Let’s be real—nobody wants to tip the IRS. Instead of paying more than you owe, redirect those dollars back into your business with a few practical moves you can take before December 31. Below are six strategies I recommend to clients when we want to reduce taxable income, improve cash flow, and start the new year strong.
1) Prepay Expenses
If you’re a cash-basis taxpayer, the IRS allows you to prepay certain expenses up to 12 months in advance and deduct them this year—no pushback under the safe-harbor rules. Qualifying items include office or equipment rent, business vehicle leases, and insurance premiums.
Example: You pay $3,000/month in rent. On December 31, 2025, you mail a $36,000 check to cover all of 2026. You deduct $36,000 in 2025. Your landlord reports the income in 2026 when it’s received. Win-win.
Note: Under the safe harbor, your 2025 prepayments can’t extend beyond 12 months (so they can’t run into 2027).
2) Delay December Billing (Cash-Basis Classic)
On cash basis, income isn’t taxable until it’s received. One tried-and-true move is to hold December invoices and send them the first week of January. That shifts taxable income into next year—without hurting your client relationships.
Example: A dentist who usually bills weekly holds all December bills and mails them in early January—pushing December 2025 income into 2026.
3) Put Equipment in Service Before December 31
The One Big Beautiful Bill Act (OBBBA) reinstated 100% bonus depreciation and increased Section 179 expensing limits. If you buy and place in service qualifying equipment by year-end, you may deduct up to 100%—new or used—covering items like machinery, computers, office furniture, and certain vehicles.
4) Use Credit Cards Strategically for Year-End Purchases
For a sole proprietor or single-member LLC (Schedule C), the deduction date is the day you charge the expense to your business or personal credit card—even if you pay the bill later. For corporations, the same is true only when the corporate card is used.
If you used a personal card for corporate expenses, have the corporation reimburse you before midnight on December 31 so the corporation gets the deduction this year.
5) Don’t Fear “Too Many” Deductions—NOLs Can Help
If legitimate deductions exceed your business income, you may create a Net Operating Loss (NOL). A 2025 NOL can be carried forward to offset future profits—turning today’s careful documentation into tomorrow’s cash-flow relief. So keep tracking and claim every deduction you’re entitled to.
6) Claim Qualified Improvement Property (QIP) the Smart Way
QIP covers improvements you make to the interior of non-residential buildings (think offices, retail, warehouses) after the building was placed in service. QIP is treated as 15-year property, eligible for 100% bonus depreciation or Section 179. To deduct in 2025, the improvements must be placed in service by December 31, 2025.
Bottom Line
Year-end planning isn’t about gimmicks—it’s about using the rules to your advantage. With a few well-timed steps, you can lower taxable income, boost cash flow, and position your business for a stronger 2026.
This article is educational and not legal, tax, or accounting advice. Always consult your advisor about your specific situation.
Ready to Put a Plan in Motion?
At Kimberly Bagley CPA, we help entrepreneurs build tax-smart businesses. Want a personalized year-end checklist and projection before December 31?