How to Reduce Your Small Business Tax Bill Before the Year Ends

As the year winds down, it’s the perfect time to review your financials and take steps to minimize your tax bill. Smart year-end planning can make a big difference come tax season — and the good news is, many strategies are still available before December 31.

Here are four effective ways to reduce your small business tax bill before the year ends:

1. Defer Income

If your business operates on a cash basis, you may be able to defer some income until next year. For example, if you can delay sending certain invoices until January, the income won’t be counted until next year’s tax return. This strategy works best if you expect to be in the same or a lower tax bracket next year. Just be careful not to postpone too much — maintaining steady cash flow is still a priority.

2. Make Year-End Purchases

Need new equipment, software, or supplies? Buying them before year-end can reduce your taxable income through deductions or depreciation. Section 179 of the tax code allows many small businesses to deduct the full purchase price of qualifying equipment or software placed in service before December 31. Think strategically about what your business needs — it’s a great time to invest in tools that support your growth while trimming your tax bill.

3. Max Out Retirement Contributions

Contributing to retirement accounts is one of the most effective ways to save for your future and reduce taxable income. If you’re self-employed, consider setting up or contributing to a SEP IRA, Solo 401(k), or SIMPLE IRA before the deadline. Even if you can’t make the full contribution now, planning ahead and setting up the account this year gives you more flexibility come tax time.

4. Take Advantage of Tax Credits

Unlike deductions, which reduce taxable income, tax credits reduce your actual tax bill dollar-for-dollar. Look into credits your business may qualify for, such as:

• The Work Opportunity Tax Credit (for hiring employees from targeted groups)

• The Small Employer Health Insurance Credit

• The Credit for Paid Family and Medical Leave

• Energy-efficient equipment or vehicle credits

Each credit has specific eligibility rules, so it’s worth checking with your tax professional to make sure you don’t miss out.

Final Thoughts

Year-end is the ideal time to get proactive about taxes. Review your income and expenses, make strategic purchases, and plan your contributions before the clock runs out. A few smart moves now can make tax season far less stressful — and far more rewarding.

If you’d like help reviewing your books or identifying potential deductions, I offer a Mini Diagnostic Review to make sure your financials are in top shape before year-end.