Year-End Tax Planning For Business Owners: 5 Key Moves

Why Q4 is the best time for year-end tax planning

By November and December, most business owners have:

• A clear sense of revenue and profit for the year
  
• A realistic view of whether this was a strong year or a lighter one
  
• Enough time left on the calendar to take action before December 31
  
  

That makes Q4 the right time to:

• Decide whether to accelerate or defer income and expenses
  
• Revisit your entity structure and S corp status with actual profit numbers
  
• Use losses, major purchases, and timing to improve your tax position instead of just reacting at filing time
  
  

The goal is not to chase every tactic. The goal is to identify a small set of moves that provide the most impact with a reasonable amount of effort.

Strategy 1: Use heavy vehicles and equipment to your advantage

One powerful year-end lever for some business owners is the treatment of heavy vehicles and other qualifying equipment.

How the heavy vehicle strategy works

In many cases:

• Regular passenger vehicles are subject to limits on first year depreciation
  
• Certain heavy vehicles with a gross vehicle weight rating over 6,000 pounds may qualify for 100 percent bonus depreciation if placed in service before year-end
  
• That can allow you to deduct a large portion, or sometimes the full cost, in the first year
  
  

A simplified example:

• You buy an 80,000 dollar qualifying SUV in December
  
• You put 3,000 dollars down and finance the rest
  
• If it qualifies and is used for business, you may be able to deduct up to 80,000 dollars in that year, even though you only paid a fraction of that in cash
  
  

This same idea can apply to other assets, such as:

• Medical or dental equipment
  
• Production and AV gear
  
• Certain machinery and tools used in your trade or business
  
  

Guardrails to keep in mind

• You must actually use the vehicle or equipment for business
  
• If business use is 80 percent, you generally only get 80 percent of the deduction
  
• You should maintain reasonable records to support the business use percentage
  
• In many cases you need to purchase, not lease, to use bonus depreciation
  
  

Heavy vehicles and equipment are not an excuse to buy something you do not need. They are a way to align real business needs with smart timing of deductions when you have a strong profit year.

Strategy 2: Bring forward expenses you will definitely incur

Another simple but effective year-end planning move is accelerating expenses you already plan to incur.

Ask yourself: "What expenses will I absolutely pay in the next 6 to 12 months if the business continues as planned?"

If you had a strong year and cash flow allows, you may want to prepay some of those costs in Q4, especially if you report on a cash basis.

Common examples include:

• Annual software and SaaS subscriptions
  
• Professional services such as marketing, advisory, or coaching that you know you will use early next year
  
• Some office or facility costs, if prepayment is allowed and fits your plan
  

Two key concepts:

1. This is a timing strategy
   You reduce taxable income this year by pulling expenses forward. That often increases taxable income next year because those expenses are no longer available. The move is usually most valuable when this year is unusually strong and you expect a lighter year to follow.
   
   
2. Only prepay what you truly need
   Prepaying should match your real plan. You do not want to spend a dollar just to save a portion of it in tax. The goal is to shift the timing of expenses you are already committed to.
   
   

Strategy 3: Compare home office deduction and Augusta rule

If you work from home at least part of the time, there are two important tools to discuss with your tax advisor at year-end: the home office deduction and the Augusta rule.

Home office deduction

If an area of your home is used regularly and exclusively for business, you may be able to deduct a portion of:

• Rent or mortgage interest
  
• Utilities and insurance
  
• Maintenance, cleaning, and certain repairs
  
  

There are different ways to calculate the business use percentage, including:

• A square footage method that compares office square footage to the total home square footage
  
• A room or living area method in some cases, which compares business-use rooms to total living areas
  
  

The goal is a reasonable, supportable percentage that reflects business use.

