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The difference between a smart business owner and one who ends up overpaying on taxes is timing and strategy. Smart business owners know that applying end of year tax tips before December 31 can maximize deductions, improve cash flow, and give them the confidence to reinvest in their business, all while keeping their finances under control.
These strategies are designed specifically for business owners who are planning to scale in 2026
Why Year-End Planning Matters When You’re Scaling
When a business grows, so does its financial complexity. What worked for you when you started may no longer fit your current size, structure, or income. Year-end tax planning helps you take a step back and ensure your business is still set up for tax efficiency.
It allows you to:
- Capture deductions that expire on December 31
- Smooth out income fluctuations between years
- Align your compensation, investments, and structure with your growth goals
- Reduce the risk of unpleasant tax surprises in April
End of Year Tax Tips to Know Before December 2025
Apply these practical year end tax strategies to maximize your tax savings.
Use Bonus Depreciation and Section 179 – Lower Your Tax Bill
If your business invested in new assets this year, now is the time to take full advantage of bonus depreciation and Section 179 deductions. Compared to recent years, the restored 100 percent bonus depreciation rate is a major opportunity.
It allows you to make a strategic purchase and turn it into a significant, non-cash expense that directly offsets your business income. This can lower your 2025 tax bill and free up cash to reinvest in your 2026 growth.
Take an example: A logistics company planning to expand its fleet in 2026 purchases a new delivery van in December 2025. Under 100 percent bonus depreciation, the full cost can be written off in 2025, reducing taxable income and improving cash flow for the upcoming expansion.
Section 179 works similarly, allowing you to deduct the entire cost of qualifying property in the year it is placed in service. Together, these strategies are powerful tools for business owners looking to maximize deductions before December 31.
Review Income Timing to Stay in the Right Tax Bracket
Income timing is one of the simplest, most effective tax planning tools. By controlling when income is received or expenses are paid, you can reduce how much tax you owe in a given year.
- If your income is unusually high in 2025, consider deferring invoices to January or accelerating payments into this year to minimize 2025 net income..
- If next year’s income will likely be higher with consistent expenses to current yearit may make sense to accelerate income this year to take advantage of your current lower tax rate.
For example, a design firm that just signed a large December contract could choose to start billing in January, shifting taxable income into the next year while staying compliant.
The right choice depends on your projected earnings, so this is one area where a year-end consultation with your CPA can pay off quickly. Talk to a CPA to get year-end tax tips designed specifically for you.
Maximize Retirement Contributions Before the Deadline
Your retirement plan is one of the most reliable tax-saving tools available to you as a business owner. Contributions lower your taxable income while helping you build long-term wealth.
Depending on your structure and earnings, you might consider:
- 401(k) or Solo 401(k) contributions for owner-operators
- SEP IRA (Simplified Employee Pension Individual Retirement Account) contributions for self-employed or small businesses
- Roth conversions, which can make sense if you expect higher tax rates in future years
For example, if you earned $180,000 this year as an S Corporation owner and contribute $20,000 to your 401(k), you only pay income tax on $160,000. That one move can save thousands while strengthening your retirement position.
Reevaluate Your Entity Structure and Compensation
When your business is small, a Limited Liability Company (LLC) structure may make sense. But as profits grow, switching to an S Corporation (S Corp) can significantly reduce self-employment taxes.
This is also the right time to review how you pay yourself. Many scaling owners underpay or overpay salaries without realizing the tax implications.
Talk to a CPA to determine:
- Whether your business structure still fits your size and goals
- If you qualify for the Qualified Business Income (QBI) deduction
- The right mix of salary and distributions to balance taxes and compliance
Example: A marketing agency earning $250,000 in net income may save several thousand dollars in payroll taxes by electing S Corporation status and paying the owner a reasonable salary with distributions for the remainder.
Use Investment and Real Estate Opportunities Wisely
If you have investment income or own real estate, year-end is the best time to review capital gains and losses.
One effective strategy for you to consider is tax-loss harvesting, which is selling investments that have lost value to offset gains from those that performed well. Real estate investors can take advantage of cost segregation studies to accelerate depreciation and increase deductions.
For instance, if you sold a property earlier this year and earned a $40,000 capital gain, selling underperforming investments before December 31 can help offset that gain and reduce your taxable income.
Give Strategically: Charitable Donations and Family Gifting
Charitable giving does more than help your community. When structured correctly, it can also reduce your tax bill.
- Donating appreciated assets (like stocks) lets you avoid paying capital gains while still deducting the full value.
- You can give up to $18,000 per person in 2025 under the annual gift exclusion without triggering gift tax.
- Donor-Advised Funds (DAFs) allow you to secure a deduction this year and distribute gifts later.
A real estate professional, for example, might donate shares of a property-holding LLC instead of cash, locking in a larger deduction while still supporting their chosen cause.
Clean Up Books and Benefits Before the Clock Runs Out
Before December 31, review your payroll, reimbursements, and employee benefits to ensure everything is properly recorded.
- Verify that all Flexible Spending Account (FSA) funds are used or scheduled for rollover.
- Make sure Health Savings Account (HSA) contributions are maxed out.
- Check that all employee reimbursements are submitted and processed.
These steps may seem minor, but small oversights in recordkeeping can lead to lost deductions or compliance headaches later.
Project Your 2026 Cash Flow and Tax Position
The best tax planning looks forward. Before the year closes:
- Estimate your taxable income and potential liability for 2025.
- Review expected growth, hiring, or expansion plans for 2026.
- Adjust your quarterly tax estimates to match your projected income.
- Identify which systems, processes, or advisors you need in place for the next stage of growth.
For example, if you plan to hire two new employees early next year, you may need to upgrade payroll software or switch to a more robust bookkeeping system before January.
Final Thoughts
Year-end tax planning is not just about cutting your 2025 tax bill. It is about understanding your business’s bigger picture and positioning it for sustainable growth.
If your business is scaling, now is the time to make strategic moves that will pay off in April and beyond. Don’t wait for tax season to find out what you could have saved. Meet with your advisor, finalize your year-end checklist, and start 2026 ready to grow with clarity and confidence.
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