Tax season shouldn't be the first time you think about your taxes. The business owners who consistently pay the least in taxes aren't doing anything illegal — they're simply planning ahead. Here are seven strategies that can make a real difference before December 31st.
1. Accelerate Deductions, Defer Income
If you're on a cash basis (most small businesses are), you have flexibility in timing. Pay outstanding invoices, prepay business expenses, and stock up on supplies before year-end. At the same time, consider delaying invoicing for December work until January if your income will be lower next year.
Pro Tip
This strategy works best when you expect to be in a lower tax bracket next year — for example, if you're planning a major business investment or taking time off.
2. Max Out Retirement Contributions
A SEP-IRA allows you to contribute up to 25% of net self-employment income, up to $69,000 for 2025. A Solo 401(k) lets you contribute as both employee ($23,000 + $7,500 catch-up if 50+) and employer (25% of compensation). These contributions are fully deductible and reduce your taxable income dollar-for-dollar.
- SEP-IRA: Up to $69,000 (2025)
- Solo 401(k): Up to $69,000 combined employee + employer
- SIMPLE IRA: Up to $16,000 employee deferral
- Defined Benefit Plan: Potentially $200,000+ for high earners
3. Review Your Entity Structure
If you're a sole proprietor or single-member LLC earning $60,000+ in net profit, you're likely overpaying self-employment tax. Electing S-Corp status allows you to split income between a reasonable salary (subject to payroll taxes) and distributions (not subject to SE tax). The savings can easily exceed $10,000 per year.
The S-Corp election must be made by March 15th for the current tax year, or within 75 days of forming your entity. Don't wait — this is one of the highest-ROI moves available to self-employed individuals.
4. Take Advantage of Section 179 and Bonus Depreciation
Section 179 allows you to immediately deduct the full cost of qualifying equipment and software (up to $1,160,000 in 2023). Bonus depreciation allows an additional 60% first-year deduction on new and used property. If you've been thinking about buying equipment, vehicles, or technology — do it before December 31st.
5. Document Your Home Office
If you use a portion of your home exclusively and regularly for business, you can deduct a percentage of your mortgage interest, rent, utilities, insurance, and repairs. The simplified method allows $5 per square foot (up to 300 sq ft). The actual expense method often yields a larger deduction but requires more documentation.
Important
The space must be used exclusively for business — a guest room that doubles as an office doesn't qualify. Take photos and measurements now to support your deduction.
6. Hire Your Children
If you have children under 18, you can pay them a reasonable wage for legitimate work (social media management, filing, cleaning the office, etc.). Wages paid to your children are deductible as a business expense, and if they earn under the standard deduction ($14,600 in 2024), they pay zero federal income tax. For sole proprietors and partnerships owned by parents, there's also no FICA tax on wages paid to children under 18.
7. Contribute to an HSA
If you have a high-deductible health plan (HDHP), you can contribute to a Health Savings Account (HSA). Contributions are tax-deductible, growth is tax-free, and withdrawals for qualified medical expenses are tax-free. For 2025, the limit is $4,300 for individuals and $8,550 for families. This is one of the few triple-tax-advantaged accounts available.
The best tax strategy isn't the most complex one — it's the one you actually implement. Start with one or two of these strategies this year and build from there.
Tiffany Nellums, EA
Related Resource
Have more questions about tax planning strategies?
Our Tax Planning FAQ covers S-Corp elections, retirement accounts, the Augusta Rule, QBI deductions, and 10+ more common questions — all answered in plain English.
The Bottom Line
None of these strategies require exotic schemes or aggressive positions. They're all well-established, IRS-approved methods that millions of business owners use every year. The difference between those who use them and those who don't is usually just awareness and planning. If you'd like help implementing any of these strategies before year-end, book a free consultation — we'll review your specific situation and identify the highest-impact moves for your business.
Tiffany Nellums, EA
Tiffany is an IRS Licensed Enrolled Agent and NAEA member with over 10 years of experience helping business owners, real estate investors, and high-income earners reduce their tax burden through proactive planning and strategic structuring.