You built a profitable HVAC business. Now make sure you are not overpaying the IRS.
Many HVAC owners may be paying more in taxes than necessary every year — not because they are doing anything wrong, but because nobody has shown them what is available to them.
By William Yex, CFP®, CEPA®, Wealth Management Advisor
You get up early. You run the calls, manage the techs, deal with the equipment, handle the customers, and somehow still find time to keep the business growing. Your HVAC company is profitable — maybe more profitable than it’s ever been.
And then April comes around. Your CPA sends you the number, and your stomach drops.
Here’s the thing most HVAC owners don’t realize: a large tax bill may be reduced with proper planning. Not through loopholes or gray areas, but through legitimate, IRS-approved strategies that most trade business owners never get shown.
Let’s walk through nine of the most powerful ones.
Illustrative examples only – actual results will vary based on individual circumstances.
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1. Your S-Corp structure may be costing you money
If you are running your HVAC business as a solo proprietor or single-member LLC without an S-Corp election, you are likely paying self-employment tax (15.3%) on every dollar of profit — on top of income tax.
With an S-Corp structure, you split your income into a reasonable salary — subject to payroll taxes — and a distribution, which is not. For a business generating $300,000 in net profit, this single change can save $15,000-$25,000 per year.
Quick Example
An HVAC business owner nets $350,000. Without S-Corp, the business owner pays SE tax on the full amount. With S-Corp, the business owner pays himself a $120,000 salary and takes $230,000 as a distribution. Their estimated annual savings: $19,000+.
2. A SEP IRA lets you shelter up to $70,000 per year
A SEP IRA lets business owners contribute up to 25% of compensation, capped at $70,000 for 2025. Every dollar contributed reduces your taxable income dollar-for-dollar.
For a business owner in the 32% federal bracket, maxing out a SEP IRA could mean at least $22,000 back in your pocket — while that money grows tax-deferred for retirement.
Strategy 2: SEP IRA maximum contribution
Contribution limit: up to $70,000 for 2025. Deadline: your tax filing deadline, including extensions. Works best for owners with few or no full-time employees.
- Potential tax savings: $15,000-$22,000 per year
3. Cash balance plans — the strategy your CPA probably hasn’t mentioned
If you are in your 40s or 50s, profitable, and feeling behind on retirement savings, a cash balance plan may be a powerful tool available to you. These are IRS-qualified defined benefit plans that allow contributions far beyond a SEP IRA or 401(k) — sometimes $150,000 to $300,000 per year, depending on your age.
Contributions are generally tax-deductible. For a 52 year-old HVAC business owner netting $500,000, pairing a cash balance plan with a 401(k) could reduce taxable income by $200,000 or more in a single year.
Why this Works for HVAC Business Owners Specifically
Cash balance plans are most effective when the business has a few employees. Many HVAC companies are structured with the owner and a small crew — which keeps the cost of funding employee benefits manageable while the owner captures most of the tax benefit.
4. Section 179 and bonus depreciation on equipment
Every truck, diagnostic tool, and piece of equipment you buy for the business can potentially be deducted in full the year you buy it – rather than depreciated slowly over five to seven years. This is Section 179 expensing, and it is one of the most underused deductions in the trades.
Had a big equipment year? That can offset a big revenue year — keeping your taxable income lower right when it matters most.
5. Tax-loss harvesting and asset location in your investment portfolio
If you have a taxable investment account — whether for business reserves or personal wealth — smart positioning of assets can reduce your tax drag significantly year after year. This includes strategically harvesting losses to offset gains, holding tax-inefficient assets inside retirement accounts, and tax-efficient assets in taxable accounts.
Over a 10-15 year period, this kind of disciplined coordination between your CPA and wealth management advisor can have a meaningful impact over time in avoided taxes.
6. The QBI deduction — 20% off your business income, automatically
This flies under the radar more than almost anything else. The Qualified Business Income (QBI) deduction, created under the 2017 Tax Cuts and Jobs Act, allows owners of pass-through businesses — S-Corps, LLCs, sole proprietors — to deduct up to 20% of their qualified business income from their taxable income.
In plain terms: if your HVAC business generates $300,000 in qualified income, you may be able to deduct $60,000 before you even get to other strategies. At a 32% tax rate, that’s roughly $19,000 in savings from a deduction many owners don’t even know they are entitled to.
Strategy 6: QBI Deduction
Deduct up to 20% of qualified business income. Available to S-Corp owners, LLCs, and sole proprietors. Income thresholds apply — proper structuring matters to maximize eligibility. Coordinates with your overall tax picture, so working with a CPA proactively is essential.
