If you run a business, the weeks between now and December 31 are the last real window to influence your 2026 tax outcome. Once the calendar flips to January, most of your options disappear and you are left reporting on decisions already made. This year-end tax planning checklist walks through the moves worth reviewing before the year closes, from projecting taxable income to evaluating retirement contributions, equipment purchases, and the Qualified Business Income deduction under current 2026 law, including the permanent changes made by the One Big Beautiful Bill Act (OBBBA).
Start here. Not every item applies to every business, but this is the list worth running through before you decide what needs attention.
☐ Review 2026 year-to-date profit
☐ Project full-year taxable income
☐ Review estimated tax payments
☐ Evaluate retirement contributions
☐ Evaluate planned equipment purchases
☐ Review depreciation opportunities
☐ Review QBI deduction eligibility
☐ Review owner compensation and distributions where relevant
☐ Evaluate charitable giving
☐ Review state tax exposure
☐ Identify major transactions before year-end
☐ Schedule a CPA review before December 31
Some of these will not apply to your business at all, and that is fine. A sole proprietor with no employees has a very different checklist than an S corporation with payroll. Use this list to quickly identify which sections below are worth your time.
Every year-end strategy depends on knowing where you actually stand. Before evaluating any specific move, project your full-year taxable income using what you know now: year-to-date revenue and expenses, expected November and December activity, payroll costs, owner compensation, depreciation already taken, and any major transactions completed or planned.
It helps to separate book profit from taxable income early on, since the two are not always the same number. Book profit reflects your accounting records and how the business is performing day to day. Taxable income reflects adjustments required under the tax code, including depreciation methods, certain accrued expenses, and other timing differences. A business can be solidly profitable on its books and still land on a very different taxable income figure once these adjustments apply.
This is also where clean, current bookkeeping matters most. A projection built on stale or incomplete records is only a guess, which is one reason structured bookkeeping and year-end tax planning tend to work best as one connected process rather than two separate conversations that happen months apart.
If you make quarterly estimated tax payments, year-end is the time to check whether what you have paid so far lines up with your projected liability.
The IRS generally requires estimated payments when a taxpayer expects to owe at least $1,000 for the year after withholding and credits. To avoid an underpayment penalty, individuals generally need to pay the smaller of 90 percent of the current year’s tax or 100 percent of the prior year’s tax, rising to 110 percent if the prior year’s adjusted gross income was above $150,000 (or $75,000 for married filing separately).
Reviewing your position now, rather than in April, gives you time to make an additional payment if your projection shows a gap. It does not guarantee penalties will be avoided in every situation, since individual facts vary, but it does give you the information needed to make an informed decision. For tax filing and compliance questions specific to your entity type, a CPA review before year-end is more reliable than guessing.
Retirement planning is one of the more flexible year-end levers available to business owners, but the details depend heavily on your entity type and plan structure.
For 2026, the IRS has set the 401(k) employee elective deferral limit at $24,500, with an $8,000 catch-up contribution available for participants age 50 and older, and an enhanced catch-up of $11,250 for those ages 60 through 63. The SEP IRA limit for 2026 is the lesser of 25 percent of compensation or $72,000. These figures come directly from IRS guidance and are subject to your specific plan document, so confirm exact limits and deadlines before making a contribution decision.
Not every contribution has to happen by December 31. Some plans need to exist by year-end even if funding comes later, while others follow the business’s tax filing deadline. Confirming which rule applies to your plan avoids either missing an opportunity or assuming a deadline that does not apply to you.
Equipment purchases are one of the most commonly misunderstood year-end tax moves. Buying equipment before December 31 does not automatically mean the full cost is deductible immediately. That depends on the depreciation method available, whether the asset was actually placed in service by year-end, business-use percentage, and overall taxable income.
Under the One Big Beautiful Bill Act, 100 percent bonus depreciation was restored and made permanent for qualifying property placed in service after January 19, 2025, meaning eligible new and used business assets placed in service in 2026 can generally be deducted in full in the year placed in service, subject to eligibility and business use. Section 179 works differently: for 2026, the maximum deduction is $2,560,000, phasing out once qualifying purchases exceed $4,090,000. Unlike bonus depreciation, Section 179 cannot exceed the business’s taxable income, so it cannot create or increase a loss.
The asset also has to be placed in service, meaning ready for its intended business use, by December 31. Regular depreciation applies to any cost not covered by Section 179 or bonus depreciation, spreading the deduction over the asset’s useful life instead of taking it all at once.
None of this changes the underlying principle: equipment should be purchased because the business needs it, not purely because a deduction exists. Tax treatment is a factor to evaluate once the business decision is already sound, not the reason to make the purchase.
The Section 199A Qualified Business Income deduction allows eligible owners of sole proprietorships, partnerships, and S corporations to deduct up to 20 percent of qualified business income, subject to income limitations and, for certain service businesses, additional restrictions.
The One Big Beautiful Bill Act made this deduction permanent, removing the expiration date previously scheduled for the end of 2025. For 2026, the full deduction is generally available for taxpayers with taxable income at or below approximately $201,750 (single) or $403,500 (married filing jointly), per current IRS inflation adjustments. Above these thresholds, wage and property limitations and specified service trade or business rules can reduce or eliminate the deduction, though OBBBA widened the phase-in range and introduced a new $400 minimum deduction for taxpayers with at least $1,000 of qualified business income who materially participate.
