Assessing Your Current Financial Position
The foundation of effective tax planning begins with understanding where your business stands today. Taking time to review your year-to-date profit and loss statements and comparing them to previous years can reveal important trends. You might discover that revenues are running higher than anticipated, or perhaps unexpected expenses have impacted your bottom line. These insights become particularly valuable when you still have several months remaining in the year to make adjustments.
For those required to make estimated tax payments – including self-employed professionals, freelancers, S corp owners, and certain investors – mid-year serves as a crucial checkpoint to evaluate whether your payments are on track. The IRS provides safe harbor rules that can help you avoid underpayment penalties, typically by paying at least 100% of your previous year’s tax liability (or 110% for higher earners). W-2 employees, including S corp owners who receive salaries, should also review their withholdings at this time, especially if they’ve experienced significant life changes like marriage, having a child, or starting a side business.
Strategies to Reduce Your Taxable Income
Once you’ve evaluated your current financial position, the next step involves exploring legitimate ways to reduce your taxable income before year-end. One of the most straightforward methods involves maximizing contributions to tax-advantaged retirement accounts. Self-employed individuals and small business owners have several attractive options available, including SEP-IRAs which allow contributions of up to 25% of net earnings (with a 2025 maximum of $69,000), and Solo 401(k) plans that permit both employee and employer contributions with the same maximum limit plus an additional $7,500 catch-up contribution for those aged 50 and above.
Investing in necessary business equipment before year-end presents another valuable opportunity for tax savings. The Section 179 deduction allows businesses to immediately expense qualifying equipment purchases up to $1.22 million in 2025, while bonus depreciation rules permit deducting 60% of eligible asset costs upfront. Beyond these major strategies, business owners should also consider other potential deductions including properly documented home office expenses, self-employed health insurance premiums, and eligible startup costs for newer businesses.
Identifying Valuable Tax Credits
While deductions reduce taxable income, tax credits provide even more valuable dollar-for-dollar reductions in your actual tax bill. Many business owners overlook available credits simply because they don’t take time to investigate their eligibility. The Research & Development credit, for instance, isn’t just for tech companies or laboratories—all businesses that invest in product improvements, software development, or process innovations may qualify. Recent expansions to energy efficiency credits under the Inflation Reduction Act have made various green initiatives more financially attractive, including solar installations and EV charging stations. However, businesses interested in taking advantage of the EV charging station tax credit should act fast—this incentive is set to expire on September 30, 2025. Meanwhile, the Work Opportunity Tax Credit remains available for businesses that hire from specific demographic groups including veterans and the long-term unemployed.
The Importance of Proactive Planning
Perhaps the most common mistake business owners make is delaying their tax planning until the final weeks of the year. By December, the combination of holiday demands and approaching deadlines often leads to rushed decisions and missed opportunities. The summer months typically offer more time for thoughtful financial analysis and strategic decision-making. This is the ideal time to project your likely tax liability, evaluate your cash flow needs for upcoming tax payments, and implement strategies to maximize deductions and credits.
At Goodman CPA, we specialize in helping business owners navigate these decisions with confidence. Our mid-year tax reviews have helped countless clients identify savings opportunities and avoid the last-minute scramble that so often leads to paying more taxes than necessary. By taking action now, you can position yourself for a smoother year-end and potentially significant tax savings.
Taking Control of Your Financial Future
Effective tax planning isn’t an annual event; it’s an ongoing process that benefits from regular attention. The strategies you implement now can have a substantial impact on your year-end tax situation and your overall financial health. Whether it’s adjusting your estimated payments, maximizing retirement contributions, taking advantage of equipment deductions, or claiming overlooked credits, the mid-year point offers a valuable opportunity to make meaningful improvements to your tax outlook.
If you’d like professional guidance in evaluating your specific situation, Goodman CPA stands ready to help. We invite you to schedule a mid-year tax review consultation, where we can analyze your unique circumstances and help you develop a customized plan to minimize your 2025 tax liability while supporting your broader business objectives.
Get in touch, and together we’ll discover exactly how much we can help you save.