Believe it or not, we’re once again nearing the end of the tax year. With December fast approaching, we want to emphasize the need for timely year-end tax planning and cash management. These two components of financial management work together to support your business and personal goals. Let’s go over some base-level considerations related to tax planning and cash management for your veterinary practice.

Tax Planning Considerations

At its core, tax planning—whether for an individual or a business—aims to project and manage tax liability. Since many veterinarians are also practice owners, early planning is essential for both business and individual tax purposes. Here are some proactive steps you can take at the practice level to manage your tax liability and avoid surprises come April 15^th.

1. Cash Basis Planning: If your hospital reports on an accrual basis, a conversion to cash/tax basis may be necessary.
2. Plan for Equipment Purchases Before Year-End: Section 179 and bonus depreciation allow businesses to immediately deduct the full cost of qualifying equipment placed into service during the tax year. To qualify for a tax deduction for this tax year, make sure the equipment is purchased, physically received, and placed into service by December 31^st.
3. Maximize Tax-Advantaged Retirement Contributions: For practice owners, selecting the best tax-advantaged retirement plan depends on whether you have employees, your annual income, and how much you want to contribute. Common options include a 401(k), SEP IRA, SIMPLE IRA, and Defined Benefit Plan. Maximizing tax-advantaged retirement contributions in the right plan as an employer is one of the most effective tax management strategies.
4. Year-End Employee Bonuses: Are you considering a little something extra at year-end for your practice’s hard-working staff? Bonuses are deductible and take various forms: profit-sharing, retention bonuses, production-based bonuses, or discretionary year-end bonuses. Bonuses are used to reward performance, encourage retention, and incentivize your team. If you plan to issue your team bonuses as a “thank you” and as a tax planning decision, issuing a simple check or cash payment without proper tax withholding will not suffice. IRS regulations require that year-end bonuses be processed through payroll and be properly taxed and reported. Make sure you are compliant to avoid incurring any additional penalties and liabilities.

Cash Management

Cash management is essential for achieving your tax planning goals and ensuring you have the cash you need to operate. Tax planning helps you make informed purchasing decisions and drives cash management through year-end. Below are some considerations to keep in mind when it comes to cash management.

1. Consider When It Does and Does Not Make Sense to Pre-Pay: For practices that report on a cash basis, there may be opportunities to pay certain expenses in the current year.
2. Reserve Cash for Slower Months: Figure out the amount you need set aside for taxes and overhead expenses in advance to ensure you always have enough cash readily available to cover these expenses during slower months.
3. Consider Whether to Finance Equipment: Cash management can help you determine whether you should finance new equipment purchases or pay with cash up front.
4. Negotiate with Vendors: To improve your practice’s cash flow, look for vendors with flexible payment terms or negotiate flexible terms when possible.

Let RBT Help You with Tax Planning and Cash Management

Above are just some of the factors that play a role in tax planning and cash management for veterinary practices. Year-end will be here before we know it, so it’s important to get started on your tax planning now, especially in light of recent tax law changes under the One Big Beautiful Bill Act. At RBT CPAs, we help practices project and manage tax liability through strategic tax planning and provide advice on cash management so you can reach your goals. Give RBTs’ veterinary accounting team a call today to make an appointment and find out how we can be Remarkably Better Together.