2025 Last-Minute year-end general business income tax deductions

How to get the IRS to owe you money? Well, the IRS will not pay you the money they owe, barring rare deserving cases, but in most cases, you end up paying less in taxes. So here are six powerful business tax deduction strategies you can easily understand and implement before the end of 2025.

1. Prepay expenses using the IRS safe harbor

The IRS offers a safe-harbor rule that allows cash-basis taxpayers to prepay and deduct qualifying expenses up upto 12 months in advance without challenge, adjustment, or change by the IRS.

Under this safe harbor, your 2025 prepayments cannot go into 2027. This makes sense because you can prepay only 12 months of qualifying expenses under the safe-harbor rule.

For a cash-basis taxpayer, qualifying expenses include lease payments on business vehicles, rent payments on offices and machinery, and business and malpractice insurance premiums.

Example: You pay $3,000 a month in rent and would like a $36,000 deduction this year. So on Wednesday, December 31, 2025, you mail a rent check for $36,000 to cover all your 2026 rent. Your landlord does not receive the payment in the mail until Friday, January 2, 2026. Here are the results:

You deduct $36,000 this year (2025)
The landlord reports $36,000 as rental income in 2026

You get a deduction this year, while the landlord gets next year’s entire rent in advance, eliminating any collection problems while keeping the rent taxable in the year he expects it to be taxable.

Get the timing right. If the landlord pays taxes on a cash basis and receives $36,000 of 2026 rent paid in advance in 2025, he would have to pay taxes on that rent in 2025.

Don’t surprise your landlord. Before sending a big rent check, make sure your landlord understands the strategy. Otherwise, he might not deposit the rent check and instead return the check to you. This could put a crimp in the strategy because you operate on a cash basis.

Also, think proof. Remember, the burden of proof is on you. Think on how would you prove that you mailed the check on December 31?

You can send the check via U.S. Postal Service (USPS) tracking delivery methods, such as priority mail with tracking and possibly signature required. Or even better, use one of the old standards the IRS must abide by, such as certified or registered mail. With this, you have proof of the date you mailed the rent check. You also have evidence of the date the landlord received the check.

If you are using USPS online tracking, make sure to print the delivery and receipt tracking results for your tax records, because that tracking information disappears from the postal service records long before you would need it for the IRS.

One little-known rule: Under the tax rules, you don’t include the December 31 rent payment on the Form 1099 you give the landlord. This comes as a surprise to many, but putting the December 31 payment on the 1099 to the landlord would be incorrect reporting.

Second little known rule: If you and your corporation are on the cash basis and your corporation pays rent to you, you can use this strategy to create a deduction for your corporation this year. In other words, the related party rules do not apply.

2. Stop billing customers, clients and patients

Here is a strategy to reduce your taxable income for this year: stop billing your customers, clients and patients until after December 31, 2025.

Customers, clients, patients and insurance companies generally don’t pay until billed. Not billing customers and patients is a time-tested tax-planning strategy that business owners have used successfully for years.

Example: Jake, a dentist, usually bills his patients and the insurance companies at the end of each week. This year, however, he sent no bills in December. Instead, he gathers up those bills and mails them the first week of January. He has postponed paying taxes on his December 2025 income by moving it to 2026.

3. Buy office equipment

Qualifying Section 179 and bonus depreciation purchases include new and used personal property such as machinery, equipment, computers, desks, furniture and chairs.

You can likely use either 100 per cent bonus depreciation or Section 179 expensing to deduct 100 per cent of the cost of machinery, equipment, computers, desks, furniture, and chairs.

If you qualify for the Section 199A deduction, the increased expenses will reduce your Section 199A deduction.

4. Use your credit cards correctly

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 card for last-minute purchases of office supplies and other business necessities.

If you operate your business as a corporation and the corporation has a credit card in the corporate name, the same rule applies: the date of charge is the date of deduction for the corporation.

But suppose you operate your business as a corporation, and you are the personal owner of the credit card. In that case, the corporation must reimburse you if you want the corporation to realize the tax deduction, and that happens on the date of reimbursement. Thus, submit your expense report and have your corporation make its reimbursements to you before midnight on December 31.

5. Don’t assume you are taking too many deductions

You should never stop documenting your deductions, and you should always claim all your rightful deductions. We have spoken with far too many business owners, especially new owners, who don’t claim all their deductions when those deductions would have produced a tax loss.

But this won’t happen to you. Why? Because as a subscriber, you know all deductions are valuable. And you know that you must claim all your deductions to keep your taxes to their rightful amount.

If your business deductions exceed your business income, you have a tax loss for the year. With a few modifications to the loss, tax law calls this a “net operating loss” , or NOL.

If you are starting a business or, with all that’s happened to you this year, you could very well have an NOL. And the good news is that NOLs can turn into future cash infusions for your business because you carry 2025 NOLs forward to future years.

6. Deal with your qualified improvement property

Qualified improvement property (QIP) is any improvement made by you to the interior portion of a building you own that is non-residential real property if you place the improvement in service after the date the building was first placed in service.

The big deal with QIP is that it’s not considered real property that you depreciate over 39 years. QIP is a 15-year property, eligible for

Immediate deduction using Section 179 expensing
100 per cent bonus depreciation, and
MACRS depreciation

To get the QIP deduction in 2025, you need to place the QIP in service on or before December 31, 2025.

FAQs

What is the IRS Safe Harbor for Prepaying Expenses?
The IRS safe harbor rule allows cash-basis taxpayers to prepay and fully deduct eligible business expenses up to 12 months in advance. This means you can pay certain expenses before year-end and deduct the entire amount on your current-year tax return, rather than spreading the deduction over multiple years.
Why is QIP necessary for tax purposes?
QIP is depreciated over a 15-year recovery period for tax purposes and qualifies for bonus depreciation. This accelerates depreciation deductions, allowing businesses to deduct a large portion of the cost in the year the improvement is placed in service, improving cash flow.
What is Section 179?
Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying business equipment or software purchased or financed and placed in service during the tax year, instead of depreciating it over time.

BergerCPAFirst, with over 30+ years of experience, offers comprehensive tax preparation services for individuals and businesses nationwide. Our commitment is to provide personalized attention while ensuring compliance and maximizing tax benefits. If you have any questions or would like to schedule a consultation, please call (201) 587-9200 or send us an inquiry.