As the year wraps up, now’s the time to review your income and expenses to make the most of available tax-saving opportunities. Smart timing can help lower your 2025 tax bill. While cash-basis taxpayers have more flexibility in shifting income and expenses, accrual-basis businesses have unique advantages when it comes to deductions. Here are a few year-end tax tips for accrual-basis businesses.
Deduct Expenses You’ve Incurred (Even If You Haven’t Paid Them Yet)
Accrual-basis taxpayers can deduct expenses in the year they’re incurred — even if payment doesn’t happen until the following year. That means expenses related to 2025 work can still reduce your 2025 taxes, even if you pay them in early 2026.
Examples include:
- Commissions, salaries, and wages
- Payroll taxes
- Advertising
- Interest
- Utilities
- Insurance
- Property taxes
You can also accelerate deductions by charging 2025 expenses to a business credit card before year-end. (This strategy works for cash-basis taxpayers, too.)
Check Your Prepaid Expenses
Review prepaid expenses and write off anything that’s already been used.
If you’ve prepaid insurance that covers a period from 2025 into 2026, you may be able to deduct the full amount this year, depending on the election method you’ve chosen.
Other Smart Moves
Before closing your books, take a look at your accounts receivable and write off any balances you know won’t be collected. Also, be sure to pay interest on any shareholder loans to stay compliant and avoid IRS scrutiny.
For more guidance on year-end tax tips for accrual-basis businesses and to explore additional ways to reduce your 2025 tax liability, contact us.
