Ahhh, the end of the year. What a wonderful time! The holidays are a time for giving, spending time with loved ones, eating amazing food, and reflecting on all that the year brought.

While we can all agree that it’s hard not to feel happy during the holidays, there’s one thing that looms over business owners’ heads this time of year: the dreaded taxes that will soon be due.

Let’s face it. Taxes suck, especially for business owners. They really are no fun. And although they’re unavoidable, there are strategies for reducing the amount you owe.

Keep reading for a list of my favorite year-end tips to reduce your taxes.

Make a Big Investment

You know that course you’ve been eyeing for months? The one you’ve been trigger-shy on because it costs a few thousand dollars? The one that you know you’ll eventually purchase and it’ll pay off? The one you told yourself you’d purchase in January?

Or the new laptop you desperately need? Or the plane ticket for your retreat in February? Or the annual software subscription?

If you have the means to do so, make that dang investment now! As they say, the bigger the bottom line, the bigger the tax bill. Those big investments are a quick way to decrease the bottom line.

Pay Your Bills

Do you have a payment plan for your new iPhone 13 that extends into 2022? Have a hefty credit card bill that isn’t due for another month? Is your business coach’s invoice due in January? If so, I’d consider paying all of these bills now.

Although these payments aren’t due until next year, paying them now will decrease this year’s taxable income (aka decrease the amount of taxes you will owe).

Delay Your Income

As a business owner, you have the luxury of deciding when and how to invoice your clients. There are tons of ways you can collect payment. You could require clients to pay the full invoice before starting a project, you could require half now and half at project completion, or you could offer a payment plan that extends well into 2022.

If you are gearing up to send out invoices, you may want to consider holding off on sending it to your clients until late December/early January.

Why? Because income is taxed in the year it is received. This means that receiving a payment on January 1, 2022 (versus December 31, 2021) will delay paying taxes on the income for another year.

Contribute to Your Retirement Plan

One of the many benefits of working for an employer is a 401(k) match. Who doesn’t love free money?

Unfortunately, as a business owner, it’s up to you to establish and fund your retirement plan. As you can imagine, this can get costly.

Thankfully, the IRS recognizes this and has created several tax laws to help small businesses maximize retirement savings and reap valuable tax benefits.

Starting and contributing to your retirement plan not only sets yourself up for success, but is a great way to reduce your taxes.

One thing to note is that there are many types of retirement options for business owners. It’s best to consult with a financial advisor on what option is best for you.

Give Your Clients Gifts (Under $25)

December is the time for giving and what better way to thank your clients than to give them a gift?

Business gifts are a win-win for all. Not only do they make your client feel loved and appreciated, but they also reduce your net income AND are a great tool for marketing. Chances are, your client will post on IG thanking you, allowing all of her followers to see how awesome you are. Free marketing, baby!

Heads up, you can only deduct $25 per gift per person, so keep the gifts under that threshold for the maximum benefit.

Donate to Charity

Donating to charity doesn’t just help a worthy cause. It provides a tax deduction for small businesses. The IRS has even expanded tax benefits to help individuals and businesses give to charity in 2021.

There are some rules around charitable contributions, so make sure you consult with your CPA and don’t forget to keep your receipts!

Save Money for Healthcare Needs

Another great way to reduce taxes is by setting aside money for future healthcare needs. Medical costs continue to increase, and while you may be healthy now, saving money for unexpected or future healthcare needs is essential. You can accomplish this through a Health Savings Account (HSA).

Change Your Business Structure

As a small business owner, you don't have the benefit of an employer paying a portion of your taxes. You're on the hook for the entire amount of Social Security and Medicare taxes.

If your business is taxed as an LLC, you still have to pay those taxes. However, you may be able to eliminate the employer-half of those two tax responsibilities.

Becoming an S corp is a great way to reduce your taxes, but there are things to consider. It’s important to make this election when the time is right.

As a rule of thumb, if you’re profiting over $65,000, I recommend speaking to your CPA to understand if this is right for you.

Disclaimer: The information above is provided for informational purposes only and is not intended to substitute for obtaining accounting, tax, or financial advice from a professional accountant.