Year-end tax planning gives a business owner a short window to lower the 2026 tax bill, and most of that window closes at midnight on December 31. This year the window matters more than usual. The One Big Beautiful Bill Act, signed in July 2025, changed how equipment, research costs, owner income, and charitable gifts are treated, and 2026 is the first full year many of those rules apply.
This guide covers what changed for 2026, which decisions have a December 31 deadline, and what your books need to show before you sit down with your CPA. Out of the Box Technology is not a public accounting firm, so every tax decision here is one to make with your tax advisor. What we can tell you, after years of preparing books for those meetings, is that the quality of the advice depends on the quality of the numbers you bring.
Why Year-End Tax Planning Starts With Your Books
A CPA handling your year-end tax planning needs to know three things: what you have earned so far, what you expect to earn by December 31, and what you have already spent. If your books are three months behind, every one of those answers is an estimate, and the advice built on them is an estimate too.
Consider a business deciding whether to buy a $150,000 piece of equipment in December. The purchase only makes sense if the business expects enough taxable income to use the deduction, and that projection comes straight from the profit and loss statement. A business that has not reconciled its accounts since summer may buy equipment it did not need to buy this year, or skip a purchase that would have saved real money.
Before you book your planning meeting, make sure your bank and credit card accounts are reconciled through at least October, uncategorized transactions are cleared, and your receivables and payables reflect what is owed. If that work is behind, our bookkeeping team can bring it current before the meeting.
What Changed for 2026
Several provisions of the One Big Beautiful Bill Act affect 2026 returns and change the year-end tax planning conversation. Some are permanent versions of rules that were set to expire, and others are new.
Full Expensing for Equipment Is Permanent
The law made 100% bonus depreciation permanent for qualifying property acquired after January 19, 2025. Before the change, bonus depreciation was scheduled to drop to 20% for 2026 and disappear after that. Equipment, vehicles, computers, and many building improvements can again be deducted in full in the year they are placed in service.
Section 179 expensing also grew. For 2026, the maximum Section 179 deduction is $2,560,000, and it begins to phase out once qualifying purchases exceed $4,090,000. Many states do not follow the federal bonus depreciation rules, so the same purchase can produce a different result on your state return.
Research and Software Costs Are Deductible Again
Since 2022, businesses had to spread domestic research and experimental costs over five years. New Section 174A restores the immediate deduction for domestic research costs, and software development is explicitly included. If your team builds software, develops products, or improves processes, ask your CPA how these costs should be tracked and whether any previously capitalized amounts are still being deducted on your 2026 return. Foreign research costs are still spread over 15 years.
The QBI Deduction Is Now Permanent
Owners of partnerships, S corporations, and sole proprietorships can continue to deduct up to 20% of qualified business income under Section 199A, which was set to expire after 2025. Starting in 2026, the income ranges where the deduction phases in are wider, and owners with at least $1,000 of qualified business income from a business they actively run receive a minimum deduction of $400.
A Higher SALT Cap for Owners
The cap on the state and local tax deduction rose to $40,400 for 2026. It begins to shrink once modified adjusted gross income passes $505,000 and cannot fall below $10,000. Owners of pass-through businesses should also ask whether a pass-through entity tax election still makes sense in their state, since the election and payment deadlines vary.
New Limits on Charitable Deductions
Beginning in 2026, corporations can deduct charitable contributions only to the extent they exceed 1% of taxable income. Owners who itemize personally face a new floor of 0.5% of their contribution base, while those who take the standard deduction can deduct up to $1,000 in cash gifts, or $2,000 for joint filers. If your business gives through the company, the timing and structure of those gifts deserve a conversation with your CPA.
A Larger Credit for Employer-Provided Childcare
For amounts paid after December 31, 2025, the employer-provided childcare credit rose from 25% to 40% of qualifying costs, with a maximum credit of $500,000. Smaller businesses that meet the gross receipts test can claim 50%, up to $600,000. Employers that already subsidize childcare should confirm that those costs are recorded separately so they can be claimed.
Reporting Changes for 1099s and W-2s
The federal threshold for Form 1099-NEC and most Form 1099-MISC payments rose from $600 to