Projecting your business’s income for this year and next can allow you to time income and deductible expenses to your tax advantage.
t’s generally better to defer tax — unless you expect to be in a higher tax bracket next year.
Timing income and expenses can be easier for cash-basis taxpayers.
But accrual-basis taxpayers have some unique tax-saving opportunities when it comes to deductions.
Review incurred expenses
- The key to saving tax as an accrual-basis taxpayer is to properly record and recognize expenses that were incurred this year but won’t be paid until 2026.
- This will enable you to deduct those expenses on your 2025 federal tax return.
- Common examples of such expenses include:
- Commissions, salaries and wages,
- Payroll taxes,
- Advertising,
- Interest,
- Utilities,
- Insurance,
- and Property taxes.
- You can also accelerate deductions into 2025 without actually paying for the expenses in 2025 by charging them on a credit card. (This works for cash-basis taxpayers, too.)
Look at prepaid expenses
- Review all prepaid expense accounts.
- Then write off any items that have been used up before the end of the year.
- If you prepay insurance for a period of time beginning in 2025 and ending in 2026, you can expense the entire amount this year rather than spreading it between 2025 and 2026, as long as a proper method election is made.
More tips to consider
- Be sure to review your outstanding receivables and write off any that you can establish as uncollectible.
- Also, pay interest on shareholder loans.
For more information on these strategies and to discuss other ways your business can reduce 2025 taxes, contact us.
