Trade Business Tax Strategies to Help You Save in 2025

A new year means new changes to the tax laws. If you’re a small business owner or independent trade professional, what worked for you in 2024 might not be the best strategy for you in 2025. Staying up to date can help you avoid penalties and legal issues, maintain financial stability and positive cash flow, plan for retirement and family succession, and even help you grow and expand year over year. Now may be the time to tweak your trade business tax strategies to optimize your tax savings throughout the coming year.

2017 Tax Cuts and Jobs Act (Expiration or Renewal)

The 2017 Tax Cuts and Jobs Act (TCJA) was one of the most significant tax overhauls in decades that substantially impacted small businesses. Since Congress passed it through a budget reconciliation process, many of its provisions for individuals and small businesses include sunset provisions that are set to expire in 2025.

Permanent provisions included the lower corporate tax rate of 21%, changes to the Section 179 deduction and limits on the deduction for business interest expenses.
Temporary provisions expiring in 2025 included the lower individual tax rates, the bonus depreciation deduction that accompanied Section 179, the Qualified Business Income—QBI—deduction, certain business expense deductions, the increased standard deduction and child tax credit, and the state and local tax deduction cap.

The provisions set to expire at the end of 2025 will revert to pre-2017 rules unless Congress acts to extend them, revise them or make them permanent. Proactive planning and understanding the current rules can help you minimize your tax burdens and protect the future financial security and profitability of your business.

Important Trade Business Tax Strategies for 2025

While strategic tax management often begins with assuming legal responsibility for meeting established deadlines and submitting accurate income and payroll reporting, taxes are more than a matter of compliance. They can actually be a tool for protecting your business, growing wealth and ensuring your operation endures. You just need to make sure that you’re covering all the bases.

Self-Employment Taxes and Payroll Taxes
If you are self-employed, you are responsible for self-employment taxes—both the employer and employee portions of Social Security and Medicare taxes for a total of 15.3% on net earnings. Typically, you must pay quarterly estimated taxes to cover both your income and self-employment taxes by April 15, June 15, September 15 and the following January 15.

As a business owner with employees, you are responsible for withholding and paying employee payroll taxes as well as federal and state unemployment taxes and withholding taxes for your employees. Deposits for payroll taxes must be made semi-weekly or monthly, and Form 941 is filed quarterly to report wages and withholdings.

Deductions for Business Expenses
Independent tradespeople and small business owners can deduct a wide range of business-related expenses:

Tools, equipment and supplies can include purchases for business operations, repairs and maintenance.
Vehicle expenses allow you to claim either standard mileage or actual costs.
Office expenses may include qualifying home office purchases, rent, utilities and office supplies.
Business insurance may include training and certifications as well as general liability, workers’ compensation and vehicle insurance premiums.
Employee wages and benefits may include salaries, health insurance, retirement plan contributions and training costs.

So, by investing money back into your business for things you need or have to do anyway, you can also reduce your taxable income. However, some limits and qualifying expenditures may be subject to change due to changes in tax law.

Changes in Tax Law 2025
Several key tax issues for small businesses associated with 2017’s TCJA may be slated to expire or taper benefits:

The Section 179 deduction is a tax incentive that allows businesses to deduct the full cost of tangible personal property used in business—like equipment and software—purchased or financed during the tax year. It has allowed small businesses to immediately recover the cost of assets for the year of purchase rather than spreading the deduction out over years through depreciation. Section 179 limits are indexed for inflation annually, so in 2025, these limits are expected to increase slightly.
Bonus depreciation is often paired with Section 179 deductions and is another tax incentive that allows businesses to recover the cost of certain eligible assets more quickly by deducting a significant portion of the cost in the first year an asset is placed in service. Bonus depreciation has been attractive because—unlike Section 179—bonus depreciation does not have an annual deduction limit or phase-out based on total spending. While the TCJA initially set bonus depreciation at 100%, rates began to decrease after 2022. In 2023, 80% of the asset cost was deductible. In 2024, 60% of the asset cost was deductible. In 2025, the percentage goes down to 40%. In 2026, it reduces to 20%, and for 2027, bonus depreciation is scheduled to expire unless Congress extends or modifies this provision.
The qualified business income (QBI) deduction allows individuals who operate a U.S.-based “pass-through entity” as a sole proprietor, partnership, LLC or S corporation to deduct 20% of business income. Pass-through means that the profits and losses of the business pass through the business and are accounted for through the owner’s personal tax returns. Therefore, income limits do apply. This deduction is set to expire at the end of 2025 unless Congress takes action to extend or modify it.
The net operating loss deduction for businesses has been limited to 80% of taxable income under the TCJA. For most taxpayers, NOLs generated in tax years after 2017 can no longer be carried back to offset income from previous years. However, NOLs can be carried forward indefinitely to offset taxable income in future years, with the deduction limited to 80% of taxable income. The NOL provision is another deduction set to expire at the end of 2025. If Congress does not extend or modify it in some way, a two-year carryback and 20-year carryforward without the 80% income limitation will be restored.

