Year-End Tax Moves for Business Owners: The December Checklist

Almost every tax lever a business owner has expires at midnight on December 31: timing income and expenses, placing equipment in service, establishing retirement plans, fixing the S corp payroll, managing the QBI thresholds. By the time your return is prepared in spring, these are history — December is when they're decisions.

This is the year-end chapter of our year-round tax playbook, expanded into a working checklist. Run it in early December with a current profit-and-loss in hand — every move below is a calculation against your projected income, not a ritual. Here it is, theme by theme.

Income and expense timing: the cash-method levers

If you're a cash-method business (most small businesses are), income counts when received and expenses when paid — which makes December a dial you can turn.

• Defer income: invoices sent in late December often get paid in January, landing the income in next year. If this year is unusually high, invoicing on January 2 instead of December 20 is a legitimate one-year deferral.
• Accelerate expenses: pay January's rent, stock up on supplies, prepay subscriptions and insurance before December 31. The 12-month rule lets cash-method businesses deduct prepayments covering benefits that don't extend past 12 months (or the end of next year) — so prepaying a year of insurance or software in December deducts now.
• But check direction first: if next year's income will be higher — or you're near a QBI phase-out this year — the right move may be the reverse: accelerate income, defer deductions. Timing is a transfer between years, not free money; point it at the higher-rate year.

Equipment: in service by December 31 means in service

With 100% bonus depreciation permanent for property acquired after January 19, 2025, a machine, vehicle, or computer setup can be fully written off this year — but only if it's placed in service by December 31. Ordered, paid for, or sitting on a truck doesn't count; the asset has to be in your hands and ready for use in the business. A $40,000 piece of equipment delivered January 3 is next year's deduction no matter when you paid.

• Buying anyway in the next few months? Pull the purchase into December — if delivery and setup can genuinely happen in time.
• Don't buy things you don't need for the deduction — spending $40,000 to save a fraction of it in tax is still spending. The deduction sweetens a real purchase; it doesn't justify a fake one.
• Heavy vehicles, Section 179 interplay, and the SUV cap have their own rules — worth a specific look before a December vehicle purchase. Expensing smaller purchases has a separate lever: see the de minimis item below.

Retirement plans: establish now, fund later

The retirement-plan trap is that different plans have different establishment deadlines: some must exist by year-end to accept this year's contributions, while a SEP IRA can be opened and funded up to your filing deadline, extensions included. Safe-harbor 401(k)s need months of lead time and employee notices — those are next-year decisions being made now.

The December move: decide which plan you're using and get the paperwork in motion, even if the funding happens at filing time. Solo owners weighing the $72,000 (2026) solo 401(k)/SEP lane against bigger structures — and employers comparing SIMPLE, safe-harbor, and cash balance designs — will find the full ladder in our business owner's retirement plan comparison.

S corp cleanup: three fixes that only work in December

If you run an S corp, three items must land inside the calendar year:

• Health insurance onto the W-2. Premiums the company paid for a 2%+ shareholder must be added to Box 1 wages (not FICA wages) to preserve the above-the-line deduction. Tell your payroll provider in early December — after the final payroll run, the clean fix is gone. The mechanics are in our S corp health insurance W-2 guide.
• Reasonable-salary true-up. If profit ran ahead of plan and your salary looks thin against distributions, a December payroll run can bring the year's compensation up to defensible before the books close. There's no January fix for a salary that ended the year too low.
• Accountable-plan catch-up. Home office, mileage, phone, and other owner-paid expenses reimburse tax-free through an accountable plan — substantiated and paid before year-end. December is the sweep: collect the year's unreimbursed items and cut the reimbursement check.

1099 prep: chase W-9s while you still have leverage

January 31 is when 1099-NECs are due; December is when the missing W-9s are still gettable — especially from vendors with invoices outstanding. Pull the vendor payment report now, flag everyone over the reporting threshold, and match each to a W-9 on file. A vendor who won't return a W-9 in January has already been paid; a vendor waiting on a December check answers same-day.

Small levers worth pulling

• De minimis safe harbor election prep: expensing items up to $2,500 per invoice or item requires a written policy in place at the start of the year — so December is when you adopt the policy for next year. The full election mechanics are in our de minimis safe harbor guide.
• QBI threshold management: the 20% QBI deduction phases in limits above $201,750 single / $403,500 MFJ taxable income for 2026 — and SSTB owners can lose it entirely past the phase-out. If your projection puts you near the line, the timing levers above (plus retirement contributions) can hold taxable income under it, which makes those deductions worth more than face value.
• Family payroll and the Augusta rule: if kids genuinely work in the business, get their final paychecks and records squared before year-end (the wage, FICA, and documentation rules are in our hiring your kids guide), and document any legitimate home-rental days under the Augusta rule while calendars are reconstructible.

The projection meeting: do this one first

Every item above depends on one number you don't have by instinct: projected taxable income for the year. A December meeting with your tax pro — books current through November, estimates reviewed, each lever tested against the projection — is what turns this checklist from folklore into arithmetic. It also sets your January 15 final estimate to a near-exact figure, so filing season opens with no surprises.

December's rule: the return is written in the last thirty days of the year and merely transcribed in April.

The bottom line

Run the checklist in order: projection first, then timing moves, equipment, retirement plans, S corp fixes, and W-9s — each one checked against real numbers before the year locks. Taxagon's CPAs and EAs run these year-end planning sessions with business owners every December — if you want the projection built and the levers priced for your situation, reach out before the calendar runs out.

This article is general information, not tax advice for your specific situation. Tax law changes; figures are for the years stated.