The year-end tax moves that close on December 31

By the time most business owners sit down with their accountant, the year is over. That’s fine for filing. It’s too late for most planning. Here’s what tends to close on December 31, and what doesn’t.

Why December 31 matters

Your tax bill is mostly set by what happens during the year: what you earn, what you pay yourself, what you buy, and which accounts you fund. Once the year ends, most of those decisions are locked. A projection in the fourth quarter shows you where you stand while you can still act.

Moves to make before year-end

Finalize your salary

If you own an S-corp, your salary for the year runs through payroll by December 31. Review it against your profit and role before the last payroll, not after.

Elect your 401(k) deferrals

For 2026, you can defer up to $24,500 into a 401(k), with total employee and employer contributions up to $72,000, and more if you are 50 or older.¹ For most owner-employees, the deferral election must be made by year-end, even if the deposit comes later.⁵ Some first-year sole proprietors have more time under SECURE 2.0.²

Place equipment in service

Equipment, vehicles, and many improvements can be deducted quickly through bonus depreciation or Section 179. Recent law made 100% bonus depreciation permanent for qualifying property acquired after January 19, 2025, and raised the Section 179 limit to $2.5 million.³ To count for 2026, the asset generally has to be placed in service in 2026, so a December order that arrives in January may not help this year.

Check your estimated payments

Your fourth-quarter estimate is due January 15, 2027. Use your year-end projection to confirm you have met a safe harbor: generally 90% of this year’s tax or 100% of last year’s, or 110% if last year’s AGI was over $150,000.⁴

Time income and expenses

Depending on your accounting method, when you send invoices and pay bills can shift income or deductions between years. This only helps when you know which year you would rather have them in.

What can wait until you file

Some moves can be completed after December 31. Employer retirement contributions can often be made up to your filing deadline, including extensions, and SEP IRAs can generally be set up and funded by then too.⁵ That flexibility is useful, but only if the plan has already decided the amount.

Your Q4 checklist

1. Close your books through September or October.
2. Run a full-year projection.
3. Confirm your salary and final payroll.
4. Set retirement deferrals and employer contribution targets.
5. Decide on major purchases and when they’ll be placed in service.
6. Confirm your January 15 estimated payment.

All of this is easier when it’s already in your plan. See the tax plan every $300K founder should have in writing.

Frequently asked questions

What tax moves must business owners make before December 31?

Common ones include finalizing S-corp salary through payroll, electing 401(k) deferrals, placing equipment in service, and timing income and expenses. A Q4 projection shows which are worth it for you.

Can I still contribute to retirement after December 31?

Often, yes. Employer contributions and SEP IRA contributions can generally be made up to your filing deadline, including extensions. Employee deferral elections usually must be made by year-end.

Does equipment ordered in December count for this year?

Generally only if it is placed in service, meaning ready and available for use, by December 31.

Sources

1. IRS, 401(k) limit increases to $24,500 for 2026 (IR-2025-111)
2. National Association of Plan Advisors, Retroactive Deferrals for Sole Proprietors
3. IRS, One, Big, Beautiful Bill provisions; Iowa State University Center for Agricultural Law and Taxation, One Big Beautiful Bill Act Implements Significant Tax Package
4. IRS, Estimated Taxes
5. IRS, Publication 560, Retirement Plans for Small Business

This article is for educational purposes only and is not tax, legal, or investment advice. Tax rules change and depend on your specific facts. Talk with a qualified professional before acting on anything here.