Smart Tax Planning: Essential Tips to Maximize Your Savings

In this December edition of our newsletter, we're diving into the world of tax planning, a crucial skill that can help you keep more of your hard-earned money. With tax season often feeling like a daunting maze, proactive planning can turn it into an opportunity for savings. For the 2025 and 2026 tax years, taking the right approach early can make a meaningful difference in cash flow, compliance, and long-term financial outcomes. Whether you're a freelancer, a small business owner, or just managing your personal finances, these practical tips will guide you toward smarter decisions.

At Numerics, we help both business owners and individuals move beyond reactive tax filing and toward thoughtful, year-round planning. Here’s what each group should be prioritizing.

Tax Planning Tips for Business Owners (2025-2026)

Revisit Your Entity Structure

If your business revenue has changed significantly over the past couple of years, the entity structure that once made sense may no longer be the most tax efficient. For many owners, reviewing whether an LLC or S-Corporation election is appropriate can significantly impact self-employment and payroll taxes. As we approach the end of the year, this is the best time to review your options and make any necessary business structure changes.

Know Your Tax Bracket

Understanding your tax bracket is key to effective planning. Federal income tax rates in the U.S. range from 10% to 37%, depending on your income level. By estimating your annual earnings early and accurately, you can make strategic decisions like deferring income to a lower-tax year or accelerating deductions.

Tip: Use free online calculators from the IRS website to project your bracket. Keep an eye on tax law changes, for example, recent updates to standard deductions or child tax credits could impact your strategy.

Optimize Owner Compensation

How you pay yourself matters. Balancing salary, distributions, and benefits requires careful analysis to remain compliant while minimizing overall tax exposure. Proactive planning helps avoid IRS scrutiny and unexpected liabilities. If you have an S-Corporation, ensure that you do a thorough reasonable compensation analysis to make sure that you are paying yourself a fair salary.  

Use Retirement Plans Strategically

Business owners often have more flexibility than they realize when it comes to retirement contributions. Solo 401(k)s, SEP IRAs, and other plans can reduce taxable income while building wealth, but only when structured correctly based on cash flow and growth plans.

Keep Books Clean and Current

Accurate, timely bookkeeping is the foundation of strong tax planning. Clean books help identify deductions, support estimates, and allow for informed decision-making throughout the year, not just at filing time. There are a number of available accounting software products out there that are easy to use and cost effective. While QuickBooks remains a popular choice, we recommend our clients try Xero and Wave products depending on the complexity of their accounting needs.

Plan for Growth Events

Hiring employees, purchasing equipment, expanding locations, or selling assets all carry tax consequences. Planning these moves in advance during 2025 or 2026 can prevent costly surprises and improve outcomes. A philosophy of measuring twice and cutting once is one that can add some real value here. Change is good and change as a result of growth is even better, however dedicating yourself to planning properly prior to execution is the key to success in this arena.

Tax Planning Tips for Individuals (2025–2026)

Review Withholding and Estimated Taxes

Changes in income, bonuses, investment activity, or side work can quickly throw off withholding requirements. Periodic reviews help avoid underpayment penalties or overpaying and tying up cash unnecessarily. The goal is to have a small amount of tax liability or refund during tax filing season. Remember, money that the IRS or State owes you after you file your tax returns is money that could have earned interest and/or dividends if invested by you instead of overpaying your periodic tax withholdings.

Maximize Retirement Contributions

Contributions to 401(k)s and IRAs remain one of the most effective ways to reduce taxable income. Planning early ensures you take full advantage of available limits and choose the right accounts for your situation. Where you are in your career does impact the strategy you should consider between traditional vs. ROTH retirement account contributions. Consult with your CPA or Financial Planner to work out the most beneficial approach for your specific goals and targets.

Plan for Major Life Events

Buying or selling a home, changing jobs, exercising stock options, or receiving large one-time income can all have significant tax implications. Planning ahead helps reduce stress and improve after-tax results. Timing is critical and so it’s best to reach out to your CPA as early as possible to create a plan that works for you.

Track Deductions and Documentation

Charitable contributions, investment expenses, and other deductions require proper documentation. Consistent recordkeeping throughout the year makes filing smoother and reduces audit risk.

Look Beyond This Year’s Return

Tax planning isn’t just about reducing this year’s bill; it’s about aligning decisions with long-term financial goals. Multi-year planning for 2025 and 2026 can lead to better outcomes than a single-year focus. While your level of income is a big contributor, true wealth is built over time with good habits and proper planning and budgeting.

The Numerics Difference

Whether you’re running a business or managing personal finances, tax planning should be proactive, not reactive. At Numerics, we stay engaged year-round, communicate clearly, and tailor strategies to your specific situation, so you can make confident decisions and avoid unwanted surprises.

We’re here to help you stay ahead.