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Tax planning only works when you act before the year closes. Every fall, business owners repeat the same mistake: “I’ll deal with taxes at the end of the year.” By December, most high-value strategies are no longer available.

Waiting until the last minute often means missing opportunities that can save tens or even hundreds of thousands of dollars. Tax planning isn’t just about filing forms—it’s about strategically structuring your business and personal finances to protect cash flow, reduce liabilities, and maximize growth potential.

The key is early action. Tax strategies that can significantly reduce liability are often time-sensitive and should align with your goals and vision. This guide walks you through seven actionable tax planning moves that can meaningfully shift your tax outcome. Each of these moves should be considered before the calendar flips to January.

1. Review Your Entity Structure Before Year End

Image showing year-end entity structure review for small business tax planning in Arizona.

The structure of your business is one of the most overlooked but impactful factors in tax planning. The wrong entity choice can silently drain cash every year.

A year-end review allows you to identify and correct issues such as:

S-Corp salary issues. Paying yourself too little in wages can trigger IRS scrutiny for underpayment of payroll taxes, while paying too much reduces available cash for reinvestment. Finding the right balance protects your personal retirement benefits and avoids penalties.
C-Corp double taxation exposure. C-Corps pay corporate income tax on profits and shareholders pay taxes on dividends. Many business owners are unaware that switching to an S-Corp or electing certain distributions can dramatically reduce taxes.
Partnership allocation errors. Incorrectly allocated profits and losses can create unexpected tax liabilities for partners, particularly when some partners are active and others are passive. Reviewing allocations allows for mid-year adjustments that reduce tax exposure.
Trust-based structures. Family trusts or other entity-based structures may require recalibration to ensure tax efficiency. Adjusting distributions or elections before year-end can prevent unnecessary tax burdens.

Illustrative Example: A family-owned business formed as an LLC was able to create significant savings by making an s-corporation election and determining a legally reasonable wage.

Entity issues cannot be fixed retroactively. Even small adjustments before the end of the year can save thousands and improve cash flow for the next fiscal year.

Related Reading:
• The Power of Proactive Tax Planning and Why Only Thinking About Taxes at Filing Time Can Cost You
• Why the Traditional CPA Model Is Broken | The "$46K Mistake" Business Owners Make
• How to Save More in Taxes Year Round

2. Make the PTE Election if Your State Allows It

Visual representation of Arizona business owners preparing for PTE election tax savings.

The Pass-Through Entity (PTE) election is one of the most underutilized strategies for business owners. It allows owners to bypass the $40,000 SALT deduction cap, potentially saving tens of thousands in state and local taxes.

Why Timing Matters

The election generally must be made before December 31. Missing the deadline means waiting another year.
High-earning owners with substantial state tax liabilities benefit most.
Coordination with your accountant or tax advisor is essential because the election can impact other deductions and tax planning strategies.

How It Works

PTE elections allow a state-level workaround for the SALT deduction cap, effectively passing the deduction directly to the owners’ state tax returns. For businesses in high-tax states, this strategy can reduce total tax by 5–10% of taxable income.

Illustrative Example: In some states, owners with high state tax liabilities have been able to reduce federal taxable income through the PTE election and avoid the current $40,000 cap on the deduction.

Related Reading:
• How the PTE Election Helps High Earners Legally Work Around the SALT Cap
• The Power of Proactive Tax Planning
• 100% Bonus Depreciation Is Back. And It’s Now Permanent

3. Optimize Real Estate and Depreciation Strategies

Image illustrating real estate tax strategy and depreciation planning for Arizona businesses.

Real estate and business asset strategies are powerful tools for tax reduction, but only when planned properly. These generally need to be in service before year end, and are not filing season adjustments.

