Building Wealth and Cutting Taxes: A Real Look at Smart Year-End Planning for U.S. Entrepreneurs

For many small business owners, year-end can feel like standing at the intersection of opportunity and overwhelm. There’s revenue to report, bonuses to pay, and—most importantly—strategies to make sure your hard-earned money doesn’t slip away to unnecessary taxes.

That’s exactly where Mark and John, two driven U.S. entrepreneurs, found themselves this fall. Their business had just crossed $3 million in sales, with a healthy 57% gross profit margin, but they knew that numbers alone don’t build wealth — strategy does. When we sat down to map out their tax and financial plan for 2025, what unfolded was a roadmap every business owner can learn from.

Turning Profit into Purpose: Structuring Smart Compensation

Like many business owners, Mark and John were paying themselves inconsistently — a common mistake that can hurt both retirement savings and tax efficiency.

We began by designing a balanced compensation strategy that aligned with IRS guidelines while maximizing take-home pay. The key was striking a healthy balance between wages and distributions — allocating a portion of earnings as salary (subject to payroll and retirement deductions) and the remainder as profit distributions (which are not subject to self-employment taxes).

This simple shift can mean thousands in tax savings each year, and it also sets the foundation for retirement plan contributions and cleaner bookkeeping.

Investing in the Future: Retirement Plans That Reward You Twice

When it comes to retirement planning for entrepreneurs, the options go far beyond an IRA. For Mark and John, we explored two high-impact strategies:

1. A Small Business 401(k) with Profit Sharing, allowing up to $69,000 per person in contributions. It’s a win-win: business deductions today and wealth growth tomorrow. Plus, with the IRS Small Employer Credit, the setup costs are nearly free.
2. A Management S-Corporation with a Solo 401(k) — an advanced approach where a new entity handles management fees, enabling the owners to contribute independently of employee limits. This strategy adds flexibility for timing and fiscal-year planning — ideal for entrepreneurs managing multiple ventures.

Even if time runs short before December 31, options like a SEP IRA or Backdoor Roth IRA can keep tax savings on track into early 2026.

For business owners who use vehicles primarily for work, buying (not leasing) before year-end can unlock powerful deductions. As long as it’s titled under the business and used over 50% for business purposes, it’s a legitimate — and often overlooked — tax advantage.

Managing Cash Intelligently: Balancing Liquidity and Growth

With more than half a million dollars in business cash, Mark and John faced another challenge: how to keep money working without losing flexibility.

The solution was elegant — maintain cash to cover 4 months of expenses in the business and invest the rest in short-term U.S. Treasuries and money market funds.

In today’s high-interest environment, idle cash can earn 4–5% risk-free, offering both liquidity and yield. It’s a simple reminder that smart money management is about movement, not stagnation.

The Year-End Tax Moves That Matter Most

As December approaches, small business tax planning becomes all about timing. Strategic income deferral and expense acceleration can dramatically shift your tax bill.

We structured Mark and John’s books to:

• Prepay rent and marketing expenses before year-end,
• Defer income by holding late-December checks until January, and
• Pay themselves “home office rent” ($1,000/month), which is deductible to the business and tax-free personally.

These micro-decisions may sound small, but they often translate into five-figure tax savings when executed consistently.

Protecting Health, Growing Wealth: The HSA Advantage

Another key area we addressed was healthcare. Mark and John were using a faith-based plan that didn’t qualify for an HSA (Health Savings Account) — one of the most underutilized tax tools available to Americans.

By switching to a High-Deductible Health Plan (HDHP), they could contribute $8,550 per year (family limit), save roughly $2,000 in taxes, and let those funds grow and compound tax-free. For business owners, this essentially acts as an additional retirement account with medical benefits.

Giving Back with Intention: The Power of Charitable Deductions

Philanthropy isn’t just about generosity — it’s a cornerstone of good tax planning. By making charitable donations directly from the business account, Mark and John ensure those contributions are fully deductible. Tracking non-cash donations, like clothing and household items, further boosts their write-offs while supporting causes they care about.

The Bigger Picture: Turning Income Into Impact

Mark and John’s story isn’t just about numbers — it’s about building a financial ecosystem that sustains their business, family, and future.

Their success reinforces a timeless truth: tax planning isn’t about avoiding taxes; it’s about aligning your money with your mission. Whether it’s leveraging a 401(k), optimizing cash flow, or timing deductions, every choice compounds into long-term freedom.

As we head into year-end, it’s worth asking:

Are your profits working as hard for you as you worked for them?

The best time to plan your taxes was yesterday. The second best is today. Schedule a financial review and close the year not just with strong numbers — but with a strategy that lets you keep more of what you earn.