Year-End Tax Planning Checklist for Business Owners

The difference between a great tax year and an average one usually comes down to what you do in the last 60 days. Once January 1 hits, most of these levers are gone. This is the same year-end checklist we walk our business clients through every November and December.

1. Project your full-year profit and tax liability

Before optimizing anything, you need to know where you stand. We pull QuickBooks year-to-date, project the remaining months, and run a full federal + state tax estimate. This number drives every other decision: there's no point accelerating $20K of deductions if you're already going to be in a low bracket.

2. Max retirement contributions

• Solo 401(k): up to $69,000 ($76,500 if 50+) for self-employed owners: but the plan must be established by December 31
• SEP-IRA: up to 25% of compensation, max $69,000: can be established up to the filing deadline
• Cash Balance / Defined Benefit: $100K-$300K+ for higher earners over 45: must be established by December 31
• Employee 401(k) deferral: $23,000 ($30,500 if 50+): must be withheld from a paycheck dated by December 31

3. Time equipment purchases and Section 179

If your business needs equipment, vehicles over 6,000 lbs GVWR, computers, or office furniture, buying and placing it in service by December 31 unlocks Section 179 (up to $1,160,000 expensed immediately) and bonus depreciation (60% in 2026, phasing down). For a business in the 32% bracket buying $50K of equipment, that's roughly $16K of tax saved this year instead of spread over five.

4. Optimize the QBI deduction

The 20% Qualified Business Income deduction is one of the most valuable in the code: but it phases out fast above $383,900 (MFJ, 2025). If you're near the threshold, year-end moves like extra retirement contributions, charitable giving, or accelerating expenses can pull your taxable income below the cliff and save 5-figure amounts in tax. We model this for every pass-through client.

5. Review your entity election

Are you still a default LLC paying full self-employment tax? An S-Corp election filed by March 15 can apply to the entire next year. Are you accumulating cash you don't need to distribute? A C-Corp conversion might make sense. Year-end is when we run this analysis so the paperwork is ready to file in Q1.

6. Clean up the books and document everything

• Reconcile all bank and credit card accounts
• Categorize uncategorized transactions: every miscategorized expense is a missed deduction
• Take photos of inventory and equipment for documentation
• Update your mileage log and confirm business-use percentages
• Issue 1099s to contractors paid $600+ via cash or check (Zelle counts; PayPal/Venmo business accounts issue their own)

7. Charitable giving and DAF contributions

If you plan to give, doing it through appreciated stock instead of cash avoids capital gains and still gets you the full fair-market-value deduction. Donor-Advised Funds let you front-load multiple years of giving for a bigger itemized deduction in a single year. Both moves have to settle by December 31 to count.

8. Estimated tax payment review

The Q4 federal estimate is due January 15: but Q4 state estimates are often due December 31 or January 15 depending on the state. Underpaying triggers safe harbor penalties on top of the balance due. We recalculate and adjust every client's Q4 payment based on actual year-to-date results, not the projection we made in April.