If you’re a business owner, waiting until January to think about your taxes could mean missing some valuable opportunities. Some of the most important tax-saving decisions need to be made before December 31, and once the calendar year ends, certain options may no longer be available. From retirement plan elections to equipment purchases and payroll adjustments, the timing of your decisions can make a meaningful difference in your tax situation.

As the final quarter of 2026 approaches, year-end tax planning should be about more than collecting receipts and sending documents to your accountant. It’s about understanding where your business stands financially, identifying opportunities that actually apply to your situation, and making informed decisions before important deadlines pass.

Many business owners make the mistake of trying to do a little bit of everything in December, hoping that a few contributions, purchases, and expenses will somehow add up to a lower tax bill. But effective tax planning starts with understanding your numbers. Before you make any major financial decisions, you need to know what your projected taxable income looks like and which strategies are likely to make a meaningful difference.

1. Start With a Tax Projection Before Making Any Decisions

The foundation of effective year-end tax planning is a realistic tax projection. Before you fund a retirement account, purchase equipment, or accelerate business expenses, you need to understand where your business currently stands and where your income is likely to end up by December 31.

A proper tax projection looks at your business income and deductible expenses under your accounting method, along with the income and expenses you expect for the remainder of the year. If you operate an S corporation, your W-2 wages and other household income also need to be considered. This gives you a clearer picture of your projected taxable income, marginal tax bracket, and whether you’re approaching any important tax thresholds.

One common mistake business owners make is using their bank balance to estimate how much profit they’ve earned. Your available cash and taxable profit are not necessarily the same thing. Owner draws and distributions generally do not reduce business profit, and receivables and payables can affect taxable income differently depending on whether your business uses the cash or accrual accounting method.

A tax projection helps you understand how much of your income may be taxable, how much you may need to set aside for taxes, and whether certain deductions are actually worth pursuing. It also helps you avoid spending money on unnecessary purchases simply because you believe they will reduce your tax bill.

The goal is to make decisions based on your actual financial situation rather than assumptions. Once you know where you stand, you can determine which of the following strategies may be worth considering.

2. Finalize Your Retirement Plan Contributions Before Year-End

Retirement contributions can be an important part of year-end tax planning, particularly for business owners who want to build long-term wealth while managing their current taxable income. However, retirement plan deadlines are not always as flexible as people assume.

For S corporation owners, a Solo 401(k) can provide an opportunity to make employee and employer contributions, subject to applicable plan rules and compensation limits. But the timing of those contributions matters. An S corporation employee’s retirement plan generally must be established by year-end, and the employee’s salary deferral election must be completed before the compensation is paid.

This means you cannot necessarily wait until February to decide that you wish you had deferred more money from December’s paycheck. While employer contributions may generally be made after year-end by the business tax return deadline, including extensions, employee deferral elections follow different rules.

For 2026, the Solo 401(k) contribution limits discussed in the video include a $24,500 employee deferral limit and a $72,000 combined employee and employer limit, excluding catch-up contributions. Eligible individuals age 50 and older may qualify for an $8,000 catch-up contribution, while those aged 60 through 63 may qualify for an $11,250 catch-up contribution. These limits are subject to eligibility and applicable IRS rules.

However, contributing the maximum amount is not automatically the right decision for every business owner. Your W-2 compensation, plan provisions, and eligible contribution limits all matter. Additionally, traditional deductible contributions may reduce current taxable income, while Roth employee contributions generally do not provide a current-year income tax deduction.

For S corporation owners, it’s also important to understand how retirement contributions may affect the qualified business income (QBI) deduction. Employer contributions can reduce S corporation business income and potentially affect QBI, while employee elective deferrals are treated differently for this calculation.

The right retirement contribution strategy depends on your current tax bracket, expected future income, compensation, and long-term financial goals. A tax projection that models different contribution scenarios can help you understand the potential impact before committing funds.

3. Place Planned Business Equipment in Service Before December 31

If your business has already been planning to purchase equipment, technology, or other qualifying assets, the final months of the year may provide an opportunity to review the timing of those purchases.

Depending on the type of asset and your tax situation, Section 179 or bonus depreciation may allow eligible businesses to deduct some or all of an asset’s cost in the year it is placed in service. But there’s one important detail business owners need to understand: placing an order or making a payment is not necessarily enough to qualify for a current-year deduction.

For most business property, depreciation begins when the asset is placed in service. In practical terms, this generally means the equipment must be delivered, installed if necessary, and ready and available for business use before December 31 to potentially qualify for that year’s deduction.

For example, if you order a piece of machinery in December but it does not arrive or become operational until January, it will generally be considered placed in service in the following year. The same principle applies to other qualifying business assets, depending on the circumstances.

This is why it’s important to distinguish between a planned purchase and a last-minute spending decision. Buying equipment you don’t need simply to chase a tax deduction can create unnecessary financial pressure. A deduction does not make an expense free, and the tax benefit may be smaller than the cash you spend.

Prepaid expenses also require careful consideration. The 12-month rule is relevant primarily to cash-method taxpayers, but paying an expense in December does not automatically make it deductible in the current year. Contract terms, service periods, accounting methods, and other tax rules all matter. Prepaid rent, for example, has specific limitations that business owners should understand before making a large advance payment.

The key is to focus on legitimate, ordinary, and necessary business purchases you already planned to make, ensure qualifying assets are placed in service on time, and maintain the appropriate documentation.

