Tax moves businesses can still make before Dec. 31

When December hits, business clients often ask, “Is it too late to do anything about taxes?”  The good news is that it’s not too late. In fact, the final weeks of the year are the perfect time for business owners to lock in meaningful deductions, clean up compensation and distribution issues, and fine-tune cash flow.

If you’re working with small business clients, especially those who’ve had a strong year, here are four moves that are not only impactful, but realistically doable before Dec. 31.

1. Buy and place in service qualifying assets

This is the classic year-end play, and for good reason. If your client needs additional or upgraded equipment, software or tools to operate their business, they may likely be able to deduct the full purchase cost in 2025, as long as the asset is placed in service by Dec. 31.

• Section 179 expensing allows businesses to deduct up to $2.5 million of tangible personal property and qualifying improvements.
• Bonus depreciation allows businesses to deduct 100% of most qualifying property placed in service after Jan. 19, 2025. This applies to new or used equipment, software and qualified improvement property. Unlike §179, it isn’t limited by income and can create or increase a net operating loss (NOL).
• These incentives are especially useful for businesses that experienced strong earnings in 2025 and want to reinvest that cash into growth.

Example: A construction company purchases and starts using a $40,000 dump trailer on Dec. 28. The entire cost is deductible in 2025 using §179. If they had waited until January, they would’ve missed the deduction for this year and postponed the benefit until 2026.

Key tip: The property must be both acquired and in use by year-end. Just signing a contract to purchase the asset won’t qualify for a 2025 deduction.

2. Defer income and accelerate deductions (cash method only)

If your client uses the cash method of accounting, they may be able to reduce their 2025 income simply by shifting the timing of certain transactions.

• Defer revenue by holding off on issuing invoices or collecting payment until early January.
• Accelerate deductions by prepaying utilities, insurance or recurring subscriptions, as long as the expense is for 12 months or less and benefits the business within the next year.
• Audit-proof it by ensuring payments are processed and documented (via ACH, check or credit card) before Dec. 31.

These timing strategies are simple but effective and can be especially useful in years when a client expects a lower-income year ahead or wants to smooth out taxable income spikes.

3. Clean up S corporation compensation and pass-through items

For S corporations and partnerships, year-end is the right time to review how compensation, elections and distributions are lining up.

• S corporation shareholder-employees must receive reasonable compensation for their services. If a client’s payroll has been too low during the year, December is the time to true it up.
• Section 179 elections at the entity level must align with what owners can actually deduct, based on their basis and at-risk limits. If owners lack sufficient basis, they may not be able to use the deductions passed through from the entity.
• Distributions should be carefully reviewed for compliance and accuracy, particularly in states with specific rules for tracking basis accounts, like accumulated adjustments accounts (AAA) and other adjustments accounts (OAA).

These reviews aren’t just cleanup; they can prevent major headaches during tax season or audits, and they’re most effective when handled before year-end numbers are locked in.

4. Complete charitable giving, if it’s already in motion

While charitable giving is often associated with individuals, businesses, especially pass-through entities like S corporations and partnerships, can also benefit from charitable deductions at year-end.

• Cash donations made by the business must be completed by Dec. 31 to count for this year’s return. 
  
  • C corporations can typically deduct up to 25% of their taxable income in cash donations, with excess carry-forward options. 
  • For pass-through entities, the deduction flows through to the owners, who must itemize on their personal returns to use the deduction.
• Noncash gifts, such as donations of inventory, equipment or used property, are also deductible, but they need to follow specific valuation and documentation rules. Donations over $500 require Form 8283, Noncash Charitable Contributions; donations over $5,000 usually need a qualified appraisal.

Tip for business owners: Ensure the business secures written acknowledgments for donations over $250. This is critical for both tax records and IRS compliance.

Charitable contributions can be a strategic way for businesses to reduce taxable income while supporting causes they care about.

Final year-end strategy thoughts

These four strategies don’t require exotic structures or aggressive planning; they’re realistic, compliant and actionable in the final weeks of the year.

Even small actions, like placing a piece of equipment in service, adjusting a payroll run or confirming a charitable gift can have a meaningful tax impact if done by Dec. 31.