As we hit the second half of the year, Q3 presents a critical window of opportunity for self-employed professionals and business owners. This is your sweet spot for strategic planning. You've got enough data to see trends, yet enough time remaining to make meaningful changes that can significantly impact your year-end tax position.
In our recent webinar, we shared how to use Q3 to commit to your strategy and implement it in Q4 before those year-end deadlines hit.
Watch the full webinar recording to maximize your time and set yourself up for a strong end of the year.
Q3 isn't just another quarter — it's your strategic reset button. By now, you should have a clear picture of where your income stands for the year and how this year is shaping up compared to previous ones. This insight is powerful because it allows you to maximize your tax strategies effectively.
Whether you're having a lower income year or a higher income year, whether your cash flow is strong or tight, Q3 is when you make those strategic decisions. Don't wait until November or December to start planning, that gives you too little time to execute the fine details that could optimize your savings.
The foundation of any good tax strategy is clean, accurate financial data. Here's where most self-employed individuals either shine or struggle:
Start by reconciling your income and expenses through August. Fix any miscategorized transactions in QuickBooks or whichever accounting software you use. Most importantly, separate your personal and business expenses — clean data leads to clear decisions.
Calculate your year-to-date profit and recalculate your Q3 estimated taxes (due September 16th – mark your calendar!). If you've underpaid so far, consider making catch-up payments to avoid that big sticker shock at year-end.
Are you saving enough for taxes? The general rule is 20-30% of your income should be set aside for tax obligations. Your taxes will likely be your single largest expense as a self-employed individual. Use this Q3 analysis to set realistic Q4 revenue goals based on your findings.
Your business structure isn't just a legal formality — it's a tax strategy in itself. Here's what you should be doing based on your current situation:
An S-Corp election is a tax election that can prevent you from overpaying self-employment taxes. Instead of paying the full 15.3% self-employment tax rate on all your business income, you pay FICA taxes only on your reasonable salary portion.
Here's a real example: If you have $120,000 in net income as an LLC, you'd pay $16,955 in self-employment taxes. But with an S-Corp election, paying yourself a $50,000 salary and taking $70,000 in distributions, you'd only pay $7,650 in FICA taxes — saving $9,305 in self-employment taxes alone.
Shift your thinking from "Sales - Expenses = Profit" to "Sales - Profit = Expense Budget." Know what you need to take home (your profit), then budget your expenses around that number. This approach forces you to focus on efficiency and ensures you're not just working harder, but working smarter.
Retirement contributions are a powerful way to lower your tax bill while investing in your future. Don't just rely on expensing items that don't keep money in your pocket:
The Solo 401(k) is often the best choice for S-Corp filers since you're already taking payroll.
Proper expense tracking is the foundation of maximizing your tax savings, yet it's where most self-employed individuals struggle the most. The difference between organized tracking and last-minute scrambling can mean thousands of dollars in missed deductions and hours of stress during tax season. Establishing good systems now will pay dividends throughout the year and make tax preparation seamless.
Here are our do's and don'ts of when it comes to tracking deductions:
| ✅ DO |
❌ DON'T |
|---|---|
| Use a dedicated business bank account | Mix personal and business spending |
| Automate categorization with accounting software | Rely on memory at tax time |
| Save all receipts (digital is fine) | Round or estimate expenses |
| Tag expenses by type | Ignore small recurring expenses |
| Track mileage in real time | Over-expense yourself out of profitability |
| Review expenses monthly |
Even tax-savvy business owners often leave money on the table by missing these three major deduction categories:
Don't settle for the simplified $1,500 deduction. Taking actual expenses for your home office can typically generate $5,000-$10,000 in additional deductions.
Choose between standard mileage method or actual expense method. With bonus depreciation back at 100%, now might be the time for that business vehicle purchase.
Legitimately employing family members can shift income to lower tax brackets and provide retirement or education benefits – potentially saving hundreds of thousands over time.
These sophisticated tax strategies can generate substantial savings, but they require proper timing and professional guidance to implement effectively. With recent tax law changes restoring 100% bonus depreciation, this year presents unique opportunities that may not be available in future years. The key is starting the planning process now, as many of these strategies have specific deadlines and requirements that can't be rushed at year-end.
With 100% bonus depreciation restored, consider major equipment purchases or that business vehicle you've been contemplating. A truck over 6,000 pounds can be fully expensed immediately.
Rental properties offer multiple tax advantages, including cost segregation strategies and 1031 exchanges for property sales.
If you have investment gains, consider harvesting losses to offset them.
Here's your immediate checklist – tackle these items now:
Q3 is your strategic window to maximize your tax position for the year. Clean books, the right business structure, smart retirement contributions, and proper expense tracking aren't just good business practices: they're wealth-building strategies.
Remember, it's not about what you make, it's about what you keep. Start implementing these strategies now, and you'll thank yourself come tax season. The decisions you make in the next few weeks can save you thousands of dollars and set you up for a strong finish to the year.
The most successful self-employed individuals focus on what they do best and outsource the rest. Your time is better spent generating revenue than struggling with bookkeeping. Automate everything possible: tax savings, retirement contributions, and profit distributions.
Build your dream team of professionals who understand your industry and can proactively advise you. The right tax professional, bookkeeper, and financial planner can save you far more than they cost.
If you're looking for expert help to take everything off your plate, book a tax strategy session with the Formations team.
Catch up on the full session covering Q3 planning strategies by watching our on-demand webinar.