Year-End Tax Planning Checklist for Small Business Owners

Why year-end is different from the rest of the year

Tax planning throughout the year is mostly about tracking — making sure estimated payments are right, expenses are documented, and the books are current. Year-end is different. It’s the last window to make decisions that actually change your tax bill, and most of those decisions require action before December 31.

April is too late for almost everything on this list. The deductions you claim in April reflect choices made before December 31. The value of a Q4 conversation with your CPA isn’t compliance — it’s optionality. Every week that passes in Q4 closes one door.

Before December 31 — the hard deadlines

☐ Establish your Solo 401(k) if you want one for this year

A Solo 401(k) must be established — plan document signed, account opened at a financial institution — by December 31 of the tax year. Missing this deadline means no Solo 401(k) for that year. There is no extension, no retroactive establishment.

Once the plan exists, the actual contributions can be made up to the tax filing deadline (October 15 if you extend). But the plan has to be in place before the year closes. If you’re considering a Solo 401(k) for the first time, treat the establishment as a Q4 task, not an April task.

☐ Review your S-corp salary — before the year closes

S-corp owners must pay themselves a reasonable W-2 salary before the IRS can scrutinize the salary-to-distribution split. If your salary is too low for the income you generated this year, the time to address it is before December 31 — a retroactive payroll adjustment paid by year-end is defensible; one made in April after the fact is not.

The flip side also applies: if income was lower than expected and you overpaid salary (and therefore paid more FICA than necessary), you may have a correction to make before the year closes. Run the numbers with your CPA or payroll provider in November.

☐ Place business equipment in service before December 31

Section 179 expensing and bonus depreciation require that equipment be placed in service — purchased, received, and available for use — by December 31. Ordering equipment in December and having it arrive in January does not count.

The 2026 Section 179 limit is $2,560,000 (phases out above $4,090,000 in total purchases). Bonus depreciation was restored to 100% permanently by the One Big Beautiful Bill Act (OBBBA, signed July 4, 2025) — the TCJA phase-down to 80%, 60%, 40% was reversed. If you have equipment you need and planned to buy it in the next few months, buying it by December 31 gives you a full first-year deduction.

☐ Fund any planned charitable contributions

Cash donations are deductible in the year the check clears or the card is charged — not the year you intended to give. If charitable giving is part of your tax strategy, it needs to happen before December 31. Donor-advised fund contributions are also deductible in the year of deposit, even if the grants to charities happen in future years.

☐ California PTET election (pass-through entity owners)

California pass-through entity tax (PTET) lets S-corp and partnership owners pay California income tax at the entity level, which reduces federal taxable income and bypasses the individual SALT cap. The election and the tax payment must both be made by December 31 on the FTB’s online portal — this is not something handled at filing.

For 2026, the individual SALT cap is $40,400 (raised from $10,000 by the One Big Beautiful Bill Act). The PTET election is most valuable for owners whose California state tax liability exceeds what they can deduct personally, which at $40,400 is a higher bar than it was at $10,000. The math still favors making the election for most California S-corp owners with meaningful income — but your CPA should model it for your specific situation.

☐ Loss harvesting in taxable investment accounts

If you have taxable investment accounts with unrealized losses, selling those positions before December 31 locks in the loss for the current tax year. Realized losses offset realized gains dollar for dollar; excess losses offset up to $3,000 of ordinary income per year and carry forward. This is most relevant for owners who also had capital gains from business sales, asset sales, or other investments.

☐ File the S-corp election for next year (optional, but clean)

If you’re planning to switch from LLC or sole prop to S-corp status effective January 1 of next year, you can file Form 2553 any time before December 31 of this year. Alternatively, the election can be filed by March 15 of next year and still be effective January 1. The December 31 path gives you more certainty; the March 15 path is also valid. What doesn’t work: filing Form 2553 in April and expecting S-corp treatment for a prior January 1.

The decisions that reduce your tax bill are mostly made before December 31, not in April. April is for recording history. Q4 is for changing it.

After December 31 — what you can still do

Not everything has a year-end deadline. These moves can be made after January 1 and still reduce the prior year’s tax:

• SEP-IRA contributions: Can be opened and funded up to the tax filing deadline, including extensions (October 15 for most individual filers who extend). This is the most flexible retirement option for owners who want to reduce a tax bill after seeing final income.
• Solo 401(k) funding: If the plan was established by December 31, contributions can be made up to the filing deadline (including extensions). The employee deferral is typically withheld from compensation during the year, but the employer contribution can wait until filing.
• Backdoor Roth IRA: The nondeductible traditional IRA contribution (step 1 of the backdoor Roth) can be made up to April 15 of the following year and designated for the prior year. Most owners make both steps in the same tax year to avoid pro-rata complications with existing IRA balances.
• Home office deduction: Calculated based on the full year’s expenses — no specific action required before December 31 beyond continuing to use a qualifying workspace. You calculate it at filing.

The Q4 meeting agenda

When you sit down with your CPA in Q4, bring this information:

• Year-to-date net income from your bookkeeping software
• Any other income sources (spouse W-2, investment gains, rental income)
• Health insurance premiums paid during the year
• Retirement contributions made so far
• Any planned equipment purchases before year-end
• If you have an S-corp: your year-to-date W-2 salary total

With those inputs, your CPA can model the current estimated tax liability, identify which deductions are still available, and calculate whether any year-end moves — a retirement contribution, an equipment purchase, a salary adjustment — meaningfully change the number. The more complete your data, the more specific the advice.

January — the deadline summary

• January 15: Q4 estimated tax payment due (covers September–December income)
• January 31: W-2s must be issued to employees; 1099-NECs must be sent to contractors
• March 15: S-corp and partnership returns due (Form 1120-S, Form 1065); final window to file a retroactive S-corp election effective the prior January 1
• April 15: Individual returns due; SEP-IRA and backdoor Roth IRA contribution deadline for the prior year (if not extending)
• October 15: Extended individual return deadline; SEP-IRA and Solo 401(k) employer contribution deadline for the prior year (if extended)