5 Tax Savings Strategies Most Business Owners Don’t Know About

Day 3: Retirement Plans for Small Business Owners

Most business owners hate taxes (understandable). But do you know what’s worse than paying taxes? Paying taxes and not saving for retirement.

The good news? You can do both at the same time.

Let’s break down which retirement plan is best based on your business type.

1. SEP IRA: The Simple Option for One-Person Businesses

✅ Best for: Self-employed or small business owners with few/no employees

✅ Contribution limit: Up to 25% of compensation or $69,000 (2024 limit) (IRC § 408(k))

✅ Tax benefit: Contributions are tax-deductible

Why it’s great: Simple, low admin costs.

Why it’s not: All employer contributions must be equal across employees—which can get expensive if you have staff.

2. Solo 401(k): The Powerhouse for One-Person Businesses

✅ Best for: Solopreneurs or businesses with only an owner + spouse

✅ Contribution limit: Up to $69,000 (or $76,500 if 50+) (IRC § 401(k))

✅ Tax benefit: Contributions reduce taxable income

This plan allows employee AND employer contributions, so you can max out savings fast.

3. Safe Harbor 401(k): Avoid the IRS Headaches

✅ Best for: Businesses with employees

✅ Why? Unlike traditional 401(k)s, Safe Harbor automatically passes IRS compliance tests (IRC § 401(k)(12)).

Yes, you must contribute to employee accounts (either a match or a flat %), but you avoid costly IRS penalties for failing discrimination tests.

4. Defined Benefit Plan: The Secret Weapon for High Earners

✅ Best for: High-income business owners looking for massive tax-deferred savings

✅ Contribution limit: Based on actuarial calculations—often $100K+ per year

✅ Tax benefit: Huge deductions now, with tax-deferred growth (IRC § 412).

Downside? Requires a long-term commitment and high admin costs.

Tomorrow’s Topic: Tax Deductions for Staff & Employee Benefits

Want to save even more? Tomorrow, we’re looking at how to maximize deductions for employee benefits (health insurance, education, and more).

Questions? Let me know in the comments or message me!