Tax-Saving Tips | July 2026

Seven Tax-Saving Strategies Orange County Business Owners Should Know for 2026

From delayed ERC refunds to Section 199A planning, these strategies can help business owners make more informed tax decisions before year-end.

Proactive planning matters. Tax savings often depend on decisions made before the return is prepared. The following 2026 strategies may help business owners reduce taxes, avoid reporting mistakes, and preserve valuable deductions.

1. ERC Refund Received in 2026

If your business receives an Employee Retention Credit refund in 2026 for wages paid in 2020 or 2021, you may have an important tax-planning opportunity.

Many businesses filed ERC claims after filing their original income tax returns. Because the IRS took years to process some claims, refunds tied to earlier tax years may not arrive until 2026.

Current IRS guidance generally permits taxpayers to report the ERC-related income in the year the refund is received. Following that guidance can reduce the risk of an unnecessary dispute with the IRS.

Planning point: Some tax professionals believe the IRS position may eventually be challenged. A protective refund claim may help preserve your right to recover tax if future legal developments are favorable.

2. The 2026 Section 199A QBI Deduction

The Section 199A qualified business income deduction is now a permanent part of tax planning for many pass-through business owners.

Eligible owners of sole proprietorships, partnerships, S corporations, and certain other pass-through entities may qualify for a deduction of up to 20% of qualified business income. C corporations do not qualify.

2026 thresholds:

• Single and Head of Household: $201,775

• Married Filing Jointly: $403,500

Above these thresholds, W-2 wages, qualified property, retirement plan contributions, business structure, and SSTB status may affect the deduction.

The new rules also provide a $400 minimum deduction for certain taxpayers with at least $1,000 of qualified business income from an active trade or business.

3. Health Insurance for More-Than-2% S Corporation Owners

The health insurance rules remain important for S corporation owners in 2026.

To qualify for the self-employed health insurance deduction, the S corporation generally must pay or reimburse the premiums and include the amount in Box 1 of the shareholder's Form W-2, but not in Boxes 3 or 5.

Common problem: The deduction generally cannot exceed Medicare wages. An owner who takes little or no salary may lose part or all of the deduction.

Family attribution rules can also cause certain relatives to be treated as shareholders even when they do not directly own stock.

Be cautious when reimbursing non-owner employees for individually purchased health coverage outside an approved arrangement, since penalties may apply.

4. The Home-Office Deduction Can Apply to a Very Small Space

A home office does not need to occupy an entire room. A clearly defined area used regularly and exclusively for business may qualify even if it is only a few square feet.

The most valuable benefit may be mileage. A qualifying home office can establish the home as the principal place of business, potentially turning trips between the home office and other work locations into deductible business mileage.

Qualifying administrative or management activities may include bookkeeping, billing, scheduling, ordering supplies, and preparing reports.

This strategy may be available to self-employed individuals, partners, and S corporation owners whose corporations properly reimburse business expenses. W-2 employees generally cannot claim the deduction under current law.

5. Classic or Antique Cars Used in Business

A classic or antique vehicle may qualify for business depreciation when it is used in a trade or business and is subject to wear, decline, or exhaustion.

Current tax law generally treats eligible new and used vehicles similarly for depreciation purposes. However, passenger automobiles remain subject to annual luxury-auto limits, which may prevent a full first-year deduction.

Economic consideration: A classic vehicle may have higher maintenance costs, but it may hold its value better than a new vehicle.

6. Turn Suspended Passive Losses into Current Deductions

Rental real estate owners may have suspended passive losses that have accumulated for years. Those losses are generally not gone forever.

A taxable sale of your entire interest in a passive activity may release the suspended losses, allowing them to offset other income.

However, sales to related parties, transfers to controlled entities, and gifts may not produce the desired result and can reduce or delay the benefit.

The excess business loss limitation may also restrict how much is deductible in the current year, with the remaining amount carried forward.

7. Myth: Rent Furniture to Your Corporation

Personally purchasing office furniture and renting it to your S or C corporation usually does not create meaningful additional tax savings.

The corporation may receive a similar depreciation deduction by purchasing the furniture directly. Eligible new and used business furniture may qualify for 100% bonus depreciation.

Personal ownership may add rental reporting, recordkeeping, and potential self-employment tax complications. In most cases, direct corporate ownership is simpler and more efficient.

Plan Before Year-End

Tax planning is most effective before transactions are completed. Tandy Consulting helps Orange County business owners evaluate tax-saving opportunities based on their specific facts and business structure.

Schedule a Tax Planning Consultation

This article is for educational purposes only and is not legal, tax, financial, or investment advice. It does not create an engagement with Tandy Consulting Inc. Tax rules depend on individual facts and may change. Consult a qualified tax professional before implementing any strategy.