Year-End Tax Planning: Smart Moves for Closing Out 2025
By: Ironclad Accounting + Finance | Featured | November 13, 2025
As 2025 winds down, every business owner faces the same question:
What can I still do before December 31 to strengthen my financial position?
Most year-end tax advice focuses on quick deductions. The smarter approach is to look at the bigger picture — how your income, expenses, and structure all work together to support your goals for 2026.
This year, timing matters more than usual. Mid-year tax changes restored 100% bonus depreciation for many new business assets, and several of the small-business incentives introduced under SECURE 2.0 remain available. Here are the high-impact moves worth your attention now.
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Time Income and Expenses with Intention
Year-end isn’t just about what you earned — it’s about when you recognize it. A few well-timed decisions can smooth out your tax bill.
Think about:
- Paying early-2026 expenses (rent, insurance, professional fees, bonuses) before December 31 if this year’s income came in higher than expected.
- Holding certain invoices or payments until January if pushing them out lowers this year’s taxable income.
- Reviewing contracts or milestones that might shift revenue between 2025 and 2026.
A short planning conversation now can make a measurable difference in April.
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Double-Check Q4 Estimates and Withholding
If your business performed better than last year, it’s worth a quick look at estimated taxes. Under-withholding can trigger penalties even in a profitable year.
Confirm that:
- Your fourth-quarter estimate (due January 15, 2026) reflects 2025 results, not last year’s numbers.
- Owner draws or distributions fit your compensation plan and tax strategy.
- Cash reserves will comfortably cover both taxes and year-end obligations.
One hour with your accountant now beats scrambling when returns are due.
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Review Owner Pay and Keep Your Books Deal-Ready
Before closing the year, take a look at how money moved through the business — salary, draws, and bonuses. The right mix keeps taxes efficient and documentation clean.
Ask yourself:
- Is my compensation level appropriate for the way my business is structured?
- Will any year-end bonuses or draws trigger extra payroll or withholding issues?
- Are retirement contributions and profit-sharing percentages updated for the year’s results?
If growth, new partners, or a possible sale is on the horizon, use this moment to make your books “investor-ready.” That means confirming ownership records, reconciling loans or reimbursements, and cleaning up intercompany activity. Solid structure now prevents headaches later with lenders, buyers, or auditors.
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Take Advantage of 2025 Investment Incentives
Mid-2025 tax legislation brought back 100% bonus depreciation for most qualifying assets placed in service after January 19, 2025. (Items placed between January 1–19 generally qualify for 40%.)
Alongside a Section 179 deduction limit of up to $2.5 million—with a gradual phase-out beginning around $4 million—business owners have extra flexibility to match year-end equipment, vehicle, or technology purchases with 2025 income.
If you plan to buy, make sure those assets are in service before December 31 to claim the full deduction.
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Maximize Retirement and Benefit Contributions
Retirement and profit-sharing plans remain one of the best ways to manage taxable income while rewarding yourself and your team. For 2025:
- Employer contributions to 401(k), SIMPLE IRA, or SEP plans can usually be made up to your tax-filing deadline.
- New plans may qualify for SECURE 2.0 start-up and employer-match credits if properly established and eligible for the tax year they become effective.
- If you participate in your own plan, review deferral limits and catch-up contributions before making final distributions.
A brief check-in with your advisor ensures payroll, plan documents, and contributions all line up.
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Clean Up the Books Before You Close Them
A tidy balance sheet makes every new year easier. Before closing 2025:
- Reconcile owner loans, reimbursements, and intercompany transfers.
- Review accounts receivable — collect what you can and write off what you can’t.
- Verify capitalization of major purchases and update loan schedules.
Clean books mean fewer questions from your accountant, faster turnaround, and clearer insight for 2026 planning.
Quick Year-End Planning Checklist
- Review Q4 tax estimates and cash reserves.
- Confirm equipment purchases and depreciation elections.
- Verify owner pay structure and retirement contributions.
- Prepay early-2026 expenses where it makes sense.
- Document draws and distributions properly.
- Reconcile receivables and intercompany balances.
The Takeaway
Year-end planning isn’t about rushing to spend; it’s about making clear, confident decisions that strengthen your business going forward.
By tightening up timing, compensation, and structure now, you’ll enter 2026 with clean books, flexibility, and fewer surprises.