4. Review Your S Corporation Payroll, Health Insurance, and Reimbursements

For S corporation owners, payroll and reimbursement mistakes can create unnecessary complications, particularly when they are discovered after year-end. That’s why reviewing these items before December 31 should be an important part of your tax planning process.

One area that deserves particular attention is shareholder health insurance. If you own more than 2% of an S corporation, health insurance generally needs to be paid or reimbursed by the corporation and included in your W-2 wages as taxable income to support the self-employed health insurance deduction, subject to the applicable eligibility rules.

Health insurance and Health Savings Account (HSA) contributions should not automatically be treated as the same thing. An S corporation may contribute to an eligible shareholder’s HSA and report that contribution as taxable W-2 income. Alternatively, an eligible shareholder may make a personal HSA contribution directly and claim the applicable deduction on their personal return. The deduction is not automatically lost simply because the contribution was made personally rather than through payroll.

If your payroll reports combine these items or omit them entirely, it’s worth reviewing how each contribution has been handled and whether the reporting is correct.

Another important area is accountable plan reimbursements. If you personally paid legitimate business expenses on behalf of your S corporation, you should maintain the required documentation and submit those expenses for reimbursement according to the plan’s rules.

Properly substantiated accountable plan reimbursements are generally deductible by the corporation and tax-free to the shareholder, rather than being treated as W-2 wages. However, reimbursement timing, documentation, and the handling of excess reimbursements all matter.

While certain payroll errors can be corrected after year-end, doing so may require amended payroll filings, a Form W-2c, additional costs, or other complications. Some tax treatments also cannot simply be created retroactively.

A December payroll and reimbursement review can help you identify missing items, correct reporting issues where permitted, and reduce the chances of dealing with avoidable tax complications during filing season.

5. Time Business Expenses and Charitable Contributions Strategically

The timing of legitimate business expenses can affect which tax year receives the deduction. If your tax projection suggests that your income will be higher in 2026 than in 2027, it may be worth reviewing whether certain deductible expenses you were already planning to incur should be paid before December 31.

On the other hand, if you expect to be in a higher tax bracket next year, delaying certain deductible expenses may be worth discussing with your tax strategist, provided the expense timing is permitted under your accounting method and the applicable tax rules.

This could involve reviewing accounts payable, marketing expenses, professional services, and other ordinary and necessary business costs. The important thing is to understand when the expense is deductible rather than assuming that making a payment before year-end automatically creates a deduction.

The same general planning concept can apply to charitable contributions, particularly for business owners who itemize deductions or are close to exceeding the standard deduction.

For example, suppose you regularly make charitable donations every December. Depending on your financial situation, combining two years of planned charitable giving into one tax year may help you exceed the standard deduction and potentially increase your itemized deductions for that year.

However, charitable giving strategies depend on your eligibility, the type of contribution, applicable deduction limits, and substantiation requirements. The timing of the completed contribution matters, and appropriate receipts and acknowledgments should be maintained.

The broader takeaway is that tax planning isn’t necessarily about spending more money. It’s about reviewing expenses and contributions you were already planning to make and determining whether the timing can be structured more effectively.

Don’t Forget Your Tax Payment Deadlines

As you work through your year-end tax planning checklist, it’s important to distinguish between decisions that must be completed before December 31 and payments that may have a later deadline.

For example, if you want additional federal income tax withholding to count toward your 2026 tax payments, it generally needs to be withheld from wages paid by December 31. That means any additional withholding must be coordinated through year-end payroll.

By contrast, the fourth-quarter individual estimated tax payment is generally due January 15 of the following year. This distinction matters because federal income tax withholding is generally treated as paid throughout the year for penalty purposes, while estimated tax payments are generally credited when actually paid.

If you’re trying to catch up on a tax payment shortfall, understanding these differences can help you evaluate your options. Your tax projection should consider the amount of tax you’ve already paid, what you may still owe, and whether additional withholding or an estimated payment makes sense for your circumstances.

Not every tax planning deadline falls on December 31. Some employer retirement contributions, SEP contributions, and HSA contributions may have different deadlines depending on the plan, eligibility, and applicable rules. The important thing is to confirm the specific deadline for each strategy rather than assuming every decision must be completed by the end of the calendar year.

Final Thoughts: Start Your Year-End Tax Planning Before December

Year-end tax planning is most effective when it starts with a clear understanding of your financial situation. Rather than waiting until tax filing season to discover what could have been done differently, business owners can use the final months of the year to review their income, evaluate potential deductions, and make informed decisions before important deadlines pass.

The five strategies discussed here—running a tax projection, reviewing retirement contributions, placing planned equipment in service, cleaning up S corporation payroll and reimbursements, and timing legitimate expenses—can help you identify opportunities that may be relevant to your business.

But not every strategy will make sense for every taxpayer. Your business structure, accounting method, income, compensation, retirement goals, and expected future tax situation all influence which decisions may be appropriate.

The most important step is to start early. A tax projection gives you the information you need to make decisions with confidence, rather than rushing through December and hoping everything works out.

If you haven’t reviewed your 2026 tax situation yet, now is a good time to connect with your CPA or tax strategist. A proactive conversation before December 31 could help you identify opportunities, avoid preventable mistakes, and enter the new year with a clearer financial picture.