Augusta rule

The Augusta rule allows a homeowner to:

• Rent their personal residence to their business for up to 14 days per year
  
• Treat that rent as a business deduction
  
• Exclude that rental income from personal taxable income, within the rule requirements
  
  

Owners often use this for:

• Formal planning sessions
  
• Board or advisory meetings
  
• Annual or quarterly strategy days hosted at home
  
  

To support the Augusta rule you should have:

• A clear business purpose for each rental day
  
• A market-based rental rate
  
• Documentation such as dates, agendas, and meeting notes
  
  

Choosing the right approach

You generally cannot apply both approaches to the same costs in the same way, so you want to compare:

• Your ownership status (own vs. rent)
  
• Your mortgage interest, property taxes, and other home costs
  
• Your entity structure and income level
  
  

For some business owners, the home office deduction produces more long term benefit. For others, a well documented Augusta framework provides more value. The right answer depends on your specific facts, not on a one size fits all rule.

Strategy 4: Treat S corp elections as a deliberate tool

You may hear advice like “just become an S corp to save on taxes.” In reality, an S corp election is just one tool and it only helps when the numbers and facts support it.

When an S corp can help:

• Your business has meaningful, stable profit
• You can pay yourself a reasonable W 2 salary and still have profit left
• You are ready for payroll, extra filings, and tighter bookkeeping

The potential benefit comes from splitting income between:

• W 2 wages that are subject to payroll tax
• Distributions that often avoid self employment tax

Where it often does not help:

• Revenue or profit is still low or very inconsistent
• The added admin and payroll costs eat up most of the tax savings
• Your other income, state taxes, or retirement goals change the math

A useful advantage is timing. In many cases, you do not need to decide on January 1. You can often look at your almost final profit in Q4, model the impact with your advisor, and then decide whether an S corp election for the current year actually creates real net savings.

Strategy 5: Turn losses into tax planning opportunities

Losses never feel good, but they can still work for you at tax time if you use them intentionally.

Common situations:

• An investment in a small company or startup that went to zero
• Positions in your brokerage account that are sitting at a loss
• Rental properties or new business lines that are currently unprofitable

Key ideas to discuss with your tax advisor:

• Some business or startup investments may qualify for ordinary loss treatment instead of capital loss treatment, which can be more powerful if you have high ordinary income
• Tax loss harvesting can let you realize losses in the market to offset capital gains while rebuilding a similar portfolio position within the rules
• Coordinating rental, portfolio, and business losses with your entity structure can turn “dead weight” into real year-end tax savings

The theme is simple. If something did not work financially, make sure you are not leaving the tax benefit of that loss unused.

How to prioritize year-end tax planning if you are busy

If you only have a limited amount of time before December 31, focus on three steps:

1. Check your structure
   • Confirm that your current entity still fits your revenue, profit, and goals
   • Have your advisor model an S corp scenario instead of guessing
2. Tighten deductions you already have
   • Vehicles, equipment, and software that you genuinely use for business
   • Your home office or potential Augusta rule strategy
   • Travel and professional services that clearly support the business
3. Pick one or two high-impact moves
   • A well planned equipment or heavy vehicle purchase you actually need
   • A clear choice between home office and Augusta rule
   • Realistic use of losses that already exist in your world

You do not need every strategy. You need a small, coordinated set that delivers meaningful savings for the effort required.

FAQ: Year-end tax planning for business owners

What is year-end tax planning for business owners?
It is the process of reviewing your expected income, deductions, and structure before December 31 and making specific moves that can legally reduce your tax bill for the current year.

When should I start year-end tax planning?
Most business owners benefit from starting in Q4 once they have a clear view of revenue and profit. For more complex situations, it can help to start earlier, then refine in November and December.

Do I need an S corp to save on taxes?
Not always. S corp status can be powerful when profit is high enough to justify payroll and admin, but it does not fit everyone. It is better to model it with your tax team using your real numbers.

How Gelt helps business owners with year-end tax planning

Gelt works with founders, physicians, investors, and business owners whose finances have outgrown basic tax prep.

Clients get:

• A dedicated tax lead who understands both business and personal income
• A Tax Roadmap that shows estimates, deadlines, and planned strategy work across the year
• A Tax Profile that keeps entity, state, and life changes synced with the plan
• Support from expert CPAs paired with modern technology so planning is proactive instead of reactive

If this is the first year your business produced meaningful profit, or if your structure and income have become more complex, it is a good time to treat taxes as a strategic lever.

To learn more, talk to our tax team and explore how proactive, data driven tax planning can help you keep more of what you earn.

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