Your 2025 Year-End Tax Planning Checklist
As the year comes to a close, small business owners in Northern Virginia have a limited window to take advantage of tax-saving opportunities. Strategic year-end planning can mean thousands in savings and a stronger position heading into the new year. Whether you run a restaurant, law firm, medical practice, or real estate business, the following checklist will help you finish the year strong.
1. Review Income and Expenses Now
Don’t wait until January to see how your business performed. By reviewing your year-to-date financials before December 31, you can decide whether to:
- Accelerate expenses into the current year (e.g., stocking up on supplies, prepaying for services)
- Defer income into the next year (where possible) to stay in a lower tax bracket
Example: A consulting firm that billed a large project in late December might consider delaying invoicing until January, shifting that income into the next tax year.
2. Maximize Retirement Contributions
Contributing to retirement accounts is one of the most effective ways to reduce taxable income. Depending on your entity type and eligibility, you might consider:
- Solo 401(k): up to $70,000 in contributions if over 50
- SEP IRA: up to 25% of compensation, with a $70,000 limit
- Defined Benefit Plan: for high earners seeking even larger deductions
If cash flow allows, making these contributions before year-end can deliver both tax savings and long-term financial security.
3. Invest in Needed Equipment or Improvements
The Section 179 deduction and bonus depreciation provisions allow you to deduct the full cost of qualifying equipment and certain improvements in the year they’re placed into service.
Examples:
- A dentist upgrading exam chairs in December can deduct the cost now, rather than spreading it over several years.
- A construction company purchasing new machinery in November can take the full deduction immediately.
4. Evaluate Your Entity Structure
If your business has grown, your current entity type (LLC, S-Corp, C-Corp, sole proprietorship) may no longer be the most tax-efficient.
- Moving from a sole proprietorship to an S-Corp can reduce self-employment taxes.
- Some businesses benefit from changing to a C-Corp for lower corporate tax rates and fringe benefits.
5. Catch Up on Estimated Taxes
If you’ve had a profitable year, review your quarterly tax payments to avoid underpayment penalties. Making an additional estimated payment before January 15 can prevent surprises come April.
6. Clean Up Your Books and Records
Accurate financial statements make tax prep faster and less stressful. Ensure:
- All bank and credit card accounts are reconciled
- Outstanding invoices and bills are recorded
- Personal expenses are separated from business accounts
7. Consider Year-End Bonuses or Profit Sharing
If your business has extra cash, year-end bonuses can reward your team and be deductible for the current year. Profit-sharing contributions to retirement plans can also create a win-win for you and your employees.
8. Plan Ahead for 2026
Year-end planning isn’t only about this year’s taxes—it’s also an opportunity to set financial goals, review budgets, and adjust your strategy for the year ahead.
Northern Virginia small business owners have until December 31 to implement many of these strategies. Schedule your year-end tax strategy session with Shahbaz & Associates today to lock in savings for 2025 and set yourself up for a strong start in 2026.