As we approach the final quarter of the year, entrepreneurs and family business owners are not just wrapping up operations – they’re laying the groundwork for what comes next. The closing months of the calendar offer a strategic opportunity to assess your financial picture, refine your legacy, and take advantage of tax planning tools that can support your long-term goals.
Let’s explore end-of-year tax strategies that help preserve more of your business value—not just for this year, but for generations to come.
1. Maximize Deductions Before December 31st.
Small businesses often leave money on the table by waiting too long to assess deductible expenses. Accelerate necessary purchases like equipment or software. Under Section 179, the deduction limit for 2025 is $1,220,000 (unchanged from 2024) for qualifying equipment placed in service during the year.
Action Tip: Review your capital needs and consider advancing purchases planned for next year into this year. But avoid spending just to spend—each decision should tie into your larger operational or legacy plan.
2. Consider Deferring Income
If your business operates on a cash basis, deferring income until January can reduce your taxable income for the current year—especially useful if 2026 is projected to be a lower-income year. However, this only works when your business can afford to delay receipt without disrupting cash flow.
Strategic Lens: Think of it not just as a tax move, but as a timing decision. What income needs to hit this year to support growth or investments? What can wait?
3. Evaluate Retirement Contributions
Employer-sponsored retirement plans offer one of the most powerful tools for year-end tax planning. Employer-sponsored plans like SEP IRAs and Solo 401(k)s allow business owners to reduce taxable income while supporting future financial freedom. The 401(k) deferral limit for 2025 is $23,500 ($30,500 with catch-up for age 50+), and SEP IRAs allow up to 25% of compensation, capped at $70,000.
Legacy Angle: Consider employer contributions for family members working in the business. It’s a way to grow their retirement while instilling the value of financial stewardship.
4. Review Your Entity Structure
If it’s been years since you chose your business structure, your tax exposure may not match your current success. S Corporations, for example, allow income splitting between salary and distributions, which may reduce self-employment taxes. However, they’re not ideal for everyone.
End-of-Year Task: Consult your CPA about whether your current structure aligns with your tax strategy and succession goals. Don’t assume what worked in year one still works in year ten—or thirty.
5. Use a “Bonus Depreciation” Strategy While It’s Still Available
Bonus depreciation is scheduled to phase out: 40% in 2025 (down from 60% in 2024) before it disappears in 2027. Act now if you're considering large capital investments.
Legacy Impact: Capital investments today can support future business valuation, succession planning, and tax savings. Be proactive while these provisions still offer value.
6. Harvest Investment Losses
Tax-loss harvesting allows you to sell underperforming investments to offset capital gains. While this tactic is more common in personal finance, it can be relevant for businesses with investment portfolios or owner-held assets. The IRS allows up to $3,000 in net capital losses to offset ordinary income each year, with the remaining losses carried forward.
Balanced Strategy: Pairing this with reinvestment into more diversified, mission-aligned holdings can also support your long-term impact goals.
7. Make Use of the Qualified Business Income (QBI) Deduction
If you’re a sole proprietor, S corporation shareholder, or in a partnership, you may qualify for a 20% deduction of qualified business income—thanks to Section 199A. In 2025, phase-outs begin at $187,200 for individuals and $374,400 for joint filers.
Key Insight: Your total income, wages paid, and the type of business all affect this benefit. It’s a deduction worth modeling out before year-end.
8. Revisit Your Succession Plan’s Tax Implications
Legacy planning is never just about wills or buy-sell agreements—it’s about how your decisions today shape the transition of your business tomorrow. The annual gift tax exclusion rises to $18,500 per recipient in 2025. Thoughtful year-end gifting—especially to family involved in the business—can reduce estate size while fostering shared ownership and stewardship.
Legacy-Focused Tip: Don't just give assets - pass on purpose, too.
9. Review Health-Related Tax Benefits
If your business offers a Health Savings Account (HSA)-eligible plan, maxing out HSA contributions provides a triple tax advantage—contributions are pre-tax, growth is tax-deferred, and distributions for qualified expenses are tax-free. Contribution limits for 2025 are $4,300 for individuals and $8,550 for families.
Wellness and Wealth: Helping your employees and family members leverage this tool supports a holistic approach to business stewardship.
10. Have a Pre-Year-End Conversation with Your CPA and Financial Planner
Finally, don’t make decisions in a vacuum. A year-end tax strategy conversation should involve your accountant, financial planner, and, ideally, your succession advisor. Together, they can help ensure that every move aligns with your broader business vision and legacy goals.
"Neglecting to create a succession plan is like placing a fragile masterpiece on a high shelf without a safety net—it’s a gamble that the future will somehow align with our wishes despite our failure to prepare it."
Final Thought: Don’t Just Plan for Taxes—Plan for Legacy
Business tax planning is about more than minimizing your liability. It’s about creating the kind of stability and clarity that allows your business—and the people in it—to thrive long after your direct involvement ends. Whether you’re in oil and gas, construction, or agriculture, legacy is not a one-size-fits-all equation. It’s shaped by the values, strategies, and foresight you bring into moments like these.
For guidance aligned with your values, vision, and long-term impact, contact us today.
Source: www.irs.gov
