1. Review Your Projected 2026 Business Income

Before making any year-end tax decisions, estimate how much taxable income your business is likely to generate during 2026.

Start with your year-to-date profit and loss statement. Review revenue, operating expenses, payroll, contractor payments, interest, and other significant transactions. Then estimate your expected activity for November and December.

For example, a business may have generated $280,000 in revenue through September and expect another $100,000 before year-end. That projection can help the owner evaluate upcoming expenses, cash flow, and possible tax obligations.

Keep in mind that accounting profit and taxable income are not always the same. Depreciation, nondeductible expenses, accounting methods, and other tax adjustments may change the final amount.

2. Review Deductible Business Expenses

Legitimate business expenses can reduce taxable business income when they meet applicable deduction requirements. However, expenses must be properly documented and treated according tax rules.

Review your bookkeeping records for expenses that may have been missed, duplicated, or categorized incorrectly.

• Office supplies and business software
• Advertising and marketing expenses
• Business insurance and professional fees
• Rent, utilities, and eligible operating costs
• Business-related travel and eligible meals
• Contractor payments and payroll expenses
• Repairs, maintenance, and equipment purchases

Not every payment is immediately deductible. Loan principal, owner distributions, personal purchases, and certain capital expenditures require different treatment.

If your books are incomplete, our 2026 year-end bookkeeping checklist

explains how to review accounts and organize financial records before tax season.

3. Evaluate Equipment Purchases and Depreciation

If your business needs computers, machinery, tools, furniture, or other equipment, year-end planning may help you understand the available tax treatment before making a purchase.

For tax years beginning in 2026, the general Section 179 deduction limit is $2,560,000, subject to the investment phaseout beginningat $4,090,000 and other restrictions.
Section 179 also has a taxable business income limitation.

In addition, qualifying property acquired after January 19, 2025, may be eligible for 100% bonus depreciation under current federal law. Eligibility depends on the property, acquisition date, business use, and other rules.

Buying equipment on December 30 does not automatically create a deduction for 2026. The property generally must be placed in service during the applicable tax year.

For example, a contractor considering a $25,000 equipment purchase should compare the business need, available cash, financing costs, and possible tax treatment before proceeding.

Review the IRS depreciation guidance for additional information.

4. Review Retirement Plan Contributions

Retirement plans can help eligible business owners save for the future while potentially providing tax benefits. Available options include SEP IRAs, SIMPLE IRAs, solo 401(k)
plans, and other employer-sponsored plans.

For 2026, the standard employee elective deferral limit for a 401(k) plan is $24,500. Eligible participants may be able to make additional catch-up contributions.

The 2026 defined contribution annual additions limit is generally $72,000, excluding eligible catch-up contributions and subject to other limitations. SEP IRA contributions are also subject to compensation-based limits.

Contribution deadlines vary by plan type, contribution type, business structure, and plan establishment date. Not every contribution
must be deposited by December 31, but certain elections and employee salary deferrals requiretimely action.

The IRS retirement contribution limits provide additional details.

5. Consider the Timing of Income and Expenses

The timing of business income and expenses can affect taxable income, but the appropriate treatment depends on your accounting method.

Businesses using the cash method generally recognize income when actually or constructively received and deduct many eligible expenses when paid. Accrual-method
businesses follow different recognition rules.

For example, paying an eligible business expense before year-end may affect the deduction year for a cash-method taxpayer. However, prepayments, inventory, related-party
transactions, and capital purchases may be subject to special rules.

Likewise, simply waiting to deposit a check received in December generally does not move that income into the next tax year.

The goal is to evaluate legitimate business timing decisions, not to omit income or accelerate deductions improperly.

6. Check Estimated Taxes and Withholding

Business owners who receive income not subject to sufficient withholding may need to make estimated tax payments throughout the year.

This commonly affects sole proprietors, partners, and S corporation shareholders. Corporations may have separate estimated tax requirements.

Compare your projected 2026 tax liability with payments and withholding already made. The goal is to identify possible underpayments before the final payment period ends.

For calendar-year individual taxpayers, the fourth estimated tax installment for 2026 is generally due January 15, 2027. Special rules and exceptions may apply.

For more background on payment obligations, read our article:

Filed a Tax Extension but Still Owe Taxes?

7. Review Your Business Structure and Tax Opportunities

Your business structure affects how income is reported, how owners are compensated, and which tax rules apply.

Sole proprietorships, partnerships, LLCs, S corporations, and C corporations may have different planning considerations. A business that has grown significantly during 2026 may benefit from reviewing whether its existing structure still supports its operational and tax needs.

For example, an S corporation owner should review reasonable compensation, payroll, shareholder distributions, and business expense reimbursements.

Other businesses may need to evaluate eligibility for the qualified business income deduction, applicable tax credits, or other entity-specific provisions. Eligibility and benefits depend on the taxpayer’s circumstances.

Our S Corp year-end tax planning checklist covers additional considerations for shareholder-employees.