Strategic Year-End Moves for Business Owners Under the New Tax Law

In the business world, Quarter 4 is all about finishing up what you need to do for the current year and planning ahead for the new year. It’s no different in the world of tax, and with the passing of the One Big Beautiful Bill Act in July, you may have more to think about than you did earlier in the year. It’s worth taking a look at the new and updated provisions and making some decisions ahead of December 31st.

As always, the information provided in this article is general in nature and hasn’t been customized for your unique tax situation. If you need a recommendation for your situation, consult a tax professional or schedule a consultation with us.

The Equipment Purchase Window Just Got Much More Attractive

If you’ve been putting off major equipment purchases because the tax benefits kept shrinking, this is your year. The new law restored 100% bonus depreciation—meaning you can deduct the full cost of qualifying equipment in the year you buy it, not spread over several years. This applies to equipment placed in service from 2025 through 2029. Additionally, Section 179 expensing doubled from $1.25 million to $2.5 million. For most small and medium-sized businesses, this means you can immediately deduct virtually any equipment purchase you make this year.

Let me show you what this looks like in practice. Consider a hypothetical manufacturing business that has been limping along with a 15-year-old CNC machine that breaks down constantly. They’ve been waiting for the “right time” to replace it, watching as bonus depreciation dropped from 100% to 80% to 60%, and was scheduled to be only 40% this year under the old rules.

Under the previous trajectory, if they’d bought a $200,000 machine in 2025, they would have gotten an $80,000 deduction this year and had to spread the rest over several years. But with 100% bonus depreciation restored, that full $200,000 becomes a 2025 deduction. For a business in the 24% tax bracket, that’s $48,000 in federal tax savings this year instead of having that benefit spread out over time.

The timing matters because of the time value of money. A $48,000 tax savings today is worth more than the same total savings spread over five or seven years. You can reinvest those savings, pay down debt, or simply have better cash flow when you need it.

Now, Section 179 and bonus depreciation work differently, and understanding when to use which one matters. Section 179 is a deduction with a dollar limit—$2.5 million for 2025—but it’s limited by your business income. You can’t use Section 179 to create a business loss. Bonus depreciation, on the other hand, has no dollar limit and can create or increase a loss that you might be able to carry forward or backward.

For most small business owners, Section 179 is simpler and works perfectly fine. But if you’re making really large equipment purchases, or if you have a lower-income year and want to preserve the deduction for future years, bonus depreciation gives you flexibility.

The R&D Expensing Return: Software and Innovation Get Immediate Benefits

If your business does any kind of software development, product innovation, or research activities, there’s another significant change that affects your year-end planning. The new law restored immediate expensing for R&D costs through 2029. For the past few years, businesses had to amortize these costs over five years (or fifteen for international R&D), which created real cash flow problems for innovation-focused companies.

This matters for more businesses than you might think. R&D doesn’t just mean you’re running a laboratory. If you’re a software company developing new applications, a manufacturer improving your production process, or even a service business creating proprietary systems, you might have qualifying R&D expenses.

In another hypothetical example, let’s consider a software company that’s been developing a new analytics platform. They’ve spent about $180,000 this year on developer salaries, cloud computing resources, and testing directly related to this new product. Under the old amortization rules, they could only deduct $36,000 this year (the first year of a five-year amortization schedule).

With immediate expensing restored, that full $180,000 becomes a 2025 deduction. For their S-corporation with income that flows through to the owners in the 32% bracket, that’s a difference of about $46,000 in tax savings this year versus next year. That’s real money they can reinvest in the business instead of sending to the IRS.

The strategic consideration here: if you’ve been holding back on innovation projects because the tax treatment made them less attractive, this year through 2029 gives you a window to accelerate those investments. And if you’re already doing R&D work, make sure you’re properly documenting these expenses and understanding what qualifies.

The QBI Deduction Enhancement: Positioning Your Business for 2026

While we’re talking about year-end moves, there’s a change coming in 2026 that should influence some of your 2025 decisions. The Qualified Business Income (QBI) deduction—also called the Section 199A deduction—increases from 20% to 23% starting in 2026. This permanent enhancement means pass-through business owners will see their effective tax rate on business income drop even further.

Here’s why this matters for year-end planning: the QBI deduction has various limitations and phase-outs based on income levels and business type. If you’re approaching those threshold amounts, strategic timing of income and expenses between 2025 and 2026 could optimize your multi-year tax picture.

