When it comes to taxes, small business owners often think about planning in January. But waiting until the new year to act could mean missing out on critical opportunities to save on 2025 taxes. According to Louis Goldenberg, Director of Tax at Xendoo, effective tax planning begins in 2024. Taking action before the year ends ensures you maximize deductions, reduce liabilities, and start 2025 on strong financial footing.

Here are five key strategies to help small business owners save on 2025 taxes while staying ahead of the game.

1. Spend Strategically Before Year-End to Save on 2025 Taxes

Tax planning can help reduce your taxable income by taking action now. Since taxes are calculated on a cash basis, any 2024 expenses can directly impact your 2024 tax return. Here’s how to save on 2025 taxes through year-end spending:

• Prepay expenses: Pay for early 2025 costs, such as vendor invoices or office supplies, to offset 2024 income.
• Invest in assets: Purchase equipment or machinery before December 31 to take advantage of the 60% bonus depreciation available in 2024.

For more tips on end-of-year expenses, visit our Tax Planning page.

2. Prepay Taxes to Avoid Penalties and Maximize Savings

Avoiding penalties is an essential part of tax planning. Overlooked estimated tax payments can lead to unnecessary fines. Here’s how to stay penalty-free and save:

• Make your final 2024 payment: Submit by January 15, 2025, to avoid penalties.
• Pay 110% of last year’s liability: This ensures coverage even if your 2024 income increases.

Managing tax payments proactively helps protect your business from late fees and interest charges.

3. Leverage Depreciation for 2025 Tax Savings

Depreciation offers a valuable opportunity to reduce your taxable income. With the 60% bonus depreciation rate available for 2024, now is the time to make strategic investments.

• Purchase long-term assets: Buy tools or equipment to improve operations and qualify for deductions.
• Optimize your strategy: Take full advantage of depreciation to save on 2025 taxes.

Planning asset purchases carefully allows you to maximize your savings while upgrading your business.

4. Hire Family Members for Tax-Free Benefits

Hiring family members is a creative way to reduce your taxable income while supporting your family. Louis Goldenberg suggests these steps:

• Set up a family LLC: Pay your children under 18 for tasks like office work or organizing inventory.
• Stay below the tax threshold: Payments within the threshold are often tax-free for your child while deductible for your business.

This strategy benefits your family and provides meaningful tax savings.

5. Optimize Inventory Management

Inventory-heavy businesses can leverage inventory purchases as a tax-saving strategy. Deducting inventory expenses for 2024 purchases can lower your taxable income:

• Buy inventory in December: Deduct costs for supplies or stock you plan to use in early 2025.
• Review unsold inventory: Depending on your tax strategy, consider expensing unsold 2024 inventory now or deferring it to next year.

Strategic inventory management can lead to significant savings and smoother financial planning.

Proactive Tax Planning Starts Now

Don’t wait until the new year to think about taxes. Small actions now can lead to big savings when you save on 2025 taxes. Staying organized, prepaying taxes, and leveraging deductions can help reduce liabilities and set your business up for success.

Looking for expert help? Xendoo offers personalized tax strategies and real-time insights to help small business owners maximize savings. Schedule a FREE 15-minute consultation today to start planning for 2025.