Year-end tax planning is the work you do in the final months of the year to legally lower your tax bill before the window closes on December 31. For small businesses in 2026, the stakes are higher than usual: recent tax law made 100% bonus depreciation permanent and raised the Section 179 limits, giving owners real room to reduce taxable income — but only if they act before year-end. Here is what to focus on now.
What is year-end tax planning for a small business?
Year-end tax planning is the process of reviewing your profit, projected tax bill, and available deductions in the fall so you can take action while it still counts. Once the calendar flips to January, almost every meaningful lever is gone — you are simply reporting what already happened. Done in October or November, planning lets you time income and expenses, fund retirement accounts, and make purchases in the year that helps you most.
The starting point is always a projection. Before you can decide whether to accelerate a deduction or defer income, you need a realistic estimate of where your profit will land for the year and roughly what you will owe. That number tells you which moves actually help — and prevents you from spending money on a "tax strategy" that saves less than it costs.
How much can a small business write off for equipment in 2026?
In 2026, a small business can immediately expense up to $2,560,000 of qualifying equipment under Section 179, with the deduction beginning to phase out once total purchases exceed $4,090,000. On top of that, 100% bonus depreciation is now permanent, so many businesses can fully deduct the cost of qualifying assets in the year they are placed in service rather than depreciating them slowly over many years. For contractors and trades buying trucks, machinery, or equipment, this can turn a large capital purchase into a large current-year deduction.
This is a real shift from the last few years. Bonus depreciation had been phasing down — 80% in 2023, 60% in 2024, 40% in 2025 — and was headed toward zero. That phase-down is gone, and full first-year expensing is back to stay. If you held off on a purchase because the write-off was shrinking, that reason no longer applies.
What is the difference between Section 179 and bonus depreciation?
Section 179 lets you pick and choose which assets to expense and by how much, while bonus depreciation generally applies across all qualifying assets in a class. The other key difference is income:
- Section 179 cannot exceed your taxable business income — it can reduce your profit to zero, but it cannot create a loss.
- Bonus depreciation has no income limit and can create or deepen a business loss, which may be useful if you had a strong year followed by a heavy investment.
Most businesses use Section 179 first for precise control, then apply bonus depreciation to whatever qualifying property remains. Which order saves you the most depends on your income this year versus what you expect next year — exactly the kind of call worth running past an advisor.
Should I buy equipment before December 31?
Only if you actually need it — and if you do, the asset must be placed in service by December 31, 2026 to count this year. "Placed in service" means delivered and ready for use, not just ordered or paid for. The important reality check: a deduction never returns more cash than you spend. Writing off a $50,000 truck saves you tax on $50,000, but you still spent the $50,000. Buy equipment because the business needs it and the timing is favorable, not to chase a write-off.
How can I lower my business taxable income before year-end?
Beyond equipment, several classic moves can shift your 2026 tax picture, depending on whether you expect a higher or lower income next year:
- Accelerate deductible expenses — prepay rent, insurance, or supplies you will need soon to pull the deduction into this year.
- Defer income — if you are on cash-basis accounting, delaying December invoices into January can push that income into next year.
- Fund a retirement plan — contributions to a SEP-IRA, Solo 401(k), or SIMPLE plan reduce taxable income and build your own wealth.
- Write off bad debts and obsolete inventory — clean up the balance sheet and capture the deduction.
- Review your entity and owner pay — S-corp owners in particular should confirm reasonable salary versus distributions before payroll closes.
The right combination is different for every business, and a move that helps this year can hurt next year if income is climbing. Our Fractional CFO & Growth team builds a projection first, then recommends the moves that fit where your business is actually headed.
When should I start year-end tax planning?
Start now — early fall is the sweet spot. By October or November you have enough of the year behind you to project income accurately, and enough time left to actually execute a plan before December 31. Waiting until you sit down with a preparer in the spring means the year is already closed and the best strategies are off the table. The businesses that pay the least tax are almost always the ones that planned in the fall, not the ones that reacted in April.