Year-End Tax Moves Every Small Business Should Consider

As the year winds down, savvy small business owners know that strategic planning now can make a big difference on next year’s taxes. From timing expenses to taking advantage of bonus opportunities, there are several steps you can take to potentially reduce your tax liability. Here’s a guide to key year-end tax moves every small business should consider. 

1. Timing Deductions and Accelerating Expenses 

One of the simplest ways to reduce your taxable income is by carefully timing your deductions.  What to consider: 

• Prepay expenses: If you have upcoming bills for office supplies, software subscriptions, or rent, paying them before year-end may allow you to deduct them this tax year. 

• Defer income: If possible, delay sending invoices until the new year to push taxable income into next year. 

Example: 

• Your business expects $10,000 in office supply purchases. Buying them in December rather than January could reduce this year’s taxable income by $10,000. 
  

2. Bonus and Payroll Strategies 

Year-end bonuses and payroll adjustments can offer significant tax benefits for both business owners and employees. 

Options to explore: 

• Employee bonuses: Deducting bonuses paid to staff before year-end can lower your business’s taxable income. 

• Owner payroll adjustments: Adjusting your own salary or taking distributions strategically can optimize tax outcomes. 

Example: 

• Paying a $5,000 bonus to a key employee before December 31 may lower your taxable income while rewarding top performers. 

3. Depreciation and Equipment Purchases 

Investing in equipment and other capital assets before year-end can open doors for additional deductions. 

Key strategies: 

• Section 179 deduction: Allows businesses to deduct the full cost of qualifying equipment in the year it’s purchased. 

• Bonus depreciation: Certain assets may qualify for immediate write-offs rather than being depreciated over several years. 

Example:

• Purchasing a $25,000 piece of machinery in December could be fully deductible this year under Section 179, instead of depreciating it over five years. 

  
  

Take Action with a Custom Year-End Tax Review 

Every business is unique, and maximizing your savings requires a tailored approach. At Western Reserve Consulting, we help small business owners identify opportunities and implement strategies to minimize their taxes before the year closes.