Using Business Financials to Lower Next Year’s Tax Bill

We’ve officially entered June—and while summer might feel early for tax planning, it’s actually one of the smartest times of year to pause, assess, and prepare. If your business has had a strong first half of the year, you may already be on track for a higher-than-expected tax bill. But with six months still ahead, you have options—valuable ones—that can help reduce that burden before the year ends.

Waiting until Q4 (or worse, next March) to evaluate your income and expenses limits your choices. Mid-year planning, on the other hand, gives you time to consult with your CPA and take strategic steps while you're still in control.

Here’s how to get started:

✅ 1. Review Year-to-Date Financials

Start with your Profit & Loss (P&L) statement. If you use accounting software like QuickBooks or Xero, this should be easy to pull. Review:

• Gross income
• Total expenses
• Net profit
• How this year compares to the same period last year

Are you ahead of your projections? If so, this is your cue to speak with your CPA and consider whether your current estimated tax payments are sufficient.

✅ 2. Forecast Income and Expenses for the Rest of the Year

Next, look ahead. While no forecast is perfect, even rough projections can help you identify potential opportunities—or red flags. Work with your CPA or bookkeeper to answer:

• Are sales expected to increase or slow down?
• Are there major expenses coming up (equipment, staffing, seasonal inventory)?
• Will you be entering a higher tax bracket if this trend continues?

This clarity allows you to plan, not just react. And that’s where real savings can happen.

✅ 3. Strategically Plan Business Expenses

If your income is higher than expected, your CPA may suggest ways to reduce taxable income by making smart, deductible investments. These are not last-minute tricks—they’re legitimate, well-established strategies that support your operations and long-term goals. But many require planning ahead.

Here are several to consider:

📦 Purchase or Upgrade Equipment
Laptops, monitors, office chairs, machinery, tools—if your business needs it and it qualifies under Section 179, you may be able to deduct the full purchase price in the year of purchase. This could be a good time to upgrade outdated systems or invest in higher-efficiency tools.

If you work from home, ask your CPA if home office improvements—like upgrading flooring in your office, improving lighting, or installing built-in shelving—could qualify for a partial deduction based on your home office use.

🧾 Prepay for Software, Services, or Inventory
Consider paying now for expenses you’ll need anyway. Examples include:

· Annual software licenses or subscriptions (e.g., CRM, accounting, project management tools)

· Retainers for marketing, legal, or accounting services

· Ordering inventory or supplies in advance, especially if you're preparing for a busy season

Prepaying while your income is high allows you to manage cash flow and potentially bring down your taxable income for the current year—especially if you operate on a cash basis.

📚 Invest in Employee Training or Wellness Programs
Business development doesn’t have to wait. Deductible investments can include:

· Skills certifications and workshops

· Hosting a team-building retreat

· Wellness stipends or mental health support programs

These initiatives support your team and your bottom line.

❤️ Make Charitable Contributions Through the Business
If you’re structured as a C corporation, charitable donations can typically be deducted up to a percentage of taxable income. Even pass-through entities may benefit indirectly when business giving aligns with personal giving strategies.

Consider sponsoring a local event, supporting a nonprofit aligned with your mission, or donating products or services to organizations in your community.

💼 Contribute to Retirement Plans (and Possibly Hire Your Kids)
For eligible businesses, contributing to retirement plans such as a SEP IRA or Solo 401(k) can significantly reduce taxable income. The earlier you set these up, the more time you have to contribute throughout the year.

Bonus Tip: If you have children who are old enough to do legitimate work in your business—like data entry, social media help, or packaging products—consider hiring them. Their wages (if reasonable and properly documented) may be deductible, and the income earned can potentially be contributed to a Roth IRA in their name. This strategy must be carefully structured, so consult with your CPA before moving forward.

✅ 4. Schedule a Tax Planning Meeting

Once you’ve reviewed your financials and identified possible action items, talk to your CPA. A mid-year meeting gives you space to:

• Adjust estimated tax payments
• Discuss deductible investments
• Clarify your expected tax bracket
• Review any changes in tax laws or credits that could apply

This isn’t just about avoiding surprises—it’s about using the time you have left in the year to make decisions that move the needle.

Final Thoughts

Mid-year planning doesn’t need to be complicated, but it does need to happen. If you wait until Q4, your options may be limited. If you wait until tax season, it’s often too late.

By taking the time now to review your business’s financial health, forecast the months ahead, and meet with your CPA, you give yourself the best shot at a smoother—and possibly less costly—tax season next year.

You don’t need to have all the answers. You just need to start asking the right questions. 

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This article is a service of Dolev Law, a Personal Family Lawyer® Firm. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That's why we offer a Life & Legacy Planning Session,Ⓡ during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Life & Legacy Planning Session.

The content is sourced from Personal Family Lawyer® for use by Personal Family Lawyer® firms, a source believed to be providing accurate information. This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal, or investment advice. If you are seeking legal advice specific to your needs, such advice services must be obtained on your own separate from this educational material.