The goal of this article is simple—to help you put more money back in your pocket. While the IRS probably won’t mail you a check (though that can happen in some instances), the real benefit comes from paying less in taxes. In other words, this article is all about smart tax strategy. I’m breaking down three powerful business deduction moves you can easily understand and put into action before the end of 2025 to reduce your taxable income and keep more of what you earn.
1.) Prepay Eligible Expenses (The 12-Month Rule)
The tax code IRS regulations contain a safe-harbor rule that allows cash-basis taxpayers to prepay and deduct qualifying expenses up to 12 months in advance without challenge, adjustment, or change by the IRS. Under this little-known rule commonly referred to as the 12-Month Rule, cash-basis taxpayers can often deduct certain expenses in the current tax year, even if the service extends into the following year, provided the benefit doesn’t extend beyond the end of the next tax year.
Common prepaid items include:
- Business Insurance Premiums: Paying the full 12-month premium in December 2025 instead of January 2026 allows you to deduct the expense this year.
- Rent: Prepaying the first month of 2026 rent in December 2025.
- Software Licenses/Subscriptions: Prepaying annual fees in December.
Example: Shifting a Lease Deduction
Imagine you pay $\$3,000$ in lease payments each month, and you would like to secure a $\$36,000$ deduction for tax year 2025.
- On Wednesday, December 31, 2025, you mail your landlord a rent check for $\$36,000$ to cover the entire 2026 lease.
- Your landlord does not receive the payment in the mail until Friday, January 2, 2026.
Here’s what happens:
- Your Deduction (2025): You deduct the full $\$36,000$ this year (2025—the year you paid the money).
- Landlord’s Income (2026): The landlord reports the $\$36,000$ as rental income in 2026 (the year they received the money).
Actionable Tip: Look at any annual or multi-month expenses coming due in early 2026. If the service covers only 12 months, prepay it in December 2025 to shift the deduction forward.
2. Stop Billing Customers, Clients, and Patients
Here is a rock-solid, time-tested, and easy strategy to reduce your taxable income for this year: simply stop billing your customers, clients, and patients until after December 31, 2025. Please note, this strategy assumes your business is on the cash basis of accounting and operates on the calendar year.
As a business owner, it may come as no surprise to you that most customers, clients, patients, and insurance companies don’t pay until they are billed. By delaying your invoicing until the end of the year, you effectively delay cash receipt. Since a cash-basis business only recognizes income when the cash is received (not when the service is performed), delaying the receipt pushes that income into the next tax year. This is one of the easiest ways for small business owners to postpone paying taxes on current year income.
Example: The Contractors Delayed Billing
Jake, a general contractor, usually invoices his customers at the end of each week.
- This year, however, he sends no bills for services performed throughout December 2025.
- Instead, he gathers up all those bills and mails them the first week of January 2026.
The Result: The payments for his December 2025 work will not be received until January or February 2026. He just postponed paying taxes on all his December income by successfully moving that income from 2025 to 2026.
Actionable Tip: Pause all non-essential billing runs starting around December 15th. Instruct your billing department or staff to hold all new invoices and statements until January 1, 2026.
3. Use Your Credit Cards Correctly
The rule for taking a tax deduction depends entirely on who owns the credit card being used for the purchase.
- If you are a single-member LLC or sole proprietor filing Schedule C for your business, the day you charge a purchase to your business or personal credit card is the day you deduct the expense. Therefore, as a Schedule C taxpayer, you should consider using your credit cards for last-minute purchases of office supplies and other business necessities.
- If you operate your business as a corporation (S-Corp or C-Corp) and the corporation has a credit card in its name, the same rule applies: the date of charge is the date of deduction for the corporation.
- However, if you operate your business as a corporation and you are the personal owner of the credit card, the corporation must reimburse you if you want the corporation to realize the tax deduction, and that deduction happens on the date of reimbursement—not the date of the charge.
Example: The Consultant’s Last-Minute Purchase
A consultant, Maria, needs to buy $1,500 worth of new software on December 30th to get a deduction for the current year (2025).
- If Maria is a Sole Proprietor: She uses her personal credit card on December 30th. Deduction Date: December 30, 2025.
- If Maria runs an S-Corp: She uses her personal credit card on December 30th. She submits the expense report on January 2nd, and the corporation reimburses her on January 5th. Deduction Date: January 5, 2026.
Actionable Tip: If your corporation owes you money for business expenses charged to your personal card, submit your expense report and have your corporation make its reimbursements to you before midnight on December 31.
SMALL BIZ TAX LADY 