How to Reduce Your Business Taxes in Texas: CPA-Approved Strategies

Running a business in Texas comes with many advantages, including no state income tax. However, business owners are still responsible for federal taxes, payroll taxes, and the Texas Franchise Tax. To maximize your profits and keep more of your hard-earned money, it’s essential to take advantage of legal tax-saving strategies.

Here are some CPA-approved tips to help reduce your business taxes in Texas.

1. Choose the Right Business Structure

Your business structure significantly impacts your tax obligations. While Texas doesn’t impose a corporate income tax, businesses may still be subject to the Texas Franchise Tax, depending on their annual revenue.

• LLCs & S-Corps – Many small business owners choose LLCs or S-Corporations to avoid double taxation. An S-Corp election allows business owners to pay themselves a “reasonable salary” and take additional profits as distributions, which are not subject to self-employment tax.
• C-Corps – If your business reinvests most of its profits, a C-Corporation may offer better tax deferral opportunities.

Consulting with a CPA in Texas can help determine the best structure for your business and reduce your tax liability.

2. Maximize Business Deductions

Taking full advantage of tax deductions can significantly reduce your taxable income. Here are some common business deductions available in Texas:

✅ Home Office Deduction – If you work from home, you may deduct a portion of your mortgage, rent, utilities, and internet expenses.
✅ Vehicle & Mileage Deductions – If you use a car for business, you can deduct mileage or actual vehicle expenses.
✅ Office Supplies & Equipment – Computers, printers, furniture, and office supplies are fully deductible.
✅ Advertising & Marketing – Expenses for social media ads, website development, and business promotions are tax-deductible.
✅ Business Meals & Travel – Meals with clients and business-related travel expenses can be deducted at 50% or more.

Keeping accurate records of these expenses is crucial for maximizing your deductions and avoiding IRS scrutiny.

3. Take Advantage of Section 179 & Bonus Depreciation

If your business purchases new equipment, vehicles, or machinery, you can write off the full cost in the year of purchase instead of spreading it out over multiple years.

• Section 179 Deduction – Allows businesses to deduct the full cost of qualifying equipment and software.
• Bonus Depreciation – Offers additional write-offs for capital purchases like machinery, company vehicles, and furniture.

This strategy is beneficial for businesses looking to lower their taxable income while investing in growth.

4. Hire Employees & Use Payroll Tax Credits

Texas businesses can reduce their tax burden by leveraging payroll tax credits:

• Work Opportunity Tax Credit (WOTC) – Provides tax credits for hiring veterans, ex-felons, and other eligible workers.
• Employee Retention Credit (ERC) – Available for businesses that kept employees on payroll during COVID-19.
• Research & Development (R&D) Credit – A tax credit for businesses investing in innovation and new technology.

Hiring employees instead of relying solely on independent contractors can also provide long-term tax benefits and help you qualify for more deductions.

5. Contribute to a Retirement Plan

Business owners can reduce taxable income by contributing to retirement plans. Some options include:

• SEP IRA (Simplified Employee Pension Plan) – Allows business owners to contribute up to 25% of their income, reducing tax liability.
• Solo 401(k) – Ideal for self-employed individuals with no employees, offering high contribution limits.
• SIMPLE IRA – A great option for small businesses with employees, allowing both employer and employee contributions.

Setting up a retirement plan not only saves on taxes but also helps attract and retain top talent.

6. Utilize Health Savings Accounts (HSAs) & Fringe Benefits

Health-related tax deductions can add up quickly. If your business offers health insurance or other benefits, consider these tax-saving strategies:

• Health Savings Account (HSA) – If you have a high-deductible health plan, contributions to an HSA are 100% tax-deductible.
• Flexible Spending Accounts (FSA) – Helps employees cover medical expenses pre-tax.
• Employer-Provided Benefits – Offering perks like tuition assistance, gym memberships, or childcare assistance can be deducted as business expenses.

These strategies not only reduce taxes but also improve employee satisfaction.

7. Work with a Trusted CPA – Metwally CPA PLLC

Navigating business taxes in Texas can be complex, but the right CPA can help you maximize deductions, avoid penalties, and create a long-term tax strategy.

Metwally CPA PLLC specializes in helping Texas business owners minimize their tax burden and stay compliant with state and federal tax laws. Whether you need assistance with tax planning, bookkeeping, payroll, or business formation, their team is here to help

Contact Metwally CPA PLLC today for a consultation and let them help you keep more of your hard-earned money!

Final Thoughts

Reducing your business taxes in Texas requires smart planning and strategic decisions. From choosing the right business structure to maximizing deductions and leveraging tax credits, there are numerous ways to lower your tax bill legally.

By working with a Texas CPA like Metwally CPA PLLC, you can ensure your business is optimizing tax strategies while staying compliant with the IRS.

Need expert tax advice? Reach out today and start saving on your business taxes!