Effective tax planning is a year-round discipline, but December still offers valuable opportunities to reduce your 2025 tax bill. With several favorable provisions reinstated under the One Big Beautiful Bill Act, strategic action now can deliver meaningful savings when you file next year. Below are six last-minute steps business owners should consider as the year draws to a close.
1. Delay Sending Invoices if You Use Cash-Basis Accounting
Cash-basis businesses can manage taxable income by controlling the timing of when revenue is received. If pushing income into the next tax year would be beneficial, consider delaying December invoicing until early 2026. This can help lower your 2025 taxable income while keeping cash flow predictable.
2. Prepay 2026 Business Expenses Before Year-End
If your business reports on a cash basis, prepaying certain expenses is a simple way to secure additional deductions for 2025. Eligible costs may include:
- Rent or lease payments
- Insurance premiums
- Utility bills
- Office supplies
- State and local taxes
In many cases, the IRS allows deductions for expenses paid up to 12 months in advance, as long as they are ordinary and necessary for your business.
3. Invest in Equipment to Leverage Bonus Depreciation and Section 179
For companies planning equipment purchases, 2025 is an advantageous year. Under the One Big Beautiful Bill Act:
- 100% bonus depreciation is restored for qualifying assets acquired and placed in service after January 19, 2025.
- Section 179 expensing has doubled, allowing businesses to deduct up to $2.5 million in qualifying asset purchases for 2025.
To claim these benefits on your 2025 return, equipment must be placed in service no later than December 31, 2025. This can include machinery, vehicles, technology, and other fixed assets.
4. Use a Business Credit Card to Secure Deductions Now
If you want to prepay expenses or purchase equipment but don’t want to strain cash flow, using a business credit card can help. Expenses charged on a credit card are generally deductible in the year the charge is made, even if you pay the bill in early 2026. This can be a valuable strategy for year-end tax optimization.
5. Increase Retirement Plan Contributions to Reduce Taxable Income
For self-employed individuals and owners of pass-through entities — including S corporations, partnerships, and most LLCs — boosting retirement plan contributions remains one of the most effective ways to cut taxable income.
Most plans require contributions by year-end, but SEP IRA contributions can typically be made up until the business’s tax filing deadline (including extensions). Maximizing contributions not only lowers taxes but also strengthens long-term financial security.
6. Plan Ahead to Preserve the 20% Pass-Through Deduction
Owners of sole proprietorships and pass-through businesses may qualify for a 20% qualified business income (QBI) deduction. However, the full deduction begins to phase out when taxable income exceeds:
- $197,300 for single filers
- $394,600 for married couples filing jointly
If you anticipate income approaching these thresholds, consider strategies to keep your taxable income within limits — such as increasing retirement contributions or adjusting year-end compensation. Staying under the threshold can help you preserve the full QBI deduction.
Get Tailored Year-End Tax Guidance from Botwinick & Co.
Each of these strategies comes with rules, restrictions, and eligibility requirements that vary by business and tax structure. Before acting, it’s important to consult with a qualified tax professional.
Botwinick & Co. can help you:
- Evaluate which year-end strategies align with your financial goals
- Identify additional planning opportunities for 2025 and beyond
- Ensure compliance with the latest tax law changes, including OBBBA provisions
If you’re looking to reduce your tax burden while strengthening your financial strategy, our team is here to guide you every step of the way.
