Strengthen Your Business Deductions before December 31

Prepay Expenses Under the IRS Safe Harbor

If you’re on the cash basis, you can prepay qualifying expenses up to 12 months in advance and deduct them this year. That includes office rent, equipment leases, and insurance premiums.

For example, if your monthly office rent is $3,000, prepaying $36,000 on December 31st to cover your 2026 rent gives you a $36,000 deduction in 2025 and provides the landlord with income when he wants it, in 2026. Be sure to mail the funds on December 31 so they arrive in January 2026, and keep documentation, such as the USPS tracking number.

Hold Off on Year-End Billing

A simple yet effective move for cash-basis businesses: delay billing clients until January. Since you don’t recognize income until payment is received, postponing invoices can shift taxable income into 2026.

Purchase Needed Equipment

If you’ve been planning to buy office furniture, computers, or machinery, doing it now can provide a full deduction through 100 percent bonus depreciation or Section 179 expensing, as long as you place the equipment in service before December 31st.

Use Business Credit Cards Wisely

For Schedule C filers, the deduction occurs on the date of the charge, not when you pay the bill. That means charges made in December are deductible this year. Corporations can do the same when employees are using a corporate card.

Document and Claim Every Legitimate Deduction

Don’t avoid deductions because you think they might raise red flags. If they’re legitimate and supported by records, you’re entitled to them. If deductions exceed your income, that loss may create a net operating loss (NOL) that carries forward to offset future profits.

Review Qualified Improvement Property

If you improved the interior of your business or one of your commercial rental properties this year, those costs may qualify for immediate expensing rather than 39-year depreciation. To take the deduction for 2025, you must place the improvement in service by December 31.