How Can a Business Owner Legally Avoid Paying Taxes on $ 1Million?

If you’re a business owner who’s had a banner year, first of all, congratulations! But as the year comes to a close, you might find yourself dreading a massive tax bill. Let’s take an example: a $1 million taxable income. That sounds like a one-way ticket to a six-figure tax payment, right? However, there are legal strategies that can help you legally avoid paying taxes on that income.

Not so fast. What if I told you there are strategies in the tax code that could legally reduce that liability significantly—even to the point where you might not owe much at all? It sounds impossible, but it isn’t. Here’s how.

The Impossible Question

Imagine this: You’re a small business owner, and your company generated $1 million in income this year. You’ve worked tirelessly, taken risks, and now you’re staring down a potential $300,000 or more tax bill. Most people in this position would accept the hit as inevitable.

But smart business owners know that taxes aren’t just about paying your share—they’re about using the tools available to minimize your share. Here are four strategies that can make an enormous impact.

1. Accelerate Your Business Deductions

The IRS allows cash-basis taxpayers to deduct expenses in the year they’re paid. That means you can prepay certain expenses for 2025 before December 31, 2024, and claim those deductions this year. Examples include:

• Rent for your office space.
• Supplies or inventory purchases.
• Professional services, like software subscriptions or marketing fees.

By accelerating these expenses, you could immediately lower your taxable income by tens of thousands of dollars.

2. Use Section 179 and Bonus Depreciation for Big Purchases

Did you buy equipment, vehicles, or machinery for your business this year? If not, now might be the perfect time. The IRS allows you to deduct up to $1.16 million in qualifying equipment purchases under Section 179 for 2024.

Even better, bonus depreciation lets you deduct 100% of the cost of qualifying assets in the year they’re placed in service. For example:

• Buy a company vehicle or machinery.
• Upgrade your office technology or furniture.

These deductions can drastically reduce your taxable income while letting your business benefit from new resources.

3. Max Out Retirement Contributions

This is a game-changer for business owners. Setting up or contributing to a retirement plan allows you to not only save for the future but also significantly reduce this year’s tax burden. For example:

• Solo 401(k): You can contribute up to $66,000 in 2024 if you’re self-employed.
• SEP IRA: Contribute up to 25% of your compensation, up to $66,000 for the year.

These contributions are fully deductible, turning your retirement savings into immediate tax savings.

4. Employ Your Family Members

If you’re a sole proprietor or run a small business, hiring your children under 18 can be a highly effective way to lower your tax burden. Here’s why:

• Their wages are deductible for your business.
• The first $13,850 they earn is tax-free under the standard deduction.

Not only does this help with taxes, but it also allows you to put money into their future—perhaps through a Roth IRA or college savings fund.

The Big Picture

Let’s put it all together. Here’s how these strategies could work for a $1 million business income:

• Prepaid Expenses: $100,000
• Section 179 Deductions: $250,000
• Retirement Contributions: $60,000
• Family Member Salaries: $50,000

That’s $460,000 in deductions—cutting taxable income nearly in half. Combine this with other credits and advanced planning, and your total tax liability could shrink dramatically.

Why You Need Professional Guidance

While these strategies are legal and effective, implementing them correctly requires expertise. Missteps can lead to missed opportunities—or worse, IRS audits. That’s where we come in. At G&S Accountancy, we specialize in helping business owners navigate complex tax situations, ensuring they maximize savings while staying compliant.

Don’t Leave Money on the Table

The clock is ticking—these strategies are only available if you act before December 31. The good news? You don’t have to figure it out on your own. Schedule a consultation with us today, and let’s make sure your hard-earned income stays where it belongs: with you.