5 Tax Moves Every Small Business Should Make Before Year-End

Year-end tax planning isn't just for large corporations. As a small business owner, the moves you make in the final months of the year can dramatically change what you owe come April, and most of them have a hard deadline of December 31st. Here are five worth acting on before the year closes.

1. Maximize your retirement contributions

Few moves deliver as much value as funding a retirement plan. Contributions to a SEP-IRA, Solo 401(k), or even a defined-benefit plan can reduce your taxable income dollar-for-dollar while building wealth that grows tax-deferred. Depending on the plan and your income, you may be able to set aside tens of thousands of dollars before year-end.

Retirement planning is one of our specialties at TLC Advanced Solutions. The right plan depends on your income, your business structure, and your long-term goals, and choosing well can save you far more than a generic IRA. Talk to us before year-end and we'll help you pick the plan that puts the most money back in your pocket.

2. Accelerate deductible expenses

If you expect to be in the same or a lower tax bracket next year, pulling deductions into the current year lowers this year's bill. Consider prepaying January rent, restocking supplies, or making that software or equipment purchase you've been putting off. Under Section 179 and bonus depreciation, you can often deduct the full cost of qualifying equipment in the year you place it in service rather than spreading it out over many years.

3. Time your income

If you're on the cash basis, you have some control over when income lands. Delaying December invoices into January, or accelerating collections into December if you expect a higher-income year ahead, can shift taxable income to the year where it costs you the least. The right direction depends on where you expect your income to fall, which is exactly the kind of thing worth modeling before you act.

4. Revisit your entity structure

As profits grow, the way your business is taxed matters more and more. Many profitable sole proprietors and LLCs overpay self-employment tax simply because no one has revisited whether an S-corporation election makes sense. Year-end is the right time to review your structure so any election is in place for the year ahead.

5. Make your charitable and investment moves count

Charitable contributions, bunching deductions into a single year, and harvesting investment losses to offset gains are all classic year-end strategies, but they only work if you act before December 31st. A quick review of your investment accounts and giving plans can turn money you were going to spend anyway into a real deduction.

The common thread? Almost every one of these moves has to happen before the year ends. Once January arrives, the window is closed. A short year-end planning session is one of the highest-return hours a business owner can spend. If you'd like a second set of eyes on your numbers before December 31st, reach out and we'll build a plan around your specific situation.