10 Tips to Reduce your Small Business Taxes

December 9, 2025

In the midst of holiday parties and gift shopping, don’t forget to take steps to reduce your small business taxes. Year-round planning is ideal, but December still offers powerful opportunities to lower your 2025 tax bill. Here are ten strategies to consider before the year ends.

1. Purchase assets before December 31

If you’re planning to buy new or used equipment, machinery, or office furniture, act now. Assets placed in service by December 31 may qualify for:

Bonus depreciation: For 2025, 100% bonus depreciation applies to assets acquired and placed in service after January 19, 2025, under the One Big Beautiful Bill Act.
Section 179 deduction: The limit has doubled to $2.5 million for 2025, allowing many businesses to write off the entire cost of qualifying assets.

Bonus depreciation also applies to certain building improvements. Keep in mind that limitations apply, so consult a tax professional for details.

2. Write off heavy vehicles

Heavy SUVs, pickups, and vans used more than 50% for business may qualify for significant first-year depreciation deductions. Vehicles with a manufacturer’s gross weight rating above 6,000 pounds can qualify for bonus depreciation. Verify weight on the manufacturer’s label inside the driver’s side door.

3. Time income and deductions

If your company is cash-basis, postpone income until 2026 and accelerate deductions into 2025 (assuming your tax rate won’t increase next year).

Delay sending invoices until January.
Charge recurring costs on your credit card before year-end.
Prepay rent or insurance when possible.

Accrual-basis businesses can postpone providing goods or services until the next year.

4. Prepay Deductible Expenses

Cash-basis businesses can prepay certain 2026 expenses before December 31, including:

Lease payments
Insurance premiums
Utilities
Office supplies
Taxes

Many expenses are deductible even if paid up to 12 months in advance.

5. Use Business Credit Cards

No cash on hand? Use your business credit card to prepay expenses or buy equipment. Charges made before year-end are generally deductible—even if you pay the bill next year.

6. Maximize Retirement Contributions

Boost deductible contributions to retirement plans like SEP IRAs or solo 401(k)s.

Most contributions must be made by December 31.
SEP IRAs allow contributions until your tax return due date (including extensions).

7. Claim the Pass-Through Deduction

If you operate as a sole proprietorship or pass-through entity, you may deduct up to 20% of qualified business income (QBI).

Income limits: $197,300 (single) or $394,600 (married filing jointly).
Reduce income below these thresholds by increasing retirement contributions or other deductions.

8. Review Estimated Tax Payments

Ensure your estimated payments align with actual income to avoid penalties and interest.

9. Write Off Bad Debts

If you have unpaid invoices unlikely to be collected, consider writing them off before year-end.

10. Donate to Charity

Charitable contributions can reduce taxable income. Make donations before December 31 to claim them for 2025.

Account for All Possibilities to Reduce your Small Business Taxes

These strategies can help you reduce your small business taxes and keep more money in your pocket. Some moves may affect other deductions, such as the qualified business income deduction, so consult a CPA before acting. Need expert guidance? Contact us today to make the most of your tax planning opportunities.