Key Moves Include:

Cost segregation studies. Identify building components eligible for shorter depreciable lives to accelerate deductions.
Bonus depreciation. Take immediate deductions on qualifying assets purchased in the current year.
Short-term rental optimization. Business vs. personal use rules determine how much of your rental property expense is deductible.
Timing repair vs. improvement costs. Repairs are deductible immediately, while improvements are capitalized and depreciated. Correct classification can dramatically affect year-end taxes.
Preparing for a 1031 exchange. Deferring capital gains through an exchange frees cash for reinvestment.
Section 179 planning. Deduct qualifying equipment purchases immediately instead of spreading over several years.

Illustrative Example: A real estate investor who performed a cost segregation study for a property bought this year could deduct a significant amount in bonus depreciation if the investment was placed in service before year end, but you want to make sure you meet all the qualifications before year end.

4. Time Income and Deductions for Maximum Tax Savings

Bright office scene with calendar and notes for income and deduction timing. Visual support for Arizona year-end tax planning to maximize deductions and lower taxable income.

Timing is one of the simplest and most effective tax planning strategies. Adjusting when you recognize income or pay expenses can significantly reduce taxable income.

Common Timing Moves:

Accelerate expenses. Prepay rent, insurance, or subscription services to increase deductions in the current year.
Delay income when appropriate. Postpone client invoices or project payments if you use cash accounting.
Prepay certain vendor expenses. This allows deductions to hit the current year’s tax return rather than the next.
Push large receivables into January. Defers income for cash-basis businesses and reduces current-year tax.
Pull forward equipment purchases. Combine with Section 179 or bonus depreciation to maximize immediate deductions.

Illustrative Example: A software company accelerated $40,000 in SaaS subscriptions and prepaid insurance in December, reducing taxable income by $55,000. Whether this approach makes sense depends on accounting methods, cash needs, and long-term planning.

These strategies cannot be applied after the year closes, making proactive planning essential.

5. Improve Cash Flow Through Estimated Tax Adjustment

Modern Phoenix office desk with cash flow forecast chart and estimated tax papers.

Estimated taxes are often miscalculated. Incorrect estimates can:

Overpay, reducing cash available for operations or investments.
Underpay, triggering penalties and interest from the IRS.

How to Adjust:

Review year-to-date income vs. projected income.
Adjust quarterly payments to reflect actual performance.
Align payments with cash flow needs, ensuring sufficient liquidity for business operations.

Illustrative Example: A business owner who reviewed year-to-date income with their advisor throughout the year can safely adjust quarterly payments to reflect the actual performance of the business. Results vary widely, but periodic review can prevent surprises and overpayment, especially when cash is tight.

6. Align Tax Strategy With CFO-Level Planning

Minimalist executive Phoenix office setup with finance dashboard and tax strategy notes.

Tax planning cannot exist in isolation. Decisions about deductions, credits, and timing must align with your broader business strategy.

Key Areas to Align:

Capital deployment. Ensure tax moves don’t conflict with expansion or acquisitions.
Hiring plans. Consider payroll timing and benefit deductions.
Margin targets. Taxes impact profitability and cost structures.
Debt strategy. Interest deductibility can influence financing decisions.
Growth timelines. Timing expansions, mergers, or acquisitions with tax planning reduces total liability.

Illustrative Example: A company planning an acquisition of equipment reviewed their year-end expenses and determined certain timing adjustments could support the broader financial plan. The impact depended on their specific projections and transaction structure.

CFO-focused tax planning ensures all decisions reinforce your business strategy while maximizing financial impact.

Final Takeaway

If you haven’t done a tax strategy check-in this year, now is the time. Most high-impact strategies disappear once the calendar resets. Waiting until January means missing the window for key deductions, credits, and elections that can meaningfully reduce your tax burden.

Taking action before year-end doesn’t just reduce taxes—it strengthens cash flow, protects profits, and positions your business for intentional growth. Your future self—and your future cash flow—will thank you.

Remember, tax planning is not just about compliance. It’s about strategy, timing, and making every dollar work harder for your business. By implementing these six powerful moves now, you can protect your cash flow, reduce taxes, and set up your business for long-term success.

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6 Powerful Tax Planning Moves You Must Make Now to Protect Your Cash Flow