Forecasting your business’s income for this year and the next can help you strategically time income and deductible expenses to maximize tax advantages. In many cases, it’s beneficial to defer income – and thus the related taxes – unless you expect to move into a higher tax bracket next year.
Cash-basis businesses often have more flexibility in timing income and expenses, while accrual-basis businesses may have unique opportunities to save through specific deductions.
Review incurred expenses
The key to saving tax as an accrual-basis taxpayer is to properly record and recognize expenses that were incurred this year but won’t be paid until 2026. This will enable you to deduct those expenses on your 2025 federal tax return. Common examples of such expenses include:
Commissions, salaries and wages,
- Payroll taxes,
- Advertising,
- Interest,
- Utilities,
- Insurance, and
- Property taxes.
You can also accelerate deductions into 2025 without actually paying for the expenses in 2025 by charging them on a credit card. (This works for cash-basis taxpayers, too.)
Look at prepaid expenses
Review all prepaid expense accounts. Then write off any items that have been used up before the end of the year.
If you prepay insurance for a period of time beginning in 2025 and ending in 2026, you can expense the entire amount this year rather than spreading it between 2025 and 2026, as long as a proper method election is made.
More tips to consider
Be sure to review your outstanding receivables and write off any that you can establish as uncollectible. Also, pay interest on shareholder loans. For more information on these strategies and to discuss other ways your business can reduce 2025 taxes, contact us.
We Can Help
If you have any questions about year-end tax planning, or would like to discuss individual tax planning strategies that apply to your situation, do not hesitate to contact your Rudler, PSC advisor.
RUDLER, PSC CPAs and Business Advisors
This week's Rudler Review is presented by Alyssa Monson, Staff Accountant and Alexis Ludtke, CPA.
If you would like to discuss your particular situation, contact Alyssa or Alexis at 859-331-1717.
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