The Year-End Business Tax Planning Guide Every Owner Should Read

December 31 has a way of turning business decisions into history. Once the year closes, some planning opportunities close with it.

That's why year-end business tax planning should happen before tax preparation begins. It gives you time to look at where your business stands, what may have changed, and which decisions are worth making before 2027 arrives.

And no, this isn't about spending money just to get a deduction.

It's about making smarter business decisions while you still have options.

Download the Business Year-End Tax Checklist to help you identify the items worth reviewing before December 31.

Start With One Question

What changed in your business this year?

Maybe revenue jumped. Or margins tightened. You bought equipment, hired employees, took on debt, expanded into another state, developed new software, or changed how much you took out of the business.

Those changes can have tax consequences.

They can also affect cash flow, estimated payments, owner compensation, deductions, credits, and your plans for next year.

That's why your 2025 tax return shouldn't be your roadmap for 2026. It tells you what happened then. A year-end projection helps you see where you're headed now.

Five Conversations Worth Having Before Year-End

You don't need to become a tax expert before December 31. You do need to know which questions to ask.

1. What will our 2026 tax picture look like?

Don't wait for tax preparation to find out.

A year-end projection can help estimate your tax liability based on current income, deductions, credits, depreciation, and distributions. It can also show whether federal or state estimated payments may need attention.

More importantly, you can test decisions before you make them.

What happens if you purchase equipment this year? Make a larger retirement contribution? Change an owner distribution? Move an expense?

Seeing the numbers first can change the decision.

2. Are we planning a major purchase?

Equipment and qualifying property can create significant tax deductions, but "we can deduct it" isn't a good reason to buy something.

Ask whether the business needs the investment, whether the timing makes sense, and how the purchase affects cash.

For 2026, the Section 179 deduction limit is $2.56 million, with the phaseout beginning at $4.09 million of qualifying property placed in service.

The key phrase is placed in service. Waiting until the final days of December to have this conversation could limit your options.

3. Does owner compensation still make sense?

Your business may look very different today than it did in January.

Your compensation strategy should reflect that.

For closely held businesses, year-end is a good time to review wages, distributions, guaranteed payments, and retirement contributions. S corporation shareholder-employees should also review reasonable compensation.

Don't make compensation something you discover while preparing the tax return. Make it a decision you review while there's still time to act.

4. Are we missing deductions or credits?

Some of the best questions at year-end start with:

"We did this during 2026. Does it matter for taxes?"

Research and software development, employee benefits, hiring, training, investments, and other activities may have tax implications.

State and local programs can also provide credits or incentives for certain business activities.

The catch? You may need documentation to support them.

It's much easier to gather that information now than reconstruct it next spring.

5. What's changing in 2027?

This may be the most important conversation of all.

Are you planning to:

• Add a partner or owner.
• Sell part or all the business.
• Raise capital.
• Take on significant debt.
• Make a major investment.
• Enter another state.
• Hire aggressively.
• Change your retirement plan.

Tax planning shouldn't happen after these decisions are made.

For example, if a stock sale, ownership transition, or capital raise could be on the horizon, LMJ's year-end checklist recommends reviewing potential QSBS status before the transaction.

The earlier your CPA knows what's coming, the more useful the planning conversation can be.

Tax Planning Should Support the Business Plan

Here's the bigger point.

The goal isn't the lowest possible tax bill.

A decision that saves taxes but drains cash, creates unnecessary debt, or doesn't support your growth plans may not be much of a win.

Year-end planning gives you a chance to look at taxes alongside cash flow, compensation, debt, investments, and next year's priorities.

Ask:

What do our 2026 numbers tell us we should do differently in 2027? That's a much more useful conversation than simply asking, "How much do we owe?"

Frequently Asked Questions

Your Year-End Review Doesn't Need to Start from Scratch

We've created a Business Year-End Tax Checklist to help you identify the items worth reviewing before December 31.

It covers tax, cash flow, compensation, reporting, deductions, credits, state considerations, and other planning areas that could deserve attention based on your situation.

Download the Business Year-End Tax Checklist, mark the items that apply to your business, and use it to start your year-end planning conversation.

Because the best time to find out you had an option isn't after the option is gone.