December isn't just about holiday parties and year-end wrap-ups—it's also your last chance to make smart tax moves that can save you serious money. If you've had a profitable year, the expenses you choose to pay before December 31 can significantly lower your tax bill while setting you up with the services and tools you'll need in the coming year anyway. The secret? Understanding how cash-basis accounting works and getting strategic about your payment timing. 

Understanding the cash-basis advantage

For businesses using cash-basis accounting, which includes most small businesses, expenses are deductible in the year they're paid, regardless of when the actual service or benefit is received. This creates a powerful planning opportunity in the final weeks of the year. By prepaying certain 2026 expenses before December 31, 2025, you can claim those deductions on your current year's tax return while still receiving the full benefit of those services throughout the coming year.

Prepay 2026 expenses in December 2025

The most straightforward year-end tax strategy is identifying recurring business expenses you'll need anyway and paying for them before the calendar flips. This approach works particularly well for subscription-based services and annual contracts that your business depends on.

Consider prepaying these common marketing and operational expenses:

• Digital infrastructure: Annual website hosting and domain renewals are perfect candidates for prepayment. You'll need these services regardless, so paying the annual fee in December rather than waiting until your renewal date in 2025 shifts the deduction into the current year.

• Marketing platforms: Twelve-month subscriptions to email marketing platforms like Mailchimp, Constant Contact, or ConvertKit can be paid annually rather than monthly. The same applies to social media management tools, scheduling platforms, and analytics software.

• Service retainers: If you work with freelancers or agencies on a retainer basis—for social media management, content creation, or graphic design—consider paying for Q1 2026 services in December.

• Advertising commitments: Annual advertising contracts or prepaid ad spend with Google, Facebook, or industry publications can generate immediate deductions while securing your marketing presence for the year ahead.

• Cloud storage and software: Annual subscriptions for cloud storage services that house your marketing materials, project management tools, or design software all qualify.

The financial benefit is straightforward: prepaying these expenses reduces your 2025 taxable income, potentially dropping you into a lower tax bracket or reducing your self-employment tax burden. Meanwhile, you've already paid for services you'll use throughout 2026, improving your cash flow planning for the new year.

Important caveat: The IRS allows prepayment deductions only for services extending 12 months or less beyond the payment date. Keep clear documentation showing both the payment date and the service period covered. Your accountant will thank you come tax time.

Accelerate planned marketing investments

Beyond recurring subscriptions, consider whether any planned marketing investments could be moved from January into December. If you're experiencing a profitable year, accelerating these expenses can meaningfully reduce your current tax liability while still delivering strategic value to your business. Consider:

• A website redesign or major update you've been planning can move forward a few weeks earlier. The work serves your business the same whether it's completed in late December or early January, but the tax treatment differs significantly.

• Professional photography sessions for your 2026 marketing materials, product shots, or team headshots can be scheduled and paid for before year-end. The photos will be just as valuable in your January campaigns, but the expense reduces your 2025 taxes.

• Brand identity work, like logo refreshes or design updates from creative professionals, can be commissioned and paid for in December, even if final deliverables arrive in early January.

• Marketing consulting services or strategy sessions to plan your 2025 approach become immediately deductible when paid before December 31.

• Upgrading software subscriptions from basic to professional tiers—especially for tools you know you'll need at the higher level—locks in the deduction for the current year.

The strategic reasoning

The logic behind accelerating expenses is simple but powerful: if you're having a profitable year, these prepayments reduce your tax liability while funding marketing initiatives that would benefit your business regardless of timing. You're not spending money you wouldn't otherwise spend—you're simply being strategic about when that spending occurs.

This approach works best when you have clear visibility into your annual profit and confidence in your investments. The goal isn't to spend frivolously just to reduce taxes but rather to time inevitable and valuable business expenses in a way that provides maximum financial benefit. 

As always, consult with your accountant before making significant year-end purchases to ensure they align with your overall tax strategy and financial situation.