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Let’s go over some year-end tax strategies for businesses.
As the year winds down, business owners are turning their attention to one critical task—tax planning. The last few months of the year are the perfect time to review finances, assess performance, and implement smart tax-saving measures. With the right year-end tax strategies for businesses, you can reduce your tax liability, strengthen cash flow, and set the stage for a financially healthy new year.
Review Your Income and Expenses
Start by taking a close look at your business income and expenses for the year. Determine if you can accelerate certain deductions or defer income to minimize taxable profit. For example, you may consider:
- Accelerating expenses: Prepaying rent, utilities, or insurance before year-end.
- Deferring income: Delaying billing until January for work completed in December.
This tactic can help balance your income across tax years and keep you in a favorable tax bracket.
Take Advantage of Section 179 and Bonus Depreciation
Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment or software purchased or financed during the tax year. Bonus depreciation can also be used for larger purchases.
These deductions can make a significant difference for businesses investing in new technology, vehicles, or equipment before December 31.
Review Employee Benefits and Retirement Contributions
Contributing to employee retirement plans is not only a great benefit for your team but also a valuable tax deduction. Business owners can contribute to 401(k), SEP IRA, or SIMPLE IRA plans before year-end to reduce taxable income.
Also, reviewing health savings accounts (HSAs) and flexible spending accounts (FSAs) ensures your employees and your business get the full benefit of tax-advantaged plans.
Reassess Your Entity Structure
The end of the year is an excellent time to review whether your business entity type (LLC, S-Corp, C-Corp, etc.) still aligns with your goals. Different entities are taxed in unique ways, and what worked a few years ago might not be ideal today. Consulting with a tax professional can help you determine if restructuring could save money in the upcoming tax year.
Maximize Deductions and Credits
Make sure you’re taking advantage of all deductions and credits available to your business, including:
- R&D (Research and Development) credits for innovation and product development.
- Energy-efficient upgrades for facilities or vehicles.
- Work Opportunity Tax Credit (WOTC) for hiring individuals from targeted groups.
Proper recordkeeping throughout the year ensures you don’t leave any money on the table
Manage Inventory and Write-Offs
If your business carries inventory, conduct a year-end count and identify obsolete or unsellable items. Writing off outdated inventory can provide a valuable deduction and give you a clearer view of your financial standing heading into the new year.
Evaluate Charitable Contributions
Year-end is also the season of giving, and charitable donations are an effective way to reduce your tax bill while supporting causes that align with your company’s values. Remember that contributions must be made to qualified organizations and properly documented to qualify for deductions.
Plan for Estimated Taxes and Payroll Adjustments
Before December 31, verify that you’ve paid enough in quarterly estimated taxes to avoid penalties. Reviewing your payroll taxes and employee classifications can prevent compliance issues during tax filing season.
Consult Your CPA Before Year-End
The most effective year-end tax strategies for businesses come from proactive planning with a qualified accountant or tax advisor. They can help identify opportunities specific to your industry, ensure compliance with the latest IRS rules, and forecast tax obligations to avoid surprises.
Prepare Now for a Strong Financial Future
Taking time now to implement smart year-end tax strategies sets your business up for success in the new year. From maximizing deductions and credits to optimizing your financial structure, every decision you make before December 31 can help you retain more of your hard-earned profits and strengthen your bottom line.
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.