Recordkeeping
Accurate records of income or payroll, expenses and receipts are a cornerstone of effective tax management for independent tradespeople and small business owners. Good records ensure you’re in legal compliance for accurate tax reporting and prepared for any potential audits.

Accurate, readily available records are also key for ensuring you’ve maximized your deductions, tracking expenses, managing depreciation and documenting QBI. They simplify tax preparation and provide the real-time data you need for strategic tax planning for the future. Those same records can mean the difference for business growth requiring loans or valuations, for example.

If you haven’t yet automated your records with accounting software, now is a good time to do so—and deduct the costs of the update.

Retirement Contributions
Contributions to retirement accounts can play a dual role for self-employed tradespeople and small business owners. They can help secure financial stability in retirement and provide significant tax benefits by reducing taxable income. IRAs and other dedicated plans provide a number of options that allow deductions to reduce taxable income.

SEP IRA. Simplified Employee Pension IRAs let employers set aside money in retirement accounts for themselves and their employees for up to 25% of each employee’s pay.
SIMPLE IRA. Savings Incentive Match Plan for Employees IRAs let employers set up IRAs and match a certain percentage amount when employees contribute a portion of their pay to their account.
Solo 401(k). Also known as a one-participant 401(k) plan, solo 401(k)s are designed for self-employed individuals with no employees. However, you can make contributions to the account as both the employer and employee—employer contributions up to 25% of compensation and elective deferrals of up to 100% of compensation.
Traditional and Roth IRAs. Traditional IRAs let you save money tax-deferred while Roth IRA contributions rely on post-tax money. Traditional IRAs are not subject to income limits, and as long as neither you nor your spouse has a 401(k) or other retirement plan at work, you can deduct the full amount of your contribution limit regardless of your income.
Defined Benefit Plans. Employers fund benefit plans, offering a guaranteed, predetermined benefit amount at retirement. The employer typically has full responsibility for funding and managing plan investments.

Health Insurance
If you are self-employed, you may be able to deduct health insurance premiums if you meet IRS requirements. If you provide employee health benefits, you may qualify for the Small Business Health Care Tax Credit. Health insurance premiums for employees are deductible business expenses.

State and Local Taxes
Responsibilities for self-employed individuals and small business owners can vary by state and locality. It is your responsibility to comply with any specific state or local taxes that apply to your business.

Advice from a Qualified Tax Consultant
Since tax laws are constantly changing and can raise complex issues, working with a CPA—certified public accountant—or tax professional familiar with small businesses can help you optimize deductions, ensure that you and your business are in compliance, and avoid unpleasant surprises. They can also help you with proactive tax planning that will let you take full advantage of new opportunities—whether Congress renews sunset provisions, modifies them, lets them expire or introduces something entirely different.

Indirect Tax Advantages of Suppliers
Even the company you choose as your supplier can offer advantages that make your tax situation a bit easier. For example, a supplier may provide equipment, tools, machinery or other products that qualify for the Section 179 deduction or specific tax credits like energy-efficient or U.S.-made products. They may offer advantageous payment terms or financing or even state or local sales tax benefits. You may be able to secure discounts, long-term contracts or tax-advantaged purchases.

Choose Coburn's for Your Next Project

At Coburn's, we understand that every dollar you save allows you to invest in and grow your business. Our team has been serving tradespeople and contractors for nine decades and counting—and we take pride in being able to deliver all of the commercial and residential plumbing, electrical, waterworks and HVAC products and services our clients need.

If you’re looking to stretch your money further in 2025 and beyond, be sure to stop by your local Coburn's when planning new projects.

References:

https://www.ey.com/en_us/insights/tax/steps-to-take-now-to-prepare-for-tax-legislation-in-2025#:~:text=Some%20of%20the%20business%20tax,increases%20come%20online%20after%202025.

https://about.bgov.com/insights/elections/2025-tax-policy-crossroads-what-will-happen-when-the-tcja-expires/

https://www.irs.gov/businesses/small-businesses-self-employed/self-employment-tax-social-security-and-medicare-taxes

https://www.irs.gov/faqs/estimated-tax/individuals/individuals-2

https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes#:~:text=If%20you%20are%20in%20business,have%20to%20pay%20a%20penalty.

https://www.brookings.edu/articles/which-provisions-of-the-tax-cuts-and-jobs-act-expire-in-2025/

https://www.cbh.com/insights/articles/tcja-expiration-potential-impact-on-2025-tax-legislation/

https://www.irs.gov/retirement-plans/plan-sponsor/simplified-employee-pension-plan-sep

https://www.irs.gov/retirement-plans/plan-sponsor/simple-ira-plan

https://www.irs.gov/retirement-plans/one-participant-401k-plans