What can I do before December 31 to lower this year's taxes?
Short answer
Before December 31, creators can lower this year's taxes by buying business equipment they already need, prepaying some expenses, funding a retirement plan, and timing when income arrives, as long as each move makes business sense.
Otavio Mayole, Co-founder, DeCypher FinancialsUpdated
The moves we run with clients in the fourth quarter:
- Buy equipment you were going to buy anyway. It generally has to be bought and in use by December 31.
- Prepay some expenses. Some costs paid now for the year ahead, like software or a contractor's work, can count this year.
- Fund a retirement plan. Open a Solo 401(k) or SEP and make contributions.
- Time your income. Money counts in the year you receive it or could have received it. Not rushing invoices that are due in January can push income into next year.
- S-Corp owners: make sure your salary for the year is paid and your accountable plan reimbursements are caught up.
- Make your last estimated payment on time.
One rule above all: never spend a dollar just to save 30 cents. A write-off only helps when you needed the purchase anyway.
This is why we start Q4 planning in October, not December.
These are not guarantees. Every creator's situation is different.