Hi, I’m Bette Hochberger, CPA, CGMA. When the year comes to a close, it’s the perfect time to reflect on your financial strategies, particularly when it comes to taxes. Many individuals and businesses can benefit from strategic planning to minimize their tax liability. One effective approach is to accelerate your expenses before the end of the year. In this blog, I’ll go over how you can implement this strategy effectively.

Understanding the Concept

Accelerating expenses means prepaying certain costs or making purchases before the year ends, thereby reducing your taxable income for the current year. By doing this, you can potentially lower your tax bill, giving you more money to invest in your future. But how do you go about it? Let’s dive into some practical tips!

Prepaying Expenses

One of the simplest ways to accelerate your expenses is by prepaying bills or services that you know you will incur in the following year. This can include:

  • Rent: If you’re a business owner, consider paying your rent for January in December. This will allow you to deduct that expense this year.
  • Insurance Premiums: If you have insurance policies, such as business liability insurance or health insurance, check if you can pay your premiums in advance.
  • Subscriptions and Memberships: If you subscribe to software or services that you will continue using in the new year, consider paying for them in advance.

Buying Equipment and Supplies

Another effective strategy is to invest in equipment or supplies that you need for your business. If you purchase items that qualify for deductions—such as computers, office furniture, or inventory—before the end of the year, you can claim these expenses on your current return.

Tip: Be sure to keep receipts and documentation for any purchases, as these will be crucial when it comes time to file your taxes.

Donating to Charity

If you’re looking for a way to give back while also benefiting your tax situation, consider making charitable donations before the year ends. Not only will this help those in need, but it can also provide you with a significant tax deduction. Make sure to get a receipt for your donations, as proof is essential for your tax records.

Consulting a Tax Professional

While these strategies can be beneficial, it’s always wise to consult with a tax professional. They can provide personalized advice based on your individual financial situation and ensure that you maximize your deductions while staying compliant with tax laws.

So, when the year draws to a close, taking proactive steps to accelerate your expenses can lead to significant tax savings. Whether it’s prepaying bills, investing in necessary equipment, or making charitable donations, each of these strategies can help you keep more money in your pocket. Remember, the key is to plan ahead and take action before the clock strikes midnight on December 31st.

So, roll up your sleeves, review your finances, and start planning those year-end moves! I’ll see you next time.