases
3. Create NOL if Strategic: Bonus depreciation can create losses to carry forward

4. Maximize Retirement Plan Contributions for Double Benefits

Retirement plans remain one of the most powerful yet underutilized tax reduction tools, offering immediate deductions while building tax-deferred wealth. The combination of contribution deductions and new employer tax credits creates exceptional value for 2026.

SEP IRA: Maximum Flexibility for Colorado Businesses

• Contribute up to 25% of compensation (check current IRS limits for specific 2026 amounts)
• No annual contribution requirement—perfect for seasonal Colorado businesses
• Establishment deadline: Due date of return including extensions
• New employer tax credit: Up to $500/year for first 3 years

Solo 401(k): Highest Contribution Potential

For self-employed individuals or businesses with no employees (except spouses), the Solo 401(k) maximizes tax-deferred savings:

• Employee deferrals up to annual IRS limit (adjusted for inflation)
• Employer contributions up to 25% of compensation
• Age 50+: Additional catch-up contributions
• Age 60-63: Enhanced catch-up under SECURE 2.0 Act

New Employer Credits Stack the Benefits

• Startup Cost Credit: Up to $5,000/year for 3 years
• Employer Contribution Credit: 100% of contributions (up to $1,000 per employee) in year one for small employers
• Auto-Enrollment Credit: $500/year for 3 years
• Military Spouse Credit: Up to $500 per military spouse hired

5. Claim Immediate R&D Expensing (Retroactively Available)

The One Big Beautiful Bill Act permanently restored immediate expensing for domestic research and development costs under new Section 174A, eliminating the previous five-year amortization requirement. This change is retroactive with special provisions for small businesses.

Broader Than You Think: Qualifying R&D Activities

R&D isn't limited to laboratories and tech companies. Many Colorado businesses qualify:

• Software Development: Creating custom business applications or improving existing systems
• Product Development: Designing new products or significantly improving existing ones
• Process Improvement: Developing new or improved manufacturing or business processes
• Agricultural Innovation: Developing new growing techniques or crop varieties
• Energy Efficiency: Creating or improving energy-saving technologies

R&D Tax Credit Bonus

Beyond immediate expensing, qualified small businesses (under $5 million gross receipts) can apply up to $500,000 of R&D credits against payroll taxes, providing immediate cash benefits even for pre-profit companies.

6. Capitalize on the Quadrupled SALT Deduction

The state and local tax (SALT) deduction cap has increased from $10,000 to $40,000 for 2025, rising to $40,400 for 2026 with 1% annual increases through 2029. This change particularly benefits Colorado business owners who pay significant state income and property taxes.

SALT Optimization Strategies for Colorado Businesses

• Prepayment Strategy: Consider prepaying Q1 2027 Colorado estimated taxes in December 2026
• Property Tax Timing: Accelerate property tax payments if beneficial
• Pass-Through Entity Tax: Colorado's PTE tax election can bypass SALT limitations entirely

*Assuming 35% marginal tax rate

7. Leverage New Temporary Deductions and Credits

The One Big Beautiful Bill Act introduced temporary deductions through 2028 that can provide significant savings for qualifying businesses and their employees.

Additional Business Tax Credits to Stack

• Work Opportunity Tax Credit: Up to $9,600 per qualified new hire
• Employee Retention Credit: Check eligibility for amended returns
• Disabled Access Credit: Up to $5,000 for ADA compliance
• Energy Efficiency Credits: Various credits for renewable energy and efficiency improvements

Implementation Timeline for Maximum 2026 Tax Savings

Colorado-Specific Considerations

Colorado businesses face unique opportunities and challenges that affect federal tax strategies:

• Pass-Through Entity Tax: Colorado's PTE tax election can effectively bypass federal SALT limitations
• Enterprise Zone Credits: State credits that complement federal strategies
• Agricultural Deductions: Special provisions for Colorado's farming and ranching operations
• Energy Sector Benefits: Both traditional and renewable energy tax incentives

Common Tax Planning Mistakes to Avoid

In our four decades serving Colorado Springs businesses, we've seen costly mistakes that proper planning prevents:

1. Waiting Until Year-End: Many strategies require months to implement properly
2. Ignoring Entity Structure: The wrong structure can cost thousands unnecessarily
3. Missing Documentation: Inadequate records can disqualify legitimate deductions
4. Overlooking Credits: Tax credits provide dollar-for-dollar savings often missed
5. DIY Complex Strategies: Professional guidance pays for itself in tax savings

The Bottom Line: Act Now for Maximum Savings

The 2026 tax landscape offers unprecedented opportunities for business tax savings, but capturing these benefits requires strategic planning and timely action. The permanent QBI deduction, enhanced Section 179 limits ($4 million for 2026), restored bonus depreciation, and immediate R&D expensing create a perfect storm of tax-saving opportunities.

In nearly 40 years of serving Colorado Springs businesses, we've never seen such favorable conditions for tax planning. The businesses that will benefit most are those that plan proactively rather than react at year-end. Every month you wait is potential savings lost.

Next Steps: Your Tax Savings Action Plan

1. Schedule a Tax Planning Session: Professional guidance ensures you capture all available benefits
2. Gather Financial Information: Compile income statements, equipment needs, and employee data
3. Create an Implementation Timeline: Work backward from deadlines to ensure timely execution
4. Document Everything: Maintain clear records for all deductions and credits
5. Monitor Changes: Tax laws evolve—stay informed through regular CPA consultations

About Lockhart & Powell CPAs: For nearly four decades, we've helped Colorado Springs businesses navigate complex tax laws and maximize savings. Our deep understanding of both federal tax code and Colorado-specific opportunities ensures our clients never pay more tax than legally required. From Main Street small businesses to growing enterprises, we're your trusted partner in strategic tax planning.