As the end of the year approaches, many business owners will be surprised by the size of their tax liability. Often, they don’t seek professional advice until it’s time to file taxes—only to discover they’ve missed opportunities to save thousands, tens of thousands, or more by making simple adjustments throughout the year.
One common mistake is waiting until December to review financials and then rushing to spend money to reduce taxable income. This reactive approach often causes businesses to overlook tax-saving strategies that don’t require last-minute purchases or unnecessary expenses. Also, they could have invested in assets that either grow or generate more revenue.
The good news is that with a bit of foresight, you can take advantage of key opportunities to maximize tax savings and align with your business goals. Here are five tax-saving strategies every business owner should implement before the end of the year.
Rent Your Home to Your Business—Tax-Free
One of the easiest and most overlooked ways to save on taxes is renting your home to your business. Under a provision often called the “Augusta Rule,” you can rent your home for up to 14 days per year without paying income taxes on that rental income.
Here’s how it works:
Your business can deduct the rental payment as an expense, reducing its taxable income.
Meanwhile, you, as the homeowner, have tax-free rental income on your personal taxes.
This strategy works particularly well if you host meetings, team retreats, or client events at your home. To maximize this benefit, make sure the rental is legitimate, document the purpose of the use, and charge fair market rent.
By leveraging this rule, you can turn your home into a financial asset without any additional spending or complex arrangements.
Use an Accountable Plan for Reimbursements
Business owners often overlook the small, everyday expenses they pay for out of pocket—expenses that can add up significantly over time. An accountable plan lets you reimburse yourself for these costs while making them deductible for your business and tax-free for you.
Here are some common expenses that can be reimbursed:
The portion of your home used for administrative or business purposes
Travel expenses, including airfare, lodging, and meals for trips with a business purpose
Vehicle mileage for business-related errands or client meetings
To implement this strategy, you’ll need to create a formal accountable plan for your business. Be diligent in documenting your expenses and ensure they have a clear business connection. By doing this, you’re not just reducing your tax liability—you’re improving cash flow without spending additional money.
Take Advantage of the SALT Workaround
The state and local tax (SALT) deduction cap of $10,000 has been a challenge for many business owners, especially those in high-tax states. However, many states now allow businesses to bypass this limitation by paying state taxes at the entity level, which makes them fully deductible on your federal tax return.
For example, if your business is structured as a pass-through entity, such as an S corporation or partnership, it may qualify for this workaround. This adjustment can lead to substantial savings, though the rules vary by state.
To get started, consult with a tax professional to confirm whether your state has adopted this option, and adjust your payment process accordingly. The sooner you act, the more you can save.
Hire Your Kids
If your children help with tasks in your business, employing them can be a smart financial and tax strategy. For businesses taxed as sole proprietorships or partnerships, hiring your children can offer additional savings because wages paid to them are exempt from Social Security, Medicare, and federal unemployment taxes.
Here’s how this strategy works:
If their income remains below the standard deduction, your child won’t owe federal or state income taxes.
You can further benefit by contributing a portion of their earnings to a Roth IRA, allowing their money to grow tax-free.
This strategy helps reduce your business’s taxable income while teaching your children valuable skills and setting them up for future financial success. Just remember to document their work and pay a reasonable wage for their tasks.
Focus on Strategic Investments
At year-end, it’s tempting to make purchases just for the sake of write-offs, but it’s essential to focus on investments that benefit your business in the long run. Instead of rushing to buy equipment or vehicles, consider assets that enhance cash flow or improve operations.
For example:
Upgrading technology or software to streamline workflows
Purchasing equipment that increases productivity or expands your service offerings
Investing in marketing efforts that attract new clients or customers
Thoughtful spending now can reduce your tax liability while positioning your business for sustained growth.
Start Planning Now to Maximize Savings
These five strategies are just a starting point. Waiting until tax season to think about deductions often leads to missed opportunities. By acting now, you’ll not only lower your tax burden but also ensure your financial decisions align with your business goals.
If you’d like personalized guidance, schedule a free tax analysis today. We’ll work with you to identify opportunities, implement changes, and maximize your savings before year-end.
By acting now, you’re not just reducing your tax burden—you’re building a stronger financial foundation for the year ahead. Let’s set your business up for lasting success in the new year and beyond.
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