It is not accurate to say every LLC automatically receives a 20 percent deduction. Eligibility depends on business type, taxable income, whether the business is a specified service trade or business, and W-2 wages and qualified property held. A CPA review of your specific numbers is the only reliable way to know where you fall.
Year-end planning should also look at the relationship between business profit, owner compensation, and distributions, since these decisions interact with estimated taxes, payroll taxes, and retirement contribution capacity.
For S corporation owners specifically, reasonable compensation requirements mean an owner who works in the business generally needs to be paid a salary reflecting the value of services provided, before any distributions are taken. Distributions are not automatically tax-free; they reduce the owner’s basis in the business and can carry tax consequences depending on that basis and other factors. Reviewing this relationship before year-end, rather than after the return is filed, leaves room to adjust while it still matters.
Charitable giving can be part of year-end planning, but the tax treatment should be a secondary consideration to the philanthropic decision itself. Cash and non-cash contributions carry different documentation requirements and deduction limitations, and not every contribution is fully deductible in the year it is made.
If you are considering a charitable contribution before December 31, keep clear documentation, including receipts and, for non-cash donations, a description and reasonable valuation of what was given. Whether a business or personal deduction applies, and how much of it is usable in the current year, depends on your entity structure and overall tax position.
Certain transactions can materially change your tax picture, and reviewing them before they close is far more useful than discovering the impact afterward.
The best time to identify a tax-planning issue tied to one of these events is before the transaction closes, not after the return is prepared. Structuring, timing, and entity considerations often have far more flexibility before a deal is signed than afterward.
Different entity types carry different year-end priorities. This is a starting point, not a complete list.
Business Type | Year-End Items to Review |
Sole Proprietor | Income and expense projection, retirement contributions, estimated tax payments, equipment and depreciation decisions |
Partnership | K-1 income projections, partner distributions, partner basis, estimated tax payments at the partner level |
S Corporation | Reasonable compensation review, distributions, retirement plan contributions, estimated tax payments |
C Corporation | Corporate taxable income projection, officer compensation, equipment purchases and depreciation, estimated tax deposits |
A tax deduction reduces taxable income, but it does not create a dollar-for-dollar refund. Its actual value depends on your marginal tax rate, entity structure, and whether you can use it given your income level and other limitations. Spending money purely to generate a deduction is rarely a sound business decision on its own.
☐ What is my projected 2026 taxable income?
☐ Are my estimated tax payments on track?
☐ Should I evaluate additional retirement contributions?
☐ Do planned equipment purchases make business sense this year?
☐ What depreciation rules apply to my situation?
☐ Could I qualify for the QBI deduction, and at what level?
☐ Are there owner-level planning opportunities worth reviewing?
☐ Are there major transactions I should complete or delay?
☐ Are there state tax considerations that differ from federal treatment?
☐ What documentation should I retain for this year’s decisions?
To make this easier to work through, NexusWorks put together a Year-End Tax Planning Action Sheet, an organizational tool rather than individualized tax advice, built to help you track your tax projection, estimated payments, retirement planning options, equipment decisions, QBI review, charitable giving, major transactions, and questions worth bringing to your CPA.
Download the Year-End Tax Planning Action Sheet to keep your year-end review organized in one place before your CPA meeting.
Effective year-end tax planning starts with a real projection, not a guess made in April. A year-end strategy session with NexusWorks can help you project your 2026 taxable income, review estimated tax payments, evaluate potential retirement and depreciation opportunities, look at major transactions before they close, and review owner-level considerations specific to your entity structure.
We cannot guarantee a specific tax result or dollar amount of savings, since every business’s numbers and eligibility are different. What a year-end review can offer is a clear, current picture of where you stand and which decisions are worth making before December 31.
Book a Year-End Strategy Session → /tax-planning-strategy/
Start by projecting your full-year taxable income, then review estimated tax payments, retirement contribution options, equipment and depreciation decisions, QBI eligibility, and any major transactions in progress. Not every strategy applies to every business, so prioritize based on your entity type and current numbers.
It can, but only if the equipment is genuinely needed, placed in service by December 31, and eligible under Section 179 or bonus depreciation rules. Buying equipment solely to create a deduction is not a sound strategy, since the actual benefit depends on income, entity structure, and applicable limitations.
The Qualified Business Income deduction under Section 199A lets eligible owners of pass-through businesses deduct up to 20 percent of their qualified business income, subject to income thresholds and, for certain service businesses, additional limitations. The One Big Beautiful Bill Act made this deduction permanent starting in 2026.
It depends on the plan. Some retirement plans need to be established by December 31 even if funding happens later, while employer contributions to plans like a SEP IRA are often due by the business's tax filing deadline, including extensions. Confirm the specific deadline for your plan type before assuming a date.
If your projection shows you are behind on estimated payments relative to your expected liability, an additional payment may be worth considering. This does not guarantee penalties will be fully avoided, since outcomes depend on your specific facts, but reviewing your position now gives you more options than waiting until filing season.
Charitable contributions can provide a deduction, but the amount and eligibility depend on your entity structure, contribution type, documentation, and applicable limitations. Contributions should be made for philanthropic reasons first, with tax treatment reviewed as one part of your overall year-end picture.
Gather current profit and loss statements, a record of estimated tax payments made so far, documentation for equipment purchases, retirement plan statements, and details on any major transactions completed or planned. Current, accurate bookkeeping makes the entire projection process faster and more reliable.
Earlier is better. Scheduling in November gives you time to actually act on what a projection reveals, whereas waiting until late December leaves little room to execute retirement contributions, equipment decisions, or other time-sensitive moves before the year closes.
