For this tax year, the year-end tax savings ship has sailed. This article is for savvy small business owners who understand that tax season never stops and want to be prepared with the necessary knowledge to maximize opportunities for tax savings next year. Avoid the year-end rush and bring the following recommendations to your CPA now. Some may be subject to change, and some may remain viable. Investigate all of them and check back in September for updates to this article.
1. Maximize retirement contributions.
Contributions to IRAs and SEP-IRAs can lower taxable income because they are made with pre-tax dollars. The 2025 maximum annual contribution amount for IRAs is $7,000. A SEP-IRA is a defined benefit plan that gives you more savings bandwidth. The Internal Revenue Service (IRS) is allowing up to $70,000 in SEP-IRA contributions in 2025.
2. Harvest tax losses before it’s too late.
Realized gains are taxable income. Realized losses are deductions. Tax loss harvesting is selling stocks you took a loss on during the year. This is often done in December to lower taxable income and minimize tax liability. We published an article on this a while back. Here’s an extra tip: Don’t take any realized gains when you do this. Save them for early next year.
3. Take advantage of the gift tax exclusion.
The gift tax exclusion was raised from $18,000 to $19,000 for the 2025 tax year. You can double that if you or your spouse is feeling generous. For estate planners, this is a tax-free way to transfer generational wealth. It’s not the same as deducting a charitable donation, so don’t get them confused. Your accountant can help you sort through the differences.
4. Fund a 529 college savings plan.
Funding a 529 college savings plan provides two benefits. The first is providing for someone’s college education. The second is a tax deduction for any contributions you make to it. The IRS does not have a limit on those contributions, but states may have rules allowing only so much in aggregate contributions. Check with your state revenue department to learn more.
5. Make charitable contributions.
The IRS allows you to deduct contributions up to 60% of your adjusted gross income (AGI). That deduction could have a significant impact on your tax bill next year. Charities typically receive their largest contributions at the end of the year because businesses are looking to reduce taxable income. It’s also a great way to celebrate the holidays.
6. Defer income to the next tax year.
This one is tricky. Delayed invoicing can reduce total revenue for the current tax period. It also creates a new tax liability for the next period. Eventually, you’ll need to pay that bill. Deferring income is a strategy best employed by companies with a plan for that additional revenue in the new year. Examples of this are expansions or new product rollouts.
7. Accelerate business expenses.
Decreasing revenue is one way to lower your tax bill. Accelerating expenses is another. Paying them early reduces the asset side of the ledger. You can also increase them by bulk ordering before the year’s end. Look for items you know you’ll use, like paper goods or software subscriptions. Vendors and suppliers might even give you better unit prices if you order more than usual.
8. Check eligibility for tax credits.
This is particularly important this year because many of the tax credits available during the previous administration will either expire or be eliminated in 2025. There will also be new credits available, so check carefully for what you’re eligible for now and what’s coming up for legislation. You can use those to start tax planning for next year.
9. Review your entity structure for future tax efficiency.
Changing your corporate structure can significantly affect year-end tax savings. Some corporate entities pay several layers of taxation, including corporate tax and individual tax liability for shareholders and executives. S corps and LLCs are pass-through entities with no corporate tax liability. Consult a tax professional for advice because this action will have long-term implications.
10. Hire some seasonal help.
Big Retail and major delivery companies use this strategy every holiday season. Hiring temporary, seasonal help increases expenses and lowers net income. Do it through an employment agency, and you won’t have the headaches of severance pay, benefits, or unemployment claims. UPS hired 125,000 seasonal workers in 2024, so we know this is a strategy that works at the enterprise level. Look into seasonal positions in
11. Don’t forget personal deductions.
Focusing exclusively on the business can cause you to neglect personal tax strategies. You can use the gift exclusion and contributions to a 529 Plan or retirement savings. Mortgage interest is 100% deductible. As a business owner, you could also defer some of your income by depositing it into a corporate investment fund. Check with a financial advisor to learn more about that.
Adopt a proactive mindset and work with a proactive tax, accounting, and advisory partner.
Don’t procrastinate on this because tax season never ends; the actions your firm takes today could save you significant money tomorrow. If you didn’t do any of this last year, don’t worry about it. Strategic tax planning is forward-thinking by nature. It’s all about positioning your company to be more profitable next year. Now is the time to put the pieces in place.
Start with maximizing your retirement. Look into opportunities for tax loss harvesting. Take advantage of the gift exclusion by giving some money to your kids (if they deserve it). If they’re really good, set up a 529 Plan for them. The contributions are tax-deductible. Contact our office if you need help.
Our job is to help you be successful. Schedule a discovery call today.
Talk soon,
Jeremy A. Johnson, CPA