What is the difference between Section 179 and bonus depreciation?

Section 179 lets you choose how much of a qualifying asset to expense, up to an annual limit, and cannot create a loss. Bonus depreciation, restored to 100 percent for 2026, applies automatically to eligible property and can be used even if it creates a loss. Many businesses use them together.

Can buying equipment before year end lower my taxes?

Yes. If you buy and place qualifying equipment or vehicles in service before December 31, you can often deduct the cost in the current year through Section 179 or bonus depreciation. The asset must be in use, not just ordered, by year end.

How can an S-corp owner reduce taxes at year end?

Common moves include making retirement contributions, reviewing your reasonable salary versus distributions, funding a Section 105 or accountable plan, and timing bonuses and equipment purchases. A mid-year and year-end review helps confirm your S-corp election is still saving money.

Is it too late to set up a retirement plan for this year?

It depends on the plan. A 401(k) generally must be established by December 31 to allow employee deferrals for the year, while a SEP-IRA can often be set up and funded up until your tax filing deadline, including extensions.

Year-End Tax Planning for Small Businesses (2026)

Q: When should a small business start year-end tax planning?

Start by early fall, around September or October. Most tax-saving moves, such as buying equipment, setting up a retirement plan, or shifting income and expenses, must be completed before December 31 to count for the current year, so waiting until you file is too late.

The best time to lower your 2026 tax bill is not next April — it is right now. Year-end tax planning is the handful of decisions you make before December 31 that determine how much a small business actually owes. By early fall you have enough real numbers to project your profit, and enough runway to act while the strategies are still on the table. Here are the moves that matter most for 2026 and when to make them.

When should a small business start year-end tax planning?

Start in the early fall — around September or October — because almost every meaningful tax move has a December 31 deadline. Once the calendar flips to January, most of your options for the prior year are gone, and all your accountant can do is report what already happened. Planning now gives you time to:

Project full-year profit using three quarters of real data
See your likely tax bracket before you make big purchases
Time income and expenses deliberately instead of by accident
Set up retirement plans and other structures before they close for the year

This kind of proactive, numbers-driven planning is the heart of our Fractional CFO & Growth services, where we look ahead at the tax and cash impact of decisions instead of reacting after the fact.

How can I lower my small business tax bill before year end?

The core strategy is to accelerate deductions and defer income when it makes sense for your situation. If you use cash-basis accounting and expect a similar or lower tax bracket next year, you can often reduce this year's taxable income by:

Prepaying expenses such as rent, insurance, or supplies you will need early next year
Deferring December invoices so the income lands in January (when it fits your cash flow)
Stocking up on deductible supplies and materials before December 31
Writing off bad debt and disposing of obsolete inventory or equipment

Be careful not to spend a dollar just to save 20 to 30 cents of tax. The goal is to time purchases you were going to make anyway, not to drain cash for the deduction alone.

Should I buy equipment before year end (Section 179 and bonus depreciation)?

Yes — if you buy and place qualifying equipment in service before December 31, you can usually deduct much or all of the cost this year. Two rules make this possible, and for 2026 both are generous:

Section 179 lets you expense qualifying equipment, vehicles, and software up to a high annual limit (over $2.5 million), though it cannot create a business loss.
Bonus depreciation has been restored to 100% for 2026, so eligible new and used assets can be fully written off, and unlike Section 179 it can create a loss.

The key requirement is that the asset must be in service — actually being used in the business — by year end, not merely ordered or paid for. For contractors and trades buying trucks, tools, or machinery, this is often the single biggest lever available.

What are the best retirement and entity moves at year end?

Funding a retirement plan is one of the few ways to cut taxes and keep the money yourself. Depending on your business, consider:

Solo 401(k) or SEP-IRA contributions to shelter profit — a 401(k) generally must be established by December 31, while a SEP can often be funded up to your extended filing deadline
Reviewing your S-corp reasonable salary versus distributions to make sure the split is still efficient
Confirming your entity choice — if you are a profitable sole proprietor, an S-corp election may save on self-employment tax next year
Maximizing the Qualified Business Income (QBI) deduction, which can be worth up to 20% of qualified pass-through income if you plan around the income limits

These decisions interact with each other, so it pays to model them together rather than one at a time.

What should be on my year-end tax planning checklist?

A solid year-end review covers income timing, purchases, retirement, and clean records all at once. Before December 31, make sure you have:

An updated profit projection for the full year
A decision on any equipment or vehicle purchases
Retirement plan contributions scheduled or made
Estimated tax payments reviewed so you are not over- or under-paid
Books reconciled and W-9s collected from contractors for 1099 season

One caution: don't let the tax tail wag the business dog. Every strategy here should also make sense for your cash flow and your goals, not just your tax return. Spending $50,000 on equipment you don't need to save $10,000 in tax is a bad trade, while timing a purchase you were already planning is a smart one. The difference is having accurate numbers in front of you before you decide.

Year-end planning rewards businesses that start early and have accurate books to plan from. If you want a clear picture of what you will owe and the specific moves that will move the needle for your business, we are happy to walk through it with you before the window closes.