Year-End Tax Planning: Why It Matters and What to Do Before December 31
It’s that time of year again — when your calendar starts to fill, the holidays approach, and tax season quietly creeps closer.
Before you close the books for the year, now is the perfect time to pause and look ahead. Year-end tax planning isn’t just about reducing what you owe — it’s about making informed decisions before December 31 so you’re not surprised in April.
Know Where You Stand
The first step is understanding where you are financially right now.
If you’re a business owner, you may not have taxes withheld from a regular paycheck. Instead, you’re likely responsible for making estimated tax payments throughout the year — both federal and state.
Your final quarterly estimate for 2025 is due January 15, 2026. This payment covers income earned during October, November, and December.
If your state offers a Pass-Through Entity Tax (PTET) election, you’ll also want to calculate that year-end estimate as part of your planning.
A year-end projection with your tax advisor helps you understand:
How much profit your business has earned this year
What your estimated tax liability looks like
Whether you’ve paid in enough through estimates or withholdings
Avoid Surprises in April
No one wants to find out they owe thousands of dollars come tax time — or worse, face interest and penalties for underpayment.
Planning ahead allows you to make any final estimated payments now, rather than scrambling later. On the flip side, you also don’t want to overpay and give the IRS an interest-free loan all year. The goal is balance — paying in what’s appropriate for your actual income.
Consider Strategic Year-End Decisions
Once you know where your business stands, there are often opportunities to make smart financial moves before year-end.
This could include:
Purchasing equipment or a new vehicle for business use
Making additional contributions to your retirement plan or IRA
Prepaying certain business expenses (if on the cash basis)
Reviewing your entity structure or PTET status with your advisor
These decisions can reduce your current-year taxable income, but they should always align with your long-term goals — not just short-term deductions.
Work with Your Tax Advisor
Every business is different, and every situation requires a slightly different approach. That’s why planning now — while there’s still time to act — is so important.
Your CPA can help you run a year-end projection, calculate your final estimated payments, and identify any last-minute strategies to minimize your tax liability without hurting your cash flow.
Preparation Brings Peace of Mind
Year-end tax planning is one of the most valuable steps you can take as a business owner.
It’s not about chasing deductions — it’s about knowing where you stand, planning with intention, and heading into the new year with clarity and confidence.
A little preparation now can save a lot of stress later.
