Year-End Tax Tips and Strategies Planning for Businesses

The end of the year presents a chance to save money and strengthen your business for the year ahead. The One, Big, Beautiful Bill Act (OBBBA), which came into effect in 2025, made significant tax changes, like expanding section 179 expensing and making the family leave credit permanent. These updates create new opportunities for business owners to reduce their tax bill.

With thoughtful year-end tax planning, business owners can reduce their tax liabilities and make the most of opportunities that support long-term growth. In this article, we’re covering year-end tax planning tips and strategies to consider before December 31.

Review Your Financial Statements

Start by getting a clear picture of where you stand. Reconciling income and expenses helps you catch errors, spot opportunities for deductions, and prepare for conversations with your tax professional. If you notice unpaid invoices, make sure to follow up. If you know you’ll need certain services or equipment, prepaying now can lock in deductions for this year.

Time Your Income and Expenses Wisely

One of the most effective year-end tax planning strategies is adjusting when you recognize income and when you pay expenses. The right timing can help reduce what you owe and improve cash flow.

Defer income if you expect your profits to stay the same or dip next year. For cash-basis businesses, that could mean waiting until January to send late-December invoices. This pushes taxable income into the new year.
Accelerate deductions if you want to lower this year’s taxable income. Stock up on supplies, pay upcoming bills early, or wrap up year-end maintenance before December 31. Accrual-basis businesses may also accrue bonuses now and pay them within the allowed window.
Flip the strategy if you think you’ll be in a higher tax bracket next year. In that case, bring income into the current year and delay some deductible expenses until later. That way, you pay tax at today’s lower rate and keep deductions for when they’ll matter more.

Remember, your situation can change with business growth and/or inflation. The key is to line up income with your lower-rate years and deductions with your higher-rate years.

Maximize Deductions and Write-Offs

The easiest way to lower taxable income is to make sure you’re claiming every deduction available.

Ordinary business expenses, like rent, utilities, insurance, and supplies, should all be recorded and deducted. Year-end is also the right time to review your fixed asset list and write off anything that’s obsolete or no longer in use.

Thanks to the OBBBA, year-end tax planning is even more impactful in 2025. Section 179 expensing now allows small businesses to write off up to $2.5 million of qualifying equipment, software, vehicles, and other tangible assets in 2025. Place items in service by December 31 to deduct their full cost.

If you’re investing in innovation, the new law lets you deduct R&D costs immediately instead of amortizing them. That includes domestic product development, software, or lab research. Businesses that had to capitalize R&D costs in prior years can also take a catch-up tax deduction in 2025.

Finally, don’t forget smaller opportunities. Write down or dispose of unsellable inventory and claim deductions for bad debts you can’t collect. If you qualify, also take the home office deduction or set up a reimbursement plan through your business for home office expenses, mileage, or cell phone costs.

Leverage Tax Credits and Incentives

Tax credits cut your tax bill dollar-for-dollar, making them even more valuable than deductions. Reviewing your eligibility is an essential part of end-of-year tax planning. Credits change often and expire quickly, so it’s a good idea to consult with a tax professional before December 31 so you don’t miss out on any potential savings.

Here are a few tax credits worth considering before the end of the year:

Research & Development Credit: Offsets taxes for developing new products, software, or processes. Small businesses can sometimes apply it against payroll taxes. Make sure to keep strong documentation if applying for this credit.
Work Opportunity Tax Credit (WOTC): You can receive this tax credit if you employ certain individuals from groups that have faced barriers to employment, like veterans and ex-felons. The WOTC is available for employees who started work prior to December 31, 2025.
Family and Medical Leave Credit: If your business pays at least 50% of wages during qualified leave you can claim this permanent credit, which ranges from 12.5% to 25% of wages paid. If you don’t already, consider if it makes sense to implement a leave policy to become eligible for this credit.

Review Payroll and Employee Benefits

Double-check payroll accuracy before year-end and confirm all taxes are filed on time. Offering benefits such as HSAs, education reimbursements, or commuter benefits can be tax-advantaged for both you and your team. If you plan to pay bonuses, decide whether it’s better to process them in December or push them into January.

Max Out Retirement Contributions

Retirement contributions are a cornerstone of year-end tax planning strategies.They’re also one of the cleanest legal ways to move money from taxable income into your future self. The end of the year is the perfect time to maximize your retirement plan contributions.

401(k)

In 2025, you can contribute up to $23,500 to your 401(k). If you’re between the ages of 60 and 63, you can also contribute an additional $11,250 as catch-up contributions (this is normally $7,500).

If you are an S corporation owner, make sure your W-2 salary is high enough to support the deferral and any profit-sharing formula you want to use.

SEP IRA

Simple and flexible for owner-only businesses or small teams. Contributions are capped at the lesser of 25% of compensation or $70,000 for 2025. You can set up and fund a SEP up until your tax filing deadline (including extensions).

SIMPLE IRA

SIMPLE plans are designed for smaller employers, with contribution limits similar to 401(k)s. If you want to launch one for 2026, remember the October 1 setup deadline.

Consult With a Tax Professional

As a business owner, you wear many hats. But the tax hat doesn’t need to be one of them. Tax rules are complex and the OBBBA introduced new complexities. A qualified tax professional can help you apply strategies specific to your industry, state, and growth stage. They can also flag opportunities you might miss on your own.

Get Ready for Tax Season With Chatterton & Associates

End-of-year tax planning is one of the best ways to control your tax bill and set your business up for a strong start in 2026. From timing income to maximizing deductions, contributions, and credits, the changes made under the OBBBA make this year especially important for business owners.

Now’s the time to review your numbers to take action before December 31. At Chatterton & Associates, we specialize in helping small business owners make informed decisions that balance today’s savings with tomorrow’s growth. Whether you need guidance on the OBBBA changes, retirement financial planning, or cash flow strategies, our team is here to help you feel confident about your path forward.

Schedule a complimentary consultation and take the next step toward a stronger financial future. Also, be sure to read our Mid-Year Wealth & Tax Update: What 2025’s Shifts Mean for Your Financial Plan.

Sincerely,

The Team at Chatterton & Associates