Year-End Tax Planning for Attorneys and Law Firms

As the year comes to a close, tax planning at the end of the year gives lawyers and law companies a great chance to improve their financial strategies.  When you're a lawyer, handling your taxes isn't just about following the rules; it's also about setting up your practice for long-term growth, profit, and success.  Because tax laws are complicated and running a law company has its own unique financial needs, it is important for attorneys to plan their taxes ahead of time.  Whether you run a solo practice or a company with multiple partners, smart tax strategies for law firms can lower your tax burden, improve cash flow, and make sure you follow the rules, which are always changing.

This article talks about why it's important for lawyers and law firms to plan their taxes at the end of the year and gives them information they can use, as well as answers to common questions.  We wrote this with the help of Pathfinding Consultants to make the process easier and give lawyers the tools they need to make smart choices that help their businesses.

Why Year-End Tax Planning Matters for Law Firms

Year-end tax planning means looking over your finances before December 31 to find ways to save money on taxes and make sure you're following the rules.  This is especially important for lawyers because of the high-paying nature of their job, the costs of running a business, and the fact that they may be able to get big tax breaks.  You may not be able to use deductions, credits, or deferral tactics after the new year starts if you don't act before the end of the year.

Key Law Firm Tax Strategies to Implement Before Year-End

As you plan your taxes for the end of the year, here are some tried-and-true tax methods for law firms.  You can reduce your tax bill and improve your financial situation by taking these steps.

1. Optimize Billing and Collections

Making sure your company has a strong cash flow is the first step to good year-end tax planning.  Do not wait until December to start paying and collecting. Instead, start in Q4.  Talk to your partners about taking care of client billing problems right away, whether it's negotiating discounts or settling disagreements, so you can quickly get your fees back.

Actionable Tip: Set up a meeting with a partner to go over accounts receivable.  To avoid delays, try to get discounts before you send the bills if you need to.  For instance, if a company gets $50,000 in late fees by December 31, it can use that money to pay for tax-deductible costs ahead of time, which lowers its taxable income.

2. Maximize Tax Deductions for Lawyers

Law companies can lower their taxable income in a number of ways.  Some important tax breaks for lawyers are:

• Office Expenses: Rent, utilities, and office goods can be written off as office costs.  As of 2025, Section 179 lets you deduct up to $1,220,000 in qualified equipment bought this year, such as computers or furniture.

• Professional Expenses: For professional costs, you can deduct everything, including bar association fees, CLE classes, and malpractice insurance.

• Marketing Costs: Website upkeep, advertising, and client entertainment (up to the limits set by the IRS) are all examples.

• Home Office Deduction: If you have a separate room in your house where you work, figure out the claim based on the size of the room.

3. Schedule Accountant Meetings for Tax Projections

In the fourth quarter, meet with your company's accountant to go over year-end forecasts and make sure that your estimated tax payments are correct.  For cash-basis taxes, paying for things like rent and subscriptions ahead of time in December could lower their taxable income in 2025.  Also, look at how the cost of borrowing money affects the amount of debt you have and think about paying off revolving credit bills if your cash flow allows it.

4. Leverage Retirement Contributions

A great way for law firms to save on taxes is to put money into a retirement plan like a SEP-IRA or Solo 401(k).  Donations are tax-deductible and lower the amount of income that is taxed.  Up to 25% of net self-employment income, or $69,000, can be put into a SEP-IRA in 2025.

Tip: Talk to your attorney about which plan works best for the size and goals of your business.  If you are an attorney who works alone, a solo 401(k) is best for you. For small companies with employees, a SEP-IRA is better.

State and Local Tax Considerations

Law firms face unique state and local tax challenges, especially with the rise of remote work. Here are critical areas to address during year-end tax planning.

5. New York City Unincorporated Business Tax (UBT)

Law companies in New York City that let their employees work from home can lower their Unincorporated Business Tax (UBT) by lowering the percentage of money that goes to the city.  The way UBT is split up depends on where law services are provided.  If your workers work outside of the five boroughs, keep track of where they are and give your tax accountant this information before you file.

6. State and Local Tax Nexus Issues

The move to working from home has made it harder to connect and divide up tasks.  If your workers work from other states or countries, your business may have to file taxes or withhold taxes in new ways.  Talk to your tax professional to figure out how much your business owes in state and local taxes and how to minimize those responsibilities.

Tip: Maintain a log of employee work locations and review it during year-end tax planning to avoid unexpected tax bills.

7. Pass-Through Entity Tax (PTET)

Partnerships and S-corporations that chose the New York State or NYC Pass-Through Entity Tax (PTET) for 2025 need to make their expected Q4 tax payment by December 15, 2025. The final payment is due March 15, 2026.  Make sure you pay these bills on time to avoid fees.

Question: What is PTET, and why does it matter?With PTET, certain businesses can pay their state taxes at the entity level, which could get around the federal caps on state tax deductions.  A tax planning for law companies expert can tell you for sure if PTET is good for your business.

Additional Year-End Tax Tips and Strategies

8. Budgeting and Forecasting for 2026

The end of the year is a great time to think about your 2026 budget.  Look at expenses that aren't necessary, like marketing, travel, or company events, and think about moving money to areas that will have a bigger effect, like using AI tools or making cybersecurity stronger.  The law field is changing, and moving resources around can make things run more smoothly and improve customer service.

Tip: Involve your leadership team in budgeting discussions to align financial goals with strategic priorities.

9. Strengthen Cybersecurity

As more lawyers work from home, they need to make safety a top priority to keep client data safe.  Cybercrime has become more common, and home networks that aren't locked down are dangerous.  Hire an outside IT expert to look over your policies and make sure they are in line with data protection laws.

Tip: Deduct costs for cybersecurity software or consulting services as business expenses during year-end tax planning.

10. Avoid Common Tax Planning Mistakes

• Missing Deadlines: Due dates for retirement contributions and PTET payments are very strict (for example, December 15 for Q4 PTET).  Make plans ahead of time to avoid fines.

• Poor Recordkeeping: Lawyers can miss tax breaks if their records aren't correct.  For organization, use financial tools that run in the cloud.

• Ignoring Tax Law Changes: Keep up with changes to the 2025 tax code that affect law firms, like new deductions or credits.

• Overlooking Small Deductions: More tax tips for lawyers at the end of the year

Additional Year-End Tax Tips for Attorneys

Beyond the core strategies, here are additional year-end tax tips to enhance your tax planning for attorneys:

• Review Estimated Tax Payments: Lawyers usually pay estimated taxes every three months.  Make sure you've paid enough to escape penalties for not paying enough.  If you paid too much, change your last payment to get more cash.

• Charitable Contributions: Donations to certain charities are tax-deductible.  If your company hosts community events or gives away free legal services, keep track of these so that you can possibly deduct them.

• Hire a Tax Professional: It can be hard for law companies to plan their taxes.  A tax consultant with knowledge in the legal field, like the ones at Pathfinding Consultants, can help you find chances you might otherwise miss.

Common Mistakes to Avoid in Year-End Tax Planning

Even experienced attorneys can make tax planning mistakes. Here are pitfalls to avoid:

• Missing Deadlines: A lot of payments, like retirement contributions, need to be made by December 31.  Set due dates and plan ahead.

• Poor Recordkeeping: If you don't keep good records, you might miss tax breaks for lawyers.  To stay on top of things, use accounting tools or hire a bookkeeper.

• Ignoring Tax Law Changes: Tax laws change every year.  Make sure you know about any new tax breaks, credits, or limits that apply to law companies in 2025.

• Overlooking Small Deductions: Small costs, like gas for meetings with clients or legal magazine subscriptions, add up over time.  Keep a close eye on them.

How Pathfinding Consultants Can Help

Pathfinding Consultants is an expert in tax planning for lawyers and tax plans for law firms.  Our team knows how to handle the unique problems that come up in the law field, such as figuring out how to best use deductions and handle contingency fees.  What we offer:

• Personalized Tax Planning

• Compliance Support

• Year-Round Guidance

We stand out because we have industry-specific knowledge in the law field.  For law companies, we know everything there is to know about tax planning. We'll make sure you get the most out of your deductions and strategies.

Read More: How Does Tax Consulting Save Money?

Read More: How Does Tax Consulting Save Money?

Takeaways for Year-End Tax Planning

Tax planning at the end of the year is a great way for lawyers and law companies to save money on taxes, make more money, and plan for growth.  You can improve the financial health of your firm by taking advantage of tax breaks for lawyers, putting off income, speeding up spending, and using retirement plans.  Don't make common mistakes like not keeping good records or missing deadlines. Instead, work with a tax planning for lawyers expert to make sure you're following the rules and saving as much money as possible.

Start your year-end tax planning today to take control of your firm’s financial future. Contact Pathfinding Consultants to schedule a consultation and discover how our law firm tax strategies can benefit your practice. Let’s make this year’s tax season your most successful yet.