If you’re like most business owners, your tax planning strategy is a once-a-year event. However, if you want to minimize your tax liability, it’s important to treat your tax plan as a year-round endeavor. By the time you sign your tax return, most of the decisions shaping your tax bill have been made long ago.
When you think of your CPA as a year-round tax advisor and not just someone who helps you assemble your tax return, you’ll be far more likely to avoid unpleasant tax-season surprises.
Year-Round Tax Tips for Business Owners
Your tax needs are shaped by your individual business, so it’s always wise to seek out customized advice from a CPA or tax advisor. However, if you’re hoping to maximize your savings for the 2026 tax year, one or more of these pre-December strategies could help put you on the right track.
Accelerate Deductions
In many cases, you can prepay some of next year’s business expenses by December 31 to lower your business’s tax liability for the current year. Here are some possible options:
- Rent or lease payments
- Business insurance premiums
- Office supply purchases
- Software subscriptions
- Professional membership fees
Another way to accelerate deductions is through bonus depreciation. This is where you can deduct all of a business asset’s depreciation costs immediately instead of over several years.
For many business owners, accelerating deductions is an effective way to lower tax liability. However, there are some circumstances where it may not be ideal.
For example, if your business is growing and you expect to be in a higher tax bracket next year, you might want to wait to pay future expenses. If your business income substantially increases, having more expenses to write off may help lower your tax bill.
Defer Income
This option might not be possible for every type of business. However, if your company sends out invoices before receiving payment, you might consider sending out late December invoices in January instead.
This strategy shifts some of the current year’s income to next year, which helps you lower your total revenue (and therefore lower your tax liability, too).
Max Out Retirement Contributions
This is sound tax planning advice for everyone, business owner or not. If at all possible, contribute as much as you can to your retirement plan. Doing so can lower tax liability while also helping you lay the foundation for a happy, comfortable retirement.
If you have employees and your company matches their retirement contributions, make sure that your contributions are paid out before the due date for your business tax return.
Deduct Bad Debts
If you use an accrual-based accounting method, you might be able to deduct invoices that have proven to be uncollectible. The deduction only applies if the amount on the invoice was included in the income you reported this year or last year.
Keep in mind that the IRS only allows you to deduct bad debts if you’ve made a reasonable effort to collect the debt. To reduce the risk of potential issues down the line, keep a record of all of your previous attempts to collect each bad debt.
Take a Look at Your Inventory
If you have damaged or old inventory you can no longer sell, you might be able to claim it as a deduction. Inventory is “obsolete” if you can no longer sell it at a normal price.
If you find that your company has obsolete inventory, you can do one of the following:
- Destroy it
- Donate it to charity
- Sell it to a liquidator or junk dealer
If you sell the old inventory below cost to a dealer or liquidator, you can only write off the difference between its value and what you sold it for.
To reduce the risk of fraud, the IRS requires you to document the destruction, sale, or donation of your obsolete inventory.
The Importance of a Skilled CPA
As a business owner, you’re an expert in your industry, and you understand the importance of having the best person for the job. The tax-planning professionals and fractional CFOs at Zabel & Co. focus on more than just money. We aim to help you sharpen your financial strategy to work toward your goals in business and in life.
Ready to build or revamp this year’s tax strategy? Get in touch with us today to see how we can help.