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The year may not be over yet, but it’s still the best time to begin year-end tax planning for your business.
As Q4 unfolds, businesses should be doing more than reviewing annual performance reports or planning holiday promotions. Year-end tax planning is a crucial step to protect your bottom line, minimize tax liabilities, and position your company for a stronger start in the new year. Acting now allows you to leverage deductions, credits, and strategies that expire when the calendar flips to January.
Why Year-End Tax Planning Matters for Businesses
Too many business owners wait until tax season to think about their returns. By then, most opportunities to reduce taxes are gone. Year-end tax planning enables you to analyze your income, expenses, deductions, and credits while you still have time to act. The right moves in Q4 can help improve cash flow, strengthen profitability, and free up capital for growth.
Key Year-End Tax Planning Strategies for Businesses
Income & Expense Management
If your revenue is higher than expected, you may want to defer certain income into the next tax year. Likewise, you can accelerate deductible expenses—such as supplies, inventory, or marketing costs—before December 31 to lower this year’s taxable income.
Capital Expenditures & Section 179 Deductions
Investing in qualifying equipment, machinery, or technology before year-end can provide significant tax benefits through Section 179 deductions or bonus depreciation. This not only lowers taxable income but can also increase operational efficiency going forward.
Employee Benefits & Retirement Contributions
Review company-sponsored retirement plans like 401(k)s, SIMPLE IRAs, or SEP IRAs. Making contributions before the deadline can reduce taxable income and enhance employee retention. Additionally, consider year-end bonuses or fringe benefits that qualify as deductible business expenses.
Review Accounts Receivable & Bad Debt Write-Offs
Now is the time to address outstanding invoices. Consider writing off bad debts that are unlikely to be collected—these can be deducted from your taxable income. Tightening up receivables before year-end also improves your financial position going into Q1.
Leverage Available Tax Credits
Research credits your business may qualify for, such as the Work Opportunity Tax Credit (WOTC), R&D Tax Credit, or energy-efficiency incentives. Claiming these before the year closes can make a meaningful difference in your final tax bill.
Steps Businesses Should Take Now
- Schedule a Year-End Tax Review: Work with your CPA to project taxable income and evaluate your current position.
- Organize Documentation: Gather receipts, invoices, payroll reports, and records of all business-related purchases and investments.
- Finalize Major Purchases: If considering new equipment, vehicles, or software, complete purchases before December 31.
- Plan for Next Year: Use your year-end analysis to forecast expenses, set budgets, and plan for tax-saving strategies in 2025.
The Advantage of Early Action
Starting your year-end tax planning in Q4 gives you the flexibility to make proactive decisions rather than reactive ones. Strategic tax planning helps you keep more profits in your business, reinvest in growth, and face the new year with financial confidence. By working closely with your tax advisor now, you can ensure your business takes full advantage of every available opportunity before time runs out.
Trust the Professionals at the Harding Group
Unlike other accounting firms, The Harding Group, located in Annapolis, MD, will never charge you for consultations and strive for open communication with our clients.
Are you interested in business advising, tax preparation, bookkeeping and accounting, payroll services, training + support for QuickBooks, or retirement planning? We have the necessary expertise and years of proven results to help.
We gladly serve clients in Annapolis, Anne Arundel County, Baltimore, Severna Park, and Columbia. If you are ready to take the stress out of tax time, contact us online or give us a call at (410) 573-9991 for a free consultation. Follow us on Facebook, Twitter, YouTube, and LinkedIn for more tax tips.