As a business broker I often remind owners that beyond building equity, owning a business brings tax advantages you simply can’t unlock as a W-2 employee. While most employees rely on the standard deduction and limited itemized write-offs, business ownership lets you turn everyday costs into valuable deductions and accelerate growth.
What does this look like? Well, you can typically deduct ordinary and necessary expenses such as rent, utilities, office supplies, travel, meals and marketing. Under Section 179 of the U.S. Internal Revenue Code, you can expense the full cost of equipment or vehicles in the year you place them in service. Bonus depreciation further reduces taxable income for qualifying assets. These strategies lower your headline rate today and free up cash for reinvestment.
Retirement plans like SEP IRAs or Solo 401(k)s offer far higher contribution limits than workplace plans. As an owner, you can shelter tens of thousands of dollars each year while funding your future. In contrast, W-2 employees are capped at the 401(k) limit—$22,500 in 2024, plus a $7,500 catch-up if you’re over 50.
Health insurance premiums for yourself and eligible family members become a business deduction, and you can set up reimbursement arrangements for employee medical costs. W-2 workers, by comparison, usually deduct medical expenses only to the extent they exceed 7.5 percent of adjusted gross income, and only if they itemize.
State and federal rules change often, and every situation is unique so I recommend official guidance from a trusted CPA or tax advisor to ensure you stay compliant while maximizing deductions.
