If you run a consulting or professional services business, chances are you’re busy finishing client projects, closing contracts, and planning for next year. But the fourth quarter is also your last chance to make meaningful tax moves before the calendar resets.
Many professional services business owners and consultants wait until March or April to think about taxes, but it’s too late to make changes by then. Q4 is your window to time expenses, optimize deductions, and position your business for stronger cash flow in the year ahead.
With a few proactive steps, you can capture tax deductions for consultants that make a real difference when tax season arrives.
1. The Qualified Business Income (QBI) Deduction
Under the 2025 Tax Relief Act, the Qualified Business Income (QBI) deduction is now permanent and is one of the most valuable tax breaks available to consultants and other professional-services firms.
If you operate as a sole proprietor, partnership, or S corporation, you can deduct up to 20% of your QBI. For 2025, the deduction begins to phase in any limitations once taxable income exceeds about $197,300 for single filers or $394,600 for joint filers. Above these levels, the calculation may be limited by wage and property tests or fully phased out for “specified service trades or businesses” (SSTBs) such as consulting, accounting, legal, or financial-advisory work.
For smaller businesses, there’s now a minimum deduction floor. Taxpayers with at least $1,000 of active qualified business income can claim a minimum QBI deduction of $400, even if income is low.
What to do now:
- Estimate your year-end taxable income. If you’re near or above the phase-out range, you may be able to reduce income through accelerated expenses or additional retirement contributions.
- Review your S corp salary and distributions as “reasonable compensation” rules will affect how much of your profit counts as QBI.
- Ensure your records are accurate as QBI is based on net business income after expenses.
- Work with your CPA to model how this deduction applies to your situation, especially if you own multiple pass-through entities or have both SSTB and non-SSTB income.
2. Home Office and Workspace Expenses
If you regularly and exclusively use a space in your home for business, you may qualify for the home-office deduction. This means that the space is used for business activities on a consistent basis and not for any personal use. For example, not doubling as your guest room or dining table.
This applies whether you rent or own, and it can include a portion of your rent, mortgage interest, property taxes, utilities, internet, and phone.
What to do now:
- Make sure your workspace meets the “regular and exclusive use” rule.
- Gather documentation for rent, utilities, and internet bills.
- Use either the simplified method ($5 per square foot, up to 300 sq ft) or the actual expense method.
- Don’t forget to include furniture, equipment, and décor used for business only.
3. Professional Services and Subcontractors
When you hire another professional, such as a bookkeeper, CPA, marketing consultant, or designer, those fees are deductible as long as they’re directly related to your business.
What to do now:
- Make sure all invoices for 2025 services are dated before December 31.
- If you’re on a cash-basis method, pay them before year-end so they count this tax year.
- Keep records describing what the work was for and how it relates to your business.
4. Travel, Meetings, and Client Meals
Traveling for client work, attending conferences, or meeting clients for meals are all legitimate deductions when properly documented. Most business-related meals are 50% deductible, and travel expenses such as flights, hotels, taxis, and mileage are generally deductible when tied to client work.
What to do now:
- Keep logs showing who you met, where, and the business purpose.
- Separate personal portions of mixed-purpose trips.
- Consider prepaying early-2026 conference registrations or travel deposits if you plan to attend.
5. Software, Subscriptions, and Technology
Your business runs on technology, from accounting software to CRMs and project-management tools. These are deductible expenses that can add up quickly. Larger purchases such as laptops, monitors, or office equipment may also qualify for Section 179 expensing or bonus depreciation, allowing you to write off the cost this year.
What to do now:
- Review all your current subscriptions and cancel unused ones.
- If you genuinely need upgrades or replacements, buy and place them in service before December 31.
- Keep receipts showing purchase dates, amounts, and business purpose.
6. Retirement Plans and Owner Benefits
Setting up or contributing to a retirement plan is one of the most powerful ways to reduce taxable income. Consultants often qualify for SEP-IRAs, Solo 401(k)s, or even Defined Benefit Plans, depending on income and structure.
What to do now:
- Estimate your profit for the year and decide how much you can contribute.
- Remember that many plans must be established by December 31, even if you fund them later.
- Use these contributions strategically to manage taxable income and qualify for other deductions like QBI.
7. Prepaying or Accelerating Expenses
Cash-basis taxpayers can often choose when to pay expenses to shift deductions between years. For example, paying January rent or a marketing retainer in December may let you claim the deduction this year.
What to do now:
- Review your projected income for both this year and next.
- If you expect a higher taxable income this year, it may make sense to accelerate legitimate expenses.
- Avoid unnecessary purchases. Spend for business reasons, not just to chase a deduction.
Bring Clarity to Your Year-End Numbers
Tax planning doesn’t have to be overwhelming. With organized books and the right structure, you can finish Q4 knowing you’ve made the most of your deductions, without scrambling in April.
Affinity Accounting works with consultants and professional-services firms across the U.S. to simplify their accounting, tax, and CFO functions. If you want to review your Q4 deductions or make sure you’re set up for next year, we’d be happy to help.
Book a quick introductory call to see how we can bring more clarity and confidence to your numbers.
