As the calendar winds down, it’s time for business owners to think strategically about their taxes. While effective tax planning should be a year-round effort, the final weeks of the year offer unique opportunities to fine-tune your finances and reduce what you owe. A few thoughtful moves before December 31 can make a notable difference when tax season rolls around.
Delay Revenue When Possible
If you’re operating on a cash basis, postponing certain billings until after the New Year can help shift taxable income to the next calendar year. For example, consider holding off on issuing late-December invoices until January. This simple change can keep that income off your current return. Just be sure all timing aligns with your accounting records and consult with your tax advisor to avoid compliance issues.
Take Advantage of Section 179 Deductions
Investing in major equipment before year-end could work in your favor thanks to Section 179 of the IRS tax code. This provision allows you to fully deduct the cost of qualifying business purchases—such as vehicles, machinery, or software—in the year they’re placed in service. Rather than depreciating the expense over time, you get the full deduction upfront, which can significantly lower your taxable income.
Prepay Operational Expenses
Another way to optimize deductions is by stocking up on business essentials now. Items like office supplies, shipping materials, or even recurring service fees can often be paid in advance and claimed for the current year. If you know you’ll need them soon, buying early not only secures a tax break but also helps you start the new year fully prepared.
Bring Family Members Onboard
If you have eligible family members—such as teens on break or retired relatives—consider offering them part-time help roles. Hiring family can reduce your tax liability when done properly. Younger workers may be subject to lower tax rates, and for retirees, certain income may be tax-exempt depending on their filing status. It’s also a chance to pass down business skills and support loved ones financially.
Host a Year-End Celebration
A company holiday gathering isn’t just good for morale—it can also be a deductible expense. Costs related to food, venue rentals, and entertainment for a business-related event are typically eligible for tax deductions, provided they meet IRS criteria. It’s a win-win: you wrap up the year with a memorable event and reduce your tax bill in the process.
Boost Your Retirement Contributions
Contributing additional funds to your retirement plan before year-end can serve two purposes: it secures your financial future and lowers your taxable income. Whether you use a SEP IRA, solo 401(k), or another eligible plan, even modest increases in contributions can help reduce what you owe. Check with your financial advisor to ensure you’re within contribution limits and making the most of available benefits.
Proactive planning at the close of the year can ease your tax burden and position your business for financial strength. Set aside time to review your records, explore deductible opportunities, and consult your accountant to tailor a plan to your needs. These small steps today could lead to significant savings tomorrow.
