5 ways to cut your 2025 tax bill while there’s still time

Year end planning works because timing is a tax tool. Using it intentionally creates cleaner books, lower liability and better flexibility heading into 2026.

The final weeks of 2025 are the last chance for small and mid-size businesses to shape their tax position for the current year.

Congress reset the rules for depreciation and expensing. Accounting method choices are more flexible than many assume. S Corp treatment still offers planning room even late in the year.

These moves directly influence 2025 taxable income and 2026 cash flow.

The Law in Play

The core provisions are §168(k) for 100% bonus depreciation, §179 for expanded expensing, the accounting method rules under § § 446 and 448, S Corp rules under Form 2553, and the pass-through deduction under §199A.

The question is how to use timing, wages, and entity classification to lower tax liability without creating later issues. The IRS accepts these strategies as long as they are supported by clear records and placed in service before the end of the year.

Timeline

• January 20, 2025: OBBBA restores 100% bonus depreciation and broadens §179 coverage.

• Early 2025: IRS reiterates relief for late S Corp elections when reasonable cause exists.

• Q4 2025: Businesses reassess accounting methods and year-end income timing.

• December 31, 2025: Deadline to place assets in service, adjust W-2 wages, and correct S Corp distribution issues.

• Today: Each decision still affects 2025 tax liability and the first quarter of 2026.

The Larger Story

The tax system now rewards businesses that control timing.

Depreciation rules encourage investment before year-end. The cash and accrual methods can change when income is recognized by months. S Corps must keep distributions aligned with ownership or risk structural problems. §199A is increasingly tied to wages rather than raw income.

December has become a high-leverage window for shaping a cleaner and more efficient tax profile.

The Five-Year End Tax Moves

1. Make year-end asset purchases

Businesses can deduct the full cost of qualifying assets under §168(k) as long as they are placed in service by December 31. Used assets also qualify.

The expanded §179 rules allow immediate expensing for certain building improvements, such as HVAC systems and roofs.

Buying needed equipment in December can reduce taxable income for 2025 even if the purchase is financed into 2026.

2. Reevaluate cash vs accrual accounting

Cash method taxpayers report income only when received. This allows timing control through invoicing and early payment of expenses.

The accrual method offers its own advantages when accrued expenses consistently exceed accrued income. It also allows deductions for year-end bonuses paid in the following year and deferral of advance payments.

Switching methods can change the entire income pattern for 2025.

3. Review S Corp election timing

An LLC or C Corp can still obtain S Corp status for 2025 by filing Form 2553 with a late election request if it meets the IRS criteria for reasonable cause.

The tax benefit for owner-employees can be substantial because only wages are subject to employment taxes. It is a mistake to assume the election window has closed.

4. Maintain or correct proportional S Corp distributions

S Corps must keep distributions aligned with ownership percentages to preserve the one-class-of-stock requirement.

A disproportionate distribution can be corrected within the same year with an equalizing distribution and good documentation.

Patterns of imbalance create a risk that the IRS views the entity as having a second class of stock.

5. Optimize the §199A deduction

The §199A deduction is tied to qualified business income and W-2 wages. Raising wages or paying bonuses before year-end can increase the wage base and support the full 20% deduction. Adjusting withholding on those payments can also help avoid underpayment penalties.

Practitioners, Listen Up

• Identify any asset purchases that can be placed in service this month to secure 100% bonus depreciation.
• Run a cash vs accrual analysis to see which method produces a lower 2025 income figure.
• Evaluate whether an S Corp election still lowers overall tax and file a late Form 2553 if justified.
• Review S Corp distributions and make corrections before December 31.
• Model the §199A wage limitation and adjust compensation where needed.

Businesses should finalize equipment purchases, confirm accounting method decisions, run year-end payroll adjustments, and document S Corp distribution actions before December 31.

Late S Corp elections require their own filing process, but benefit from preparation now.