Year-End Tax Planning Checklist for Business Owners

The short answer: the best time to lower this year’s tax bill is now, not in April. Most of the decisions that change your 2026 taxes, such as buying equipment, setting your salary, funding retirement plans, and timing income and expenses, have to happen by December 31. Once the year closes, a tax return can only report what already happened.

Here is the checklist we walk through with business owners every fall. Use it to organize your own review, or bring it to your tax strategist.

1. Project this year’s profit first

Every other item on this list depends on one number: what your business will earn this year. Pull your profit and loss statement through October, then estimate November and December based on what you know is coming, such as big jobs, seasonal slowdowns, and bonuses.

Clean, current books make this step fast. If your books are a few months behind, catch them up first. Planning on stale numbers is how owners end up surprised in April.

Once you have a projection, compare it with last year. A much bigger year usually calls for more aggressive moves (larger retirement contributions, equipment purchases, charitable giving). A slower year may be the right time to recognize income or convert retirement money to Roth. Our guide to Roth conversions in a low-income year explains when that works.

2. Review owner pay if you’re an S corporation

S corporation owners who work in the business must pay themselves a reasonable salary through payroll before taking distributions. Salary set too low invites IRS attention. Set too high, it means paying more payroll tax than you need to.

Year end is the time to check that your salary still fits the work you do and the profit the business made, and to run any final payroll by December 31. Our article on reasonable compensation covers how the IRS looks at it. If you are not an S corporation yet and your profit has grown, ask whether the S corp election makes sense for next year.

3. Decide on equipment and vehicle purchases

The 2025 tax law made two big changes that matter at year end:

• Bonus depreciation is back at 100% for qualifying property acquired and placed in service after January 19, 2025.
• The Section 179 limit is $2,560,000 for tax years beginning in 2026. The limit starts to phase out once you place more than $4,090,000 of qualifying property in service during the year.

To count for 2026, equipment generally has to be placed in service, meaning delivered and ready to use, by December 31. A purchase order alone isn’t enough.

A deduction is only worth taking if you need the asset. A new truck still costs what it costs; the deduction lowers the tax, not the price. Our guides to Section 179 and bonus depreciation and heavy vehicle depreciation cover the details, including the separate limit for SUVs.

4. Fund your retirement plan

Retirement plans are often the largest deduction a business owner controls. For 2026:

• 401(k) employee deferrals: up to $24,500, plus an $8,000 catch-up if you are 50 or older, or an $11,250 catch-up if you are 60 to 63.
• Total contributions to a defined contribution plan (your deferrals plus the employer contribution) can reach $72,000, before catch-ups.

Plan type and timing matter. Employee deferrals into a 401(k) generally have to come out of pay received during the year, so they need to be set up before your last payroll. Some employer contributions can be made after year end, up to the tax filing deadline. A Solo 401(k) works well for owners without other employees. High earners with steady profit may want to look at a cash balance plan layered on top.

One new rule for 2026: if your prior-year wages from the plan sponsor were over $150,000, catch-up contributions have to go in as Roth contributions in plans that offer them.

5. Time income and expenses

If your business uses the cash method, you have some control over which year income and expenses land in. Paying January’s bills in December, or sending some invoices in January, can move income between years. This only helps when you expect a meaningful difference between this year’s tax rate and next year’s, and it should never hurt cash flow or customer relationships.

6. Review charitable giving

If you give to charity, how you give matters. Giving appreciated stock instead of cash can avoid capital gains tax. Bunching several years of giving into one year, often through a donor-advised fund, can push you over the standard deduction when yearly gifts would not. See donating appreciated stock and donor-advised fund bunching.

7. Check estimated taxes and the Oklahoma PTE election

Business owners usually pay tax through quarterly estimated payments. The fourth-quarter federal payment for 2026 is due January 15, 2027. Compare what you have paid with your projected tax so you aren’t surprised by penalties or a large balance due.

If you own an S corporation or partnership in Oklahoma, review the Oklahoma pass-through entity election. When it fits, the business pays the Oklahoma tax, which can turn a personal state tax payment into a business deduction on your federal return. The business-level tax and your personal tax are tracked separately, so both need to be part of the plan.

8. Clean up the paperwork

A few housekeeping items save money and stress:

• Reimburse yourself for business expenses you paid personally through an accountable plan.
• Collect W-9s from contractors you paid this year, so 1099s are ready in January.
• Document any loans between you and your business.
• Make sure mileage logs and receipts are complete.

How we help

At Cannon & Brown Tax Advisors, year-end planning is part of a year-round tax plan. Our technology keeps your numbers current, so we can test strategies against your real profit, and your tax strategist reviews every recommendation. If you’d like a clear picture of where you stand this year, start with a free tax analysis.

This article is educational and is not tax advice for your situation. Tax law may change, which may change these rules and numbers.

Sources

• IRS: 401(k) limit increases to $24,500 for 2026, IRA limit increases to $7,500
• IRS: Retirement topics, 401(k) and profit-sharing plan contribution limits
• IRS: Revenue Procedure 2025-32
• IRS: Publication 946, How To Depreciate Property