As the year winds down, December often brings a rush of activity for your company: closing the books, finalizing budgets, preparing for a holiday shut-down and scheduling a party or two. But one other task business owners should not overlook (as busy as they are) is to utilize this last and best opportunity to reduce taxes before the calendar flips to January.
The good news: as late as it is, there are still meaningful moves you can make before December 31 to strengthen your tax position. At Ensign Partners, our coordinated approach of linking legal, insurance, financial, and tax planning is designed to help business owners find and execute those final opportunities that others often miss. Even if you planned some moves in advance (as you should), you may have a better grasp of your overall financial position at the end of the year that can help you make better decisions.
Here are some areas where you can focus your energy to recognize tax benefits in these last few weeks of the year.
1. Accelerate Deductions and Defer Income
Classic tax management still works, and here are some of the most basic strategies:
- If your fiscal calendar coincides with the calendar year, consider deferring income where possible by delaying invoicing or recognizing revenue in January rather than December.
- Accelerate deductible expenses such as professional fees, rent, or utilities by paying them before year-end.
- Prepay 2026 expenses (up to 12 months ahead) if they qualify under IRS “12-month rule” safe harbors.
Timing matters, especially for cash-basis businesses. Done strategically, shifting even a few large expenses can have a measurable impact on your 2025 tax bill.
2. Maximize Retirement Contributions
Few strategies are as powerful or flexible as qualified retirement plan contributions.
- 401(k) deferrals: Owners can still contribute up to $23,000 ($30,500 if 50+) through payroll before year-end.
- Profit-sharing or SEP contributions: These can often be made up until the tax filing deadline (April 15, 2026), but confirming the structure now or making the contributions before year-end ensures deductibility.
- Defined benefit or cash balance plans: High-income owners can often make six-figure deductible contributions, but setup must begin before December 31.
At Ensign, we coordinate plan design with your CPA and financial advisor to ensure your retirement strategy reduces taxes today while strengthening your long-term wealth plan.
3. Review Equipment and Capital Purchases
With the One Big, Beautiful Bill Act (OBBBA) restoring 100% bonus depreciation and expanding Section 179 expensing to $2.5 million, year-end equipment purchases can deliver immediate write-offs. Examples include:
- Computers, vehicles, or machinery used in your business
- Office furniture or technology upgrades
- Qualified improvements to commercial property
The key is that assets must be purchased and placed in service before December 31 to qualify. Coordinate with your accounting and legal teams to ensure proper documentation and ownership structure.
4. Use Year-End Bonuses and Compensation Planning Wisely
Bonuses can do more than reward great work and improve company morale; they can also lower taxable income.
- Owner bonuses: Paying before year-end can reduce business income and shift funds into lower individual brackets if structured right.
- Employee bonuses: Consider timing, tax withholding, and the impact on benefits or retirement plan contributions.
- Deferred comp planning: Executives and key employees may benefit from 409A or other deferred arrangements to smooth income recognition.
At Ensign, we help clients coordinate bonuses within their larger cash flow, tax, and compensation strategies, ensuring the move creates real value rather than short-term savings only.
5. Optimize Charitable Giving Before December 31
Charitable contributions remain a valuable way to combine tax reduction with generosity.
- Cash gifts to qualified charities can be deductible up to 60% of adjusted gross income.
- Gifts of appreciated stock or assets avoid capital gains while providing a deduction for full fair market value.
- Donor-advised funds (DAFs) allow you to “bundle” multiple years of giving into one tax year for greater impact.
For business owners, charitable giving can also extend to corporate gifts or sponsorships when structured properly through your entity.
6. Check Your Estimated Payments and Withholding
If 2025 was a strong year, make sure your estimated tax payments are aligned. Underpaying taxes could trigger penalties even if you pay in full by April. A quick review now can help determine if a final fourth-quarter payment (due January 15) should be increased or prepaid.
Ensign’s integrated team can also review payroll withholdings and pass-through entity tax elections (PTETs) to ensure you’re taking advantage of the most current state and federal rules.
7. Review Entity Structure and Pass-Through Elections
For S corporations, partnerships, and LLCs, December is the ideal time to assess whether your entity classification and compensation structure still make sense. Changes in 2025 tax law (including the OBBBA’s permanent QBI deduction) may open new opportunities to balance income between salary, distributions, and retained earnings. Adjusting these factors before year-end and not waiting until tax season can lead to better outcomes and fewer surprises.
The Ensign Advantage: Coordinated, Year-End Strategy
At Ensign Partners, we approach tax planning not as a seasonal task but as a year-round strategic necessity. However, because taxes are based on fiscal calendars, December is when many immediate opportunities arise. By coordinating your tax strategy with your legal, insurance, and financial structures, our team helps ensure that each move supports your larger goals—not just this year’s tax bill, but your long-term wealth and legacy.
If you’re ready to take a coordinated, strategic approach to business and personal wealth growth and management, contact our Ensign Partners advisory team to schedule a consultation. Discover how we can turn the end of the year into a foundation for stronger financial results in 2026.