For 2025, the QBI deduction phases out for specified service businesses (think law, accounting, consulting, financial services) starting at $197,300 for single filers and $394,600 for married couples filing jointly. These thresholds will increase slightly for 2026 with inflation adjustments.

Let me illustrate with a consulting business scenario. Suppose you’re a business consultant running an S-corp with typical income around $350,000. You’re married and file jointly, so you’re in the phase-out range for the QBI deduction. You’ve got some flexibility on when to bill certain projects and when to make some planned equipment purchases.

If you push $30,000 of billing from December 2025 into January 2026, and pull forward some planned equipment purchases into 2025, you could lower your 2025 income to maximize your QBI deduction in a year it’s only 20%, while preserving more income for 2026 when the deduction jumps to 23%. The math here gets complex because you’re balancing multiple factors, but the strategic opportunity exists.

For businesses not in the specified service category, the phase-out thresholds are higher, and you might have more flexibility. But the principle is the same: understanding that the QBI deduction is getting better next year should factor into your year-end income and expense timing decisions.

Strategic Income and Expense Timing

Beyond the big-ticket items like equipment and R&D, there are more subtle year-end moves that can make a real difference. The basic principle is simple: if you can, you generally want to accelerate deductible expenses into this year and defer income into next year when you expect to be in the same or lower tax bracket.

But here’s where it gets strategic. With several OBBBA provisions being more generous in 2026 than 2025—particularly that QBI deduction increase—some businesses might actually benefit from the opposite approach: deferring expenses and accelerating income into 2025, then taking advantage of better tax treatment in 2026.

These aren’t one-size-fits-all decisions. The right answer depends on your specific income trajectory, business type, and whether you’re in phase-out ranges for various provisions. But October is when you need to start running these scenarios, not December 28th when your options narrow significantly.

Business Interest Deduction Considerations

There’s one more provision worth mentioning if your business carries debt: the business interest deduction limitation returned to the more favorable EBITDA (earnings before interest, taxes, depreciation, and amortization) standard through 2028. Previously it had moved to EBIT (earnings before interest and taxes), which was more restrictive.

This matters most for capital-intensive businesses or those with significant debt. Under the EBITDA standard, you can add back depreciation and amortization to your income when calculating how much interest you can deduct, which generally means more of your interest is deductible.

If you’re running a business with substantial equipment depreciation or debt service, this change might influence whether this is a good year for debt-financed expansion. The more favorable interest deduction treatment makes borrowing less expensive from a tax perspective, at least through 2028.

When These Strategies Actually Apply to Your Business

Not every business should chase every strategy. Let me be clear about when these opportunities actually make sense versus when they’re just complexity without benefit.

Equipment purchase strategies matter most if you were already planning to buy equipment within the next year or two and have sufficient business income to benefit from the deduction. Don’t buy equipment you don’t need just for a tax deduction—the tax tail shouldn’t wag the business dog. But if you’ve been putting off necessary purchases, this year through 2029 offers genuinely attractive tax treatment.

R&D expensing matters if you’re actually doing qualifying research or software development. This isn’t something you can manufacture—the activities have to meet specific IRS definitions around experimentation and technological uncertainty. But if you are doing this work, proper documentation and expense categorization can make a significant difference.

QBI optimization matters most if you’re near the phase-out thresholds or if you’re in a specified service business where the rules are more restrictive. If your income is well below the thresholds, the deduction works automatically, and if you’re well above them in a specified service business, you might be phased out regardless. The strategic opportunity exists most for those in the transition zones.

Income and expense timing strategies require that you actually have some control over the timing. If you’re a cash-basis business with discretion over when you bill or collect receivables, and when you pay expenses or make purchases, you have planning opportunities. If your income and expenses are locked into contracts with minimal flexibility, there’s less room to maneuver—and if you’re an accrual-based business, you must recognize revenue when it’s earned and expenses when they are spent, so there may be less flexibility there as well.

These strategies also assume that saving on taxes is a useful thing in the year you’re saving them. If you’re already paying minimal tax in 2025, it may be more beneficial to take the depreciation on the $100,000 purchase over the next 5-10 years rather than taking it immediately, as in most cases these cannot create losses. If you’re expecting that next year your revenue will be much higher than it is this year, you may want some expenses to be able to offset that income, rather than taking the larger benefit now. This is tax planning in a nutshell—considering all of the different variables and how they work together to create the best benefit for you.

The Documentation Side: Don’t Skip This Part

Here’s something that often gets overlooked in year-end planning: whatever strategies you implement need proper documentation. The IRS doesn’t just take your word for it when you claim large equipment deductions or R&D expensing.

