Six Year-End Tax Strategies for Business Owners in 2026

Year-end is an important opportunity for business owners to review income, expenses, major purchases, and other tax-planning decisions while there is still time to act.

Not every strategy will make sense for every business, but the following six areas are worth reviewing before December 31.

1. Consider Prepaying Certain Business Expenses

Cash-basis businesses may be able to accelerate deductions by paying certain expenses before year-end.

Under the 12-month rule, certain prepaid expenses may be deductible when paid if the benefit does not extend beyond the earlier of 12 months after the benefit begins or the end of the following tax year.

Examples may include certain insurance, rent, or service agreements.

The applicable rules depend on the type of expense and the business's accounting method, so review significant prepayments before year-end.

2. Review the Timing of Income

Cash-basis businesses generally recognize income when it is actually or constructively received.

Depending on the circumstances, the timing of collections near year-end may affect when income becomes taxable. However, income already received or made available without substantial restriction generally cannot be deferred to the following year.

Tax considerations should also be balanced with cash flow and normal business practices. Accrual-basis businesses are subject to different income-recognition rules.

3. Evaluate Equipment Purchases

Equipment, furniture, computers, and certain vehicles placed in service before year-end may qualify for Section 179 expensing or 100% bonus depreciation.

Under current law, permanent 100% bonus depreciation generally applies to qualifying property acquired and placed in service after January 19, 2025.

The largest immediate deduction is not always the best choice. Expected future income, state tax treatment, cash flow, and other tax-planning considerations can affect whether Section 179, bonus depreciation, regular depreciation, or a combination produces the better overall result.

4. Reimburse Business Expenses Properly

S corporation owners frequently pay business expenses personally during the year.

An accountable plan can allow the corporation to reimburse qualifying employee business expenses without treating the reimbursement as taxable wages, provided the expenses have a business connection, are properly substantiated, and any excess reimbursements are returned on time.

Year-end is a good time to review unreimbursed business expenses and make sure supporting documentation is complete.

5. Review Retirement Plan Contributions

Retirement plans can provide one of the most valuable planning opportunities for business owners.

Depending on the business and plan structure, options may include a Solo or traditional 401(k), SEP IRA, SIMPLE IRA, or a higher-contribution defined benefit or cash balance plan.

Contribution limits, employee requirements, and deadlines vary considerably by plan. For example, the overall defined-contribution limit increased to $72,000 for 2026, before applicable catch-up contributions.

Reviewing projected business income, cash flow, employees, and retirement goals before year-end can help determine which plan structure makes the most sense.

6. Review Qualified Improvement Property

Certain improvements to the interior of nonresidential real property may qualify as qualified improvement property, or QIP, when the improvements are placed in service after the building was first placed in service.

QIP generally has a 15-year recovery period under the general depreciation system and may qualify for bonus depreciation when the applicable requirements are satisfied. Certain improvements, including building enlargements, elevators or escalators, and improvements to a building's internal structural framework, do not qualify.

Businesses completing significant renovations should review the nature and placed-in-service date of the improvements before year-end.

Final Thoughts

The best year-end tax planning usually comes from coordinating several decisions rather than chasing one large deduction.

Reviewing projected income, business expenses, retirement contributions, planned purchases, and other significant transactions before December 31 can help identify opportunities while there is still time to make meaningful changes.

A strategy that reduces one area of tax does not necessarily produce the best overall result, which is why these decisions are most useful when evaluated together as part of a broader tax projection.

Is Your Business Ready for Year-End?

Proactive planning can help identify available deductions and determine which strategies make sense for your business before the year closes.

Weissgarber CPA works with business owners on year-end and ongoing tax planning designed around their broader business and individual tax picture.

This article is for general informational purposes only and does not constitute tax or legal advice. Tax outcomes depend on individual circumstances and applicable law.