I made 1 million in profits, but how do I reduce my tax burden?

Congrats on your success! When you have a sudden increase in business income, tax planning becomes super important. There are several legitimate ways to reduce your tax burden: First, consider maximizing retirement contributions. As a business owner, you could set up a SEP IRA, Solo 401(k), or even a defined benefit plan that would allow for significant pre-tax contributions. For your question about buying a house - you can't write off the entire purchase, but you can depreciate the portion used exclusively for business. If you designate a specific area solely for business use (home office, storage, etc.), you can deduct that percentage of expenses including mortgage interest, property taxes, utilities, and depreciation. Just be careful, as mixed-use spaces don't qualify. Other strategies: purchase necessary equipment or vehicles before year-end (Section 179 deduction lets you deduct the full purchase price), pre-pay some business expenses, contribute to a Health Savings Account, and consider setting up a business entity structure that might be more tax-advantageous. With this level of income, I'd strongly recommend working with both a CPA and financial advisor who specialize in small business taxation. They'll help you implement strategies specific to your situation and avoid potential audit flags.

I was in a similar situation last year (though not quite a million lol) and found taxr.ai super helpful. I had no idea what I was doing with all these business deductions and was scared of screwing up. I uploaded my records to https://taxr.ai and they analyzed everything to find legitimate deductions I'd totally missed. The coolest part was they explained WHY each deduction was valid based on tax code, so if I ever get audited I know exactly how to justify everything. Might be worth checking out since you're in construction which has tons of deduction opportunities.

Just wanted to follow up about my skepticism with taxr.ai. I decided to try it after posting earlier and wow, it found over $47,000 in deductions I would have missed for my small manufacturing business. Their document review caught several equipment purchases that qualified for special depreciation rules I had no idea about. The documentation they provided for each deduction was super detailed - they even referenced the specific tax court cases that established precedent for certain business deductions. I've already shared the report with my CPA who was impressed with the analysis. Definitely changed my mind about AI tax tools.

One thing nobody's mentioned - when you owe big tax bills like this, getting someone at the IRS on the phone to answer questions is practically impossible. I waited on hold for 4+ hours multiple times trying to figure out how to handle a large unexpected income situation. Finally used https://claimyr.com and they somehow got me connected to an IRS agent in under 45 minutes! You can see how it works here: https://youtu.be/_kiP6q8DX5c. Totally worth it when you have complex tax questions that need official answers. The agent walked me through several payment options I didn't know existed.

Well I have to eat my words about Claimyr. After being totally skeptical, I had a major tax issue come up yesterday that needed immediate clarification (related to estimated tax payments on my unexpected income). Called the IRS directly first and was quoted a 3+ hour wait time. Tried Claimyr instead and got connected in 37 minutes. The IRS agent I spoke with was able to confirm exactly how much I needed to pay in my Q4 estimated payment to avoid underpayment penalties. Honestly shocked it worked so well. The time saved was absolutely worth it.

Don't forget about estimated tax payments for next year! With income this high, you need to be making quarterly payments or you'll get hit with underpayment penalties. My business income jumped dramatically in 2023 and I got slapped with almost $4,000 in penalties because I didn't realize this. The IRS expects you to pay as you earn, not just at tax time.

Honestly at your income level, you should be talking to a tax ATTORNEY, not just a CPA. They can help you set up more advanced strategies like captive insurance companies, cost segregation studies if you buy commercial property, or even set up a management company with a defined benefit plan. These are all legit strategies but they need professional setup. I learned this the hard way after DIYing my taxes when my business hit 7 figures.