- Potential tax savings: $10,000-$25,000 per year
7. An HSA is the only triple tax-free account in the tax code
If you are enrolled in a high-deductible health plan (HDHP) — which many self-employed business owners are — you qualify for a Health Savings Account. The HSA is unique because it delivers three tax benefits that no other account offers simultaneously: contributions are tax-deductible, growth is tax-free, and withdrawals for qualified medical expenses are tax-free.
For 2025, you can contribute up to $4,300 as an individual or $8,550 as a family. If you are 55 or older, you can add another $1,000 on top. Unlike a Flexible Savings Account, the money rolls over every year and can be invested — making it a powerful secondary retirement vehicle once you hit 65, at which point you can withdraw for any reason penalty-free.
The Real Power Move
Pay medical expenses out of pocket now, save the receipts, and let the HSA grow tax-free for decades. You can reimburse yourself years later — there is no time limit. Many owners use this as a stealth retirement account on top of everything else.
8. Hiring your kids or spouse can shift income out of your tax bracket
If your children are old enough to do legitimate work — answering phones, helping with social media, cleaning the shop, filing paperwork — you can pay them a reasonable wage as a business expense. That shifts income from your tax bracket (potentially 32-37%) into theirs, which may be 0% if they earn under the standard deduction threshold ($14,600 in 2024).
For a child under 18 working in a sole proprietorship or partnership owned entirely by their parents, you also avoid FICA taxes entirely on those wages. That is a deduction for you, near-zero tax for them, and money that can go directly into a Roth IRA in their name — building their financial future while reducing yours today.
Hiring a spouse follows similar logic. If your spouse does not have earned income, bringing them on legitimately allows them to contribute to their own retirement account — potentially adding another $7,000 to $70,000 in additional tax-deferred contributions depending on the plan you choose.
Strategy 8: Hiring Family Members
Pay must be reasonable and documented. Work must be real. Keep proper payroll records. This strategy must be structured correctly — but when it is, it is entirely legitimate and highly effective. Your CPA and wealth management advisor should coordinate on this together.
- Potential tax savings: $5,000-$15,000 per year, depending on the family situation
9. A cost segregation study can unlock massive depreciation on your building
If you own the building your HVAC business operates out of — or any commercial real estate — a cost segregation study may be one of the highest-ROI tax moves available to you.
Normally, commercial real estate is depreciated over 39 years. But a cost segregation study breaks a building down into its individual components — electrical systems, plumbing, flooring, lighting, parking lots, landscaping — and reclassifies many of them as personal property or land improvements that can be depreciated over 5, 7, or 15 years instead.
The result is a massive front-loading of depreciation deductions in the early years of ownership. On a $1,000,000 building, a cost segregation study might accelerate $200,000-$400,000 of depreciation into the first few years — creating a deduction that offsets a significant portion of your business income.
Who This is For
Any HVAC owner who purchased, built, or renovated a commercial property in the last several years. The study costs $5,000-$15,000, depending on the property, but typically returns many multiples of that in tax savings. It can often be applied retroactively without amending prior returns.
The Bigger Picture
None of these strategies work best in isolation. The HVAC owners who truly minimize their tax burden are the ones working with a coordinated team — a CPA who handles the filings and a wealth management advisor who plans proactively throughout the year — not just in March when the damage is already done.
The strategies above are not exotic. They are available to most profitable trade business owners right now. The only question is whether anyone has taken the time to show them to you.
If you have been writing big checks to the IRS and wondering whether there is a better way, the answer is likely almost certainly yes.
Want to Know How Much You Could Be Saving?
William Yex works exclusively with trade business owners — HVAC, plumbing, electrical, landscaping, and construction — helping them build and protect real wealth around their business. A 30-minute conversation is all it takes to identify where the opportunities are.
Apollon Wealth Management, LLC (“Apollon”) provides advice and make recommendations based on the specific needs and circumstances of each client. For clients with managed accounts, Apollon has discretionary authority over investment decisions. Investing involves risk and clients should carefully consider their own investment objectives and never rely on any single chart, graph, or marketing piece to make decisions. The information contained herein is intended for information purposes only, is not a recommendation to buy or sell any security and should not be considered investment advice. See Apollon’s Form ADV Client Disclosure Brochure for information about risks and considerations relating to the services offered through Apollon. This is available on our website, www.apollonwealthmanagement.com.
Apollon does not provide tax advice; individuals are strongly advised to consult with a tax professional before making any tax-related decisions. Tax strategies are general in nature and may not be suitable for all individuals. The information provided herein may not be relied on for purposes of avoiding taxes. The specific considerations for you may need expertise or review by a tax professional, licensed insurance provider, estate planning attorney or other professional to determine how it applies to you. Information provided is generic in nature, for educational purposes and not specific advice. Speak with your tax professional about your specific personal considerations before making any planning decisions.
