What tax strategies are available to Virginia small business owners that they typically miss?

The S-Corp election is the single most overlooked strategy for profitable small businesses in Virginia. If you’re operating as a sole proprietor or single-member LLC and earning more than roughly $60,000 in net profit, you’re paying self-employment tax on the entire amount at 15.3%. Electing S-Corp status lets you split income between a reasonable salary and distributions. Only the salary portion gets hit with payroll taxes. For a business netting $150,000, the savings can easily reach $10,000 or more per year. The election is free to make with the IRS, but it requires running proper payroll on yourself and keeping clean books.

Virginia’s Pass-Through Entity Tax election is another one that flies under the radar. After the federal SALT cap limited state and local tax deductions to $10,000 on personal returns, Virginia created a workaround. S-Corps and partnerships can elect to pay state income tax at the entity level, which is deductible against federal income without the cap. If you’re an owner receiving K-1 income and your household already hits the $10,000 SALT limit, this election effectively gives you back a deduction you lost. Many business owners don’t know it exists because their tax preparer doesn’t mention it.

Retirement plan selection matters more than most owners realize. A SEP-IRA is simple to set up but only allows employer contributions. A Solo 401(k) lets you contribute as both employer and employee, often resulting in much higher total contributions at the same income level. For a business owner earning $150,000, the Solo 401(k) can allow over $60,000 in annual contributions compared to roughly $37,500 with a SEP. That difference reduces your taxable income significantly. If you have employees, a SIMPLE IRA might make more sense, but the point is that the default choice is rarely the best one.

Accountable plans are almost never set up by small business owners, even though they’re one of the easiest wins. If you use your personal vehicle or home office for business, an accountable plan lets your company reimburse you tax-free for those expenses. Without one, you either lose the deduction entirely or take it in a less favorable way on your personal return. The reimbursement is a deductible expense for the business and not taxable income to you. Setting it up requires a written plan and proper documentation, but the ongoing savings are real.

HSA contributions paired with a high-deductible health plan give you a triple tax benefit. Contributions are deductible, growth is tax-free, and withdrawals for medical expenses are tax-free. For 2024, a family can contribute $8,300. That’s $8,300 off your taxable income every year while building a medical savings account that rolls over indefinitely.

Section 179 lets you deduct the full purchase price of qualifying equipment in the year you buy it instead of depreciating it over several years. Trucks, tools, computers, office furniture, and certain vehicle purchases all qualify. Timing a large equipment purchase in a high-income year can make a meaningful difference on your tax bill. The annual limit is over $1 million, so this isn’t just for small purchases.

The Qualified Business Income deduction gives eligible business owners a 20% deduction on pass-through income. But it phases out for certain service businesses above specific income thresholds, and the calculation has multiple paths depending on your W-2 wages and property basis. Many owners either don’t claim it or claim it incorrectly. Proper tax strategy can help structure your income to maximize or preserve this deduction.

A few more that deserve mention. The Augusta Rule lets you rent your home to your business for up to 14 days per year without reporting the rental income personally, while the business deducts the rent as an expense. R&D tax credits aren’t just for labs and pharmaceutical companies. If you’re developing software or proprietary products, you may qualify. And if you own commercial real estate, a cost segregation study can accelerate depreciation and front-load deductions worth tens of thousands of dollars.

The common thread across all of these is that they require planning before year-end, not scrambling in April. Most bookkeepers in Fairfax and the broader DMV area see business owners miss these strategies simply because nobody brought them up in time. A quarterly review of your financial position gives you the chance to make elections, adjust salary, time purchases, and fund retirement accounts while you can still act on them.