As the year winds down, business owners still have time to make smart moves that can significantly lower their 2025 tax bill. Whether you run a small business, work as an independent contractor, or manage a growing company — these year-end strategies can help you save thousands.

Below are six proven, IRS-approved deductions you can take advantage of before December 31, 2025.

1. Prepay Expenses Using the IRS Safe Harbor

If your business operates on a cash basis, the IRS allows you to prepay qualifying expenses up to 12 months in advance — and deduct them this year.

You can prepay items like:

• Office or equipment rent

• Business insurance

• Pofessional subscriptions or advertising

Example: If your monthly rent is $3,000, prepaying a full year’s rent ($36,000) before December 31 lets you deduct that full amount in 2025 — even though it covers 2026.

Pro Tip: Always document your payment (use certified mail or electronic confirmation) for audit safety.

2. Delay Billing Until January

If you’re on the cash basis, your income is taxed when you receive it — not when you earn it. That means by delaying invoices until January, you can push taxable income into 2026.

Example: A consultant who waits until the first week of January to bill clients can reduce their 2025 taxable income while still keeping cash flow stable.

3. Buy Equipment or Technology Before Year-End

Now’s the perfect time to upgrade your tools and technology. Purchases made and placed in service by December 31 may qualify for:

• Section 179 Expensing (deduct up to $1,220,000)

• Bonus Depreciation (currently 60%)

That includes laptops, furniture, machinery, or even vehicles used for business.

Pro Tip: You don’t have to pay in full — even financed purchases count if you start using the asset before year-end.

4. Use Business Credit Cards Wisely

Timing matters! For sole proprietors and single-member LLCs, the day you charge an expense is the day you can deduct it.

So if you charge a purchase on December 31, it’s deductible for 2025 — even if you pay the bill later.

Corporations can do the same, but make sure the card is in the company’s name (or reimburse personal charges before year-end).

5. Clean Up Your Books and Accounts

Before closing the year, take a few hours to reconcile your accounts, review unpaid invoices, and record all receipts.

• Write off any uncollectible debts

• Record small expenses you might’ve missed

• Double-check your mileage and home-office logs

Pro Tip: Use apps like QuickBooks, Wave, or FreshBooks to automate future tracking.

6. Set Up or Maximize a Retirement Plan

You can still reduce your 2025 taxable income by contributing to:

• SEP IRA

• Solo 401(k)

• SIMPLE IRA

Even if you don’t have a plan yet, you can set one up and fund it before filing your return. These are powerful ways to save for retirement and cut taxes at the same time.

Final Thoughts

Tax savings don’t happen automatically — they happen when you plan ahead. These last-minute actions can make a big difference for your 2025 bottom line.

For personalized advice, feel free to reach out directly at Mid America Tax Planners - Contact Us.