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Flexibility Meets Strategy: Tax Planning for Self-Employed and Working Retirees

December 5, 2025 | TS Prosperity Group

Our team at TS Prosperity Group remains steadfast in providing clarity and confidence during times of change. We created the “Preparing for 2026 & Beyond: Tax Code Updates” series is to provide a depth of knowledge from those you’ve come to know and trust, and to view tax updates as more than a policy change--but as an opportunity with fiduciary-focused recommendations to help you DO MORE for your future.

Part Two --“Flexibility Meets Strategy: Tax Planning for Self-Employed and Working Retirees”

This article focuses on how the One Big Beautiful Bill Act (OBBBA) provides expanded deductions and reduced self-employment tax to help self-employed clients or retirees working part time coordinate their earned income with current retirement benefits.

Entrepreneurs, small business owners, and even retirees with a part-time gig can benefit from the OBBBA tax bill update. It’s a fresh set of tools to help keep more money in your pocket and build long-term security. Whether you’re running a full-time operation or just consulting in retirement, the changes create new ways to reduce taxes, save more, and manage your cash flow better.

Expanded Deductible Business Expenses

One of the biggest changes is the reinstatement of 100% first-year bonus depreciation for qualified assets placed in service after Jan. 19, 2025. The introduction of qualified production property (QPP) also benefits from 100% first-year depreciation on certain U.S.-based nonresidential real estate.

Additionally, businesses can now deduct up to $2.5 million under Section 179 expensing (up from $1.25 million in 2024). There is a phase-out threshold at $4 million, and both amounts will be adjusted for inflation beginning in 2026.

The Qualified Business Income (QBI) deduction is now permanent and raises the phaseout limitation, making this benefit available to more people. The limits increased from $50,000 to $70,000 (single) and from $100,000 to $150,000 (married, filing jointly). Plus, the OBBBA created a minimum $400 deduction if your business has at least $1,000 of qualified business income, starting in 2026.

Flexibility for Qualified Small Business Stock Gains

Currently, Qualified Small Business Stock (QSBS) must be held for no less than five years to exclude up to 100% of capital gains. For QSBS issued after July 4, 2025, holders now have more opportunities to sell their stock with tax-free treatment under a new tiered system:

  • 50% exclusion for stock held three years
  • 75% exclusion for stock held four years
  • 100% exclusion for stock held five years

Tips Are Given Their Own Deduction

Qualified tips—meaning tips received in an occupation where tips are customarily and regularly received, such as professional consultants or service-oriented part-timers (the IRS will publish a list of qualifying occupation)—now receive a new $25,000 deduction, effective until 2028. Even better? This deduction is in addition to the standard deduction.

The deduction is reduced by $100 for each $1,000 by which your gross income exceeds $150,000 (single) or $300,000 (married, filing jointly).

Overtime Too

If your spouse hasn’t reached full retirement age and still works more than a regularly scheduled 40-hour workweek, and receives overtime pay, there is a new $12,500 deduction (single) or $25,000 deduction (married, filing jointly) created to help offset that overtime pay. This deduction is allowed with the standard deduction. Overtime will be notated on the W-2 for transparency on who can claim that additional deduction.

Like the Qualified Tip Deduction, the overtime deduction is reduced by $100 for each $1,000 by which your gross income exceeds $150,000 (single) or $300,000 (married, filing jointly).

No matter the way you are earning additional money in retirement, having a collaborative team approach work alongside you may:

  • Revisit your business expense strategy, making even small adjustments for a large after-tax impact.
  • Ensure your earned income doesn’t unintentionally push you into a higher tax bracket or reduce other benefits.
  • Leverage investments and retirement benefits for maximum future impact with the least amount of tax liability.

At TS Prosperity Group, we help clients adapt to changes using our Four Pillars of Financial Planning: investment planning, retirement planning, estate planning, and tax planning. If you’re self-employed, run a small business, or work part-time, now is the time to revisit your income strategy. Let’s create a plan that maximizes deduction, minimizes taxes, and helps you DO MORE with today’s earnings for tomorrow’s reward.