December isn't just the end of the calendar year — it's the last chance to reduce this year's tax bill. Once January 1 arrives, most of these opportunities disappear.
Here are five year-end moves that every business owner should consider before December 31.
1. Buy Equipment and Technology Now
Thanks to Section 179 and bonus depreciation, business equipment purchased before December 31 can be fully deducted in the current year — even if it's bought on December 30.
Computers, software, furniture, vehicles, machinery, tools — anything your business needs. If you were going to buy it in January anyway, buying it in December saves you an entire year of tax benefits.
Section 179 allows deductions up to approximately $1,250,000. That's a massive deduction opportunity.
Action: Make a list of equipment your business needs in the next 6 months. Purchase and place it in service before December 31.
2. Max Out Retirement Contributions
If you have a Solo 401(k), employee contributions must be made by December 31. (Employer contributions have until your filing deadline.)
For SEP-IRAs, you have until your filing deadline — but why wait? Contributing now puts money to work sooner and locks in the deduction.
Potential deduction: up to $70,000 ($77,500 if 50+).
Action: Calculate your maximum contribution with your CPA and fund it before year-end.
3. Prepay Deductible Expenses
Under the IRS 12-month rule, you can prepay certain expenses up to 12 months in advance and deduct the full amount in the current year. This includes:
- Rent (prepay January-March rent in December)
- Insurance premiums
- Software subscriptions
- Professional memberships
- Service contracts
Action: Identify recurring expenses you can prepay before December 31 to accelerate the deduction into this year.
4. Defer Income (If It Helps)
If you're a cash-basis business and expect to be in a lower tax bracket next year (or simply want to reduce this year's tax), delay invoicing in late December so payments arrive in January.
This is perfectly legal. You're not hiding income — you're timing when you receive it.
Note: This only helps if next year's bracket will be the same or lower. If you expect higher income next year, collecting income this year at a lower rate might be better. Your CPA can model both scenarios.
Action: Review outstanding invoices and decide whether to send or hold based on your projected income.
5. Review Your Entity Structure for Next Year
If you're operating as a sole proprietor and your income supports an S-Corp election, December is the time to plan for it. Form 2553 is due by March 15 of the year the election takes effect.
A year-end CPA meeting is the perfect time to run the S-Corp analysis, determine the optimal salary, and set up payroll — so everything is ready for January 1.
Action: Schedule a year-end tax planning meeting with your CPA. If you don't have one, find one now.
The Best Year-End Move: Talk to Your CPA
These five strategies can save thousands — but the optimal combination depends on your specific income, bracket, and business situation. A CPA who sees your complete picture can identify exactly which moves make sense and how much each one saves.
Don't wait until March to do your taxes. Plan in December to save in April.
Find a CPA for year-end tax planning at ListMyCpa.com. Search by state, city, and specialization — and make your December count.