For equipment purchases, you need invoices showing the equipment was placed in service before December 31st. “Placed in service” means it’s ready and available for use in your business, not just ordered or paid for. If you’re buying equipment in December, make sure it’s actually delivered, installed, and operational before year-end, not just on order.

For R&D expenses, you need contemporaneous documentation of the research activities, the technological uncertainty you were trying to resolve, and the systematic process you followed. You can’t recreate this after the fact—it needs to be documented as you do the work.

For income and expense timing, make sure the timing reflects legitimate business reasons, not just tax avoidance. Asking a client to wait a week to pay an invoice so it falls in January is usually fine. Creating complicated arrangements purely to shift timing can create issues if examined later.

When Professional Help Makes Sense

These planning opportunities are real, but they’re also complex enough that mistakes can be costly. You should consider professional guidance if you’re contemplating equipment purchases over $100,000, if you’re doing any R&D work and unsure whether it qualifies, if your business income puts you near any of the QBI phase-out thresholds, or if you’re considering significant income or expense timing strategies.

A few hundred dollars for a year-end tax planning consultation can easily save thousands in unnecessary taxes or help you avoid costly mistakes. The tax code has gotten more favorable for business owners this year, but navigating it still requires expertise.

The Bottom Line: Don’t Let December Sneak Up on You

We’re in mid-October, which means you have about ten weeks to implement year-end strategies. That sounds like plenty of time until you factor in equipment lead times, financing arrangements, and the reality that December gets busy for everyone.

The business tax provisions in the One Big Beautiful Bill Act create genuine opportunities for small and medium-sized businesses. Section 179 doubled, bonus depreciation restored to 100%, R&D expensing back, QBI deduction increasing next year—these aren’t minor tweaks. For a business owner making the right strategic moves, the tax savings can be substantial, which you can then reinvest into more business growth.

But these opportunities require action before December 31st. Equipment needs to be purchased and placed in service. R&D expenses need to be properly categorized and documented. Income and expense timing decisions need to be made and implemented while you still have time to execute them.

If you’re running a business and haven’t yet thought through your year-end tax strategy for 2025, now is the time. Review your capital purchase plans, evaluate your R&D activities, understand your QBI deduction situation, and model whether income or expense timing strategies make sense for your specific circumstances.

The difference between business owners who proactively plan and those who passively let the year end is often measured in five figures of unnecessary tax payments. With the enhanced provisions now available, that difference might be even larger this year.

What to Do Right Now

Start by identifying which of these strategies potentially apply to your business. If you’ve been considering any equipment purchases for the next year or two, run the numbers on accelerating them into 2025. If you’re doing any software development or product innovation work, evaluate whether you have qualifying R&D expenses and ensure they’re properly documented.

Look at your income projections for 2025 and 2026. Are you near any of the QBI phase-out thresholds? Do you have flexibility on when you recognize income or pay expenses? Run some scenarios to see if timing strategies could provide meaningful benefit.

And if any of this feels complex or uncertain, reach out to a tax professional now while there’s still time to implement strategies. December is too late for many year-end planning opportunities because lead times for equipment, documentation requirements, and payment processing timelines can all become constraints.

The new tax law created opportunities for business owners who take advantage of them. Make sure you’re one of them.

Additional Planning Resources

For more detailed guidance on these business tax topics, explore our resource hubs:

• New Tax Law Changes - Comprehensive reference guide to all OBBBA provisions including detailed explanations of Section 179, bonus depreciation, R&D expensing, and QBI deduction enhancements
• Business Operations & Tax Deductions - Deep dives into the QBI deduction, home office rules, recordkeeping requirements, and business expense strategies
• Business Entities & Formation - Entity comparison tools, S corporation guides, and business structure planning resources

These resources provide the technical details and documentation templates that complement the strategic planning advice in this article.

Questions about year-end tax planning for your business? The strategies that make sense depend on your specific situation—business structure, income level, industry, and growth plans all factor into the analysis. Contact JCT Tax Solutions today to schedule a year-end planning consultation. We’ll review your circumstances, model different scenarios, and develop a strategic plan to maximize your tax benefits before December 31st.

This analysis is based on the One Big Beautiful Bill Act provisions as enacted in 2025. While we’ve worked to provide accurate and current information, tax law is complex and individual circumstances vary significantly. The scenarios described are illustrative examples and may not reflect your specific situation. For personalized advice regarding your business’s year-end tax planning, please schedule a consultation with our team. We’re here to help you navigate these opportunities and make informed strategic decisions for your business.