Cut Your Business Taxes This Year-End

• 100% bonus depreciation and the new Section 179 deduction limit are potent tools for year-end asset purchases.
• Accelerating deductions and deferring income are practical strategies to manage your taxable income.
• Retirement plan contributions offer a dual benefit: they reduce your tax bill and provide for your future.
• Cleaning up accounts receivable and writing off bad debt can directly impact your taxable income.

The final quarter of the year is a sprint for most business owners. You're busy managing holiday rushes, closing deals, and planning for the new year. But amidst all the chaos, there's one thing you can't afford to overlook: strategic year-end tax planning.

Simply filing your taxes by the deadline is a reactive approach. Proper financial health comes from being proactive, and the end of the year is the perfect time to make moves that will directly and legally reduce your business tax bill. Here are five of the most effective strategies to consider before December 31.

1. Optimize Your Capital Expenditures with Depreciation

This is the most powerful tool in your year-end tax planning arsenal, especially with the recent changes. Thanks to the "One Big Beautiful Bill Act" (OBBBA), there are significant opportunities for businesses to save big on new equipment, vehicles, and technology.

100% Bonus Depreciation: This key provision, which was set to phase out, has been made permanent. This allows you to immediately expense 100% of the cost of new or used qualifying business assets purchased and placed into service after January 19, 2025. This is a game-changer for cash flow.

Section 179 Deduction: The deduction limit for Section 179 has been dramatically increased to $2.5 million for 2025, with a phase-out threshold of $4 million in total purchases. This is a powerful tool for small and medium-sized businesses.

Don't wait until the last minute. To take advantage of these deductions for your 2025 tax return, the assets must be in service by December 31. This is a great reason to invest in that new machinery, office furniture, or software you've been putting off.

2. Time Your Income and Expenses

The classic tax planning strategy for cash basis taxpayers is still highly effective. You want to accelerate expenses into the current year and defer income into the next, if following cash-based accounting.

Accelerate Expenses: Pay any outstanding bills, such as office supplies, vendor invoices, or software subscriptions, to get the deduction in 2025. You can also pay upcoming expenses like rent or insurance in advance.

Defer Income: Hold off on invoicing customers until after the new year. This moves the income into the next tax period, giving you more time to use that money to operate.

3. Maximize Your Retirement Plan Contributions

Contributing to a retirement plan is a win-win. It helps secure your financial future and provides a substantial tax deduction for your business.

If you have a 401(k) plan, you and your employees can make contributions up to the IRS limits for 2025.

Consider a SEP IRA if you don't have an existing retirement plan. You can set it up at the last minute and contribute until the tax deadline.

4. Clean Up Your Accounts Receivable

Accounts receivable is a tax risk that's often overlooked. If you have any invoices from customers you deem uncollectible, you can write them off as bad debt. Doing this means you're not paying taxes on money you'll never receive.

Before year-end, review your aged receivables and make a final push to collect. Any uncollectible items should be written off to ensure you're not overpaying your taxes.

5. Review Your Inventory

If your business holds inventory, a year-end review is crucial. If you have any obsolete, damaged, or unsellable inventory, you can write down the value and claim a deduction for the loss. This can significantly impact your taxable income, especially for retail or manufacturing businesses.

Final Thoughts

Year-end is the perfect time to get your financial house in order and make strategic tax decisions. These strategies are most effective when built on clean, up-to-date economic data.

Ready to implement these strategies and ensure your business is on the right track for a prosperous new year? Contact Us or reach out to the experts at the arbo team at support@arbohq.com.