Key Takeaways
- It is not too late to create meaningful tax savings before December 31, but the remaining moves are very timing-sensitive.
- Low-cost, in-stock equipment and supplies are the most realistic last-minute purchases that can still be deducted this year.
- Opening retirement plans now (even if you fund them later) can preserve valuable deductions that disappear after year-end.
- A short, focused review of payroll, owner compensation, receivables, and prepaid expenses can prevent costly cleanup during tax season.
An assumption that costs some of my Tri-State clients tax savings at this time (late December) each year:
“Isn’t it too late to do anything meaningful for this year’s taxes?”
So, as your go-to for tax insight, let me say: You’re not out of time yet.
But the key is knowing which strategies will work in a tight window and which aren’t worth your effort.
Here are the smartest last-minute moves you can still make before December 31.
Can I still make purchases to reduce taxes this year?
Yes – as long as the asset is placed in service by December 31 (not just ordered).
When that condition is met, several expensing options come into play:
- Immediate expensing under Section 179, which allows qualifying equipment, machinery, and certain software to be deducted right away instead of being depreciated over time.
- Bonus depreciation, which currently allows many businesses to write off 100% of qualifying property in the year it’s placed in service.
- Low-cost asset expensing under the de minimis safe harbor is often the most realistic option in a short window.
Big, custom equipment purchases with long lead times? Probably not going to be feasible.
But low-volume, off-the-shelf purchases could work. Especially items you can buy locally or receive quickly, like laptops, monitors, office furniture, printers, or point-of-sale equipment, for example.
If the items are in stock and you can pick them up or get guaranteed expedited delivery, they can often be installed and operational for your Cincinnati business within days.
Now, if financing is required, the window tightens significantly. Some equipment-specific or online lenders can move fast, but approvals and funding need to happen almost immediately to avoid missing the deadline. At this stage, cash purchases are your best bet.
Can I open a retirement plan now and worry about funding later?
Certain retirement plans only need to be established by December 31 to qualify for deductions tied to this tax year. The actual funding can often happen the following year, around the time you file your return. But opening the plan now preserves the option to claim deductions for this year, even if cash flow improves later.
If your business is an S-Corp, C-Corp, or Partnership, your deadline for establishing a Solo 401(k) or Small Business 401(k) is December 31, 2025.
If you miss this deadline, you forfeit the right to make the highly valuable employee salary deferral contribution for the entire 2025 tax year. The employer profit-sharing portion can still be funded later, but the employee portion is lost.
How can timing income help me save on taxes?
Prepaying certain ordinary and necessary business expenses before December 31 can pull deductions into the current year. Expenses like 1) insurance premiums, 2) marketing or advertising, 3) office supplies, and 4) software subscriptions.
There’s a safe harbor that allows you to prepay up to 12 months in advance, provided the benefit doesn’t extend beyond the following year. This can be an effective way to reduce taxable income without buying assets or changing operations (as long as it doesn’t strain your cash flow).
Going the other direction, if you’re on the cash method, delaying invoices or collections until early January can push income into the next tax year. This can help keep you below certain thresholds or smooth out tax exposure, but of course, it needs to be balanced carefully against business realities and client expectations.
What accounting items should I review before year-end?
Before December 31, it’s critical to review:
- Owner compensation (especially if you have an S corporation)
- Bonuses or final payroll runs
- Contractor payments
- Payroll tax deposits
Making adjustments now helps ensure your books reflect reality and reduces the risk of penalties or reclassification issues later. Fixing this in January is much harder. Fixing it in March is even worse.
If you’re short on time and overwhelmed…
The final days of December are incredibly valuable when used wisely. And a quick planning conversation can help you prioritize which moves are worth making in this window.
So if you’re feeling the time crunch and want to accomplish as many of these tax-saving strategies as possible, grab a last-minute appointment. Let’s make the most of the rest of 2025:
FAQs
“Is it too late to reduce my small business taxes this year?”
No, but your options are narrower than they were earlier in the year. While long-term planning moves are off the table, there are still legitimate, IRS-approved strategies that can reduce this year’s tax bill if they’re completed before December 31. The key is acting quickly and choosing strategies that work in a short window.
“What are the best last-minute tax deductions for small businesses before year-end?”
The most effective last-minute deductions typically include purchasing and placing in service necessary equipment, expensing low-cost business assets, opening retirement plans, prepaying eligible expenses, and making final payroll or compensation adjustments.
“Can I still buy equipment at the end of the year and deduct it on my taxes?”
Yes, as long as the equipment is purchased and placed in service by December 31. That means it must be delivered, installed, and ready for use… not just ordered. Smaller, in-stock items like computers, office equipment, and tools are usually the safest bets this late in the year.
“What does ‘placed in service’ actually mean for tax purposes?”
“Placed in service” means the asset is ready and available for use in your business. It does not require heavy usage, but it must be functional and operational before year-end. Simply paying for something or having it shipped after December 31 does not qualify.
“What is the de minimis safe harbor?”
The de minimis safe harbor allows businesses to expense lower-cost items instead of depreciating them over time. It’s one of the most practical year-end strategies because qualifying items are usually inexpensive and readily available.
“Can I open a retirement plan now and still deduct contributions for this year?”
In many cases, yes. Certain retirement plans only need to be established by December 31 to qualify for deductions tied to this tax year, even if the funding happens later.
“Does my business entity type affect what I can still do before year-end?”
Absolutely. Your entity type determines whether you must finalize “reasonable salary” payments by December 31 to avoid IRS penalties (S Corps) or if you can defer tax liabilities through the 21% flat corporate rate (C Corps). Unlike sole proprietors, who have more flexibility, S Corp and Partnership owners must ensure specific year-end distributions and basis adjustments are documented to qualify for the 20% Qualified Business Income (QBI) deduction.
“Should I prepay business expenses to lower my taxes?”
Prepaying certain expenses can be effective for cash-basis businesses, provided the expenses are ordinary, necessary, and fall within IRS timing rules. For example: A cash-basis business might prepay its entire 2026 office lease or annual insurance premium by December 31 to immediately accelerate those deductions into the 2025 tax year, provided the benefit does not extend beyond 12 months.
However, this strategy should be used carefully to avoid cash flow strain or deductions that won’t hold up under review.
