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6 last-minute tax tips for businesses

At Padgett, we’re big believers in year-round tax planning, but we also know that December can still offer valuable opportunities to lower your 2025 tax bill. If you’re looking for smart moves to make before year-end, here are six strategies we often discuss with our small business clients:

1. Consider postponing invoices.

If you use the cash method of accounting and want to defer income into next year, you may benefit from waiting until early 2026 to send out invoices.

2. Prepay certain expenses.

Cash-basis businesses can sometimes reduce their 2025 taxes by prepaying eligible 2026 expenses. This may include items like lease payments, insurance premiums, utilities, office supplies, or even certain taxes. Many of these expenses are still deductible if paid up to 12 months in advance.

3. Invest in equipment before year-end.

Thanks to the One Big Beautiful Bill Act, 100 percent bonus depreciation is back for assets acquired and placed in service after January 19, 2025. Section 179 expensing has also doubled for 2025, allowing businesses to deduct up to $2.5 million. If you’re planning to purchase equipment or other fixed assets, remember they must be placed in service by December 31 to count toward your 2025 return.

4. Use a business credit card if cash is tight.

If you’d like to prepay expenses or buy equipment this month but don’t have the cash available, using your business credit card can help. In many cases, expenses are deductible when charged, even if the card isn’t paid off until next year.

5. Contribute to your retirement plan.

For self-employed individuals and owners of pass-through businesses, increasing retirement plan contributions can be one of the most effective ways to reduce taxable income. Some contributions need to be made by December 31, but plans like SEP IRAs may allow you to contribute for 2025 up through your tax filing deadline, including extensions.

6. Review your eligibility for the pass-through deduction.

Owners of sole proprietorships or pass-through entities may be able to deduct up to 20 percent of qualified business income (QBI). However, the deduction begins to phase out once 2025 taxable income exceeds $197,300 (or $394,600 for joint filers). One way to stay under the threshold is by increasing retirement plan contributions or making other strategic adjustments before year-end.

If you’re unsure which of these strategies makes sense for your business, your local Padgett advisor can help you walk through your options and make a plan that fits your goals.

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