The "12-Month Rule" Tax Loophole
Plus: The Zero-Based Calendar & The "Unroll" Purge | Tuesday, December 30, 2025
– 3 min read
Can You Pay 2026 Rent Today? (Yes)
It’s December 30.
You have cash in the bank and want to lower your 2025 taxable income.
You ask: “Can I pre-pay my January-June rent or insurance right now and deduct it on my 2025 return?”
The Answer
Yes, thanks to the IRS “12-Month Rule” (Reg. 1.263(a)-4(f)).
The Rule
A cash-basis taxpayer can deduct a prepaid expense immediately if:
- The benefit does not extend beyond 12 months.
- The benefit does not extend beyond the end of the tax year following the year of payment.
The Play
- Insurance: Pay your full 2026 business liability policy ($2,000) today. Fully deductible in 2025.
- Rent: Pay your January-December 2026 rent today. Fully deductible in 2025.
- Software: Pay the annual subscription for Salesforce/Zoom/Adobe today. Fully deductible in 2025.
