Smart moves to lower your tax bill before December 31
If you own a small business in San Diego County, now’s the time to review your numbers and make smart year-end tax moves. These strategies can help you reduce taxes, improve cash flow, and position your business for growth in 2026.
1. Review Your Business Structure
Your entity type (LLC, S-Corp, or C-Corp) impacts how much you pay in federal and California taxes.
- S-Corp owners: Make sure your salary and distributions are properly balanced to maximize the 20% Qualified Business Income (QBI) deduction.
- LLCs: You may save by electing S-Corp status if your profits are growing.
- C-Corps: Consider bonuses or retirement contributions before year-end to reduce taxable income.
✅ Local tip: California’s Pass-Through Entity (PTE) Tax can provide a federal deduction workaround — ask your CPA if it makes sense for you.
2. Accelerate Deductions & Defer Income
If your books are on the cash basis, you can manage when income and expenses hit your tax return.
- Prepay January rent, insurance, or vendor invoices in December.
- Buy needed equipment or vehicles before year-end to take advantage of Section 179 or bonus depreciation.
- Delay billing clients until January if you want to defer income into next year.
✅ Pro tip: Document purchase dates and payment confirmations for audit support.
3. Max Out Retirement Contributions
Retirement plans are a win-win: you save for the future and lower this year’s taxes.
- Solo 401(k): Up to $23,000 employee deferral ($30,500 if 50+), plus employer contribution.
- SEP IRA: Up to 25% of compensation.
- SIMPLE IRA: A great fit for smaller teams.
✅ Local tip: California employers must comply with CalSavers — check deadlines if you haven’t set up your plan.
4. Capture Every Deduction & Credit
Don’t leave money on the table. Common deductions include:
- Home office, auto, and business mileage
- Equipment, software, and subscriptions
- Health insurance premiums
- Marketing and professional fees
- Payroll and benefits
You may also qualify for California small business credits or federal R&D credits if you develop products or processes.
5. Clean Up Your Books & Payroll
Accurate books make tax filing painless.
- Reconcile all bank, credit card, and loan accounts.
- Review owner draws and shareholder loans.
- Verify payroll reports match your general ledger.
- File and pay California sales tax (CDTFA) and business property tax on time.
✅ Local tip: San Diego businesses often forget city business-license renewals and property-tax declarations — check your due dates.
6. Plan Ahead for 2026
Once the year ends, many opportunities disappear. Before December 31:
- Review your year-to-date P&L with your CPA.
- Estimate your 2025 quarterly tax payments.
- Consider setting up new payroll or benefit plans for next year.
A short planning session now can save thousands in April.
Final Thoughts
Year-end tax planning isn’t just about cutting your tax bill — it’s about running a smarter business. For San Diego entrepreneurs, combining federal, California, and local tax strategies creates a major advantage heading into the new year.
If you’d like help running through these strategies or seeing how much you can save before year-end, Accounting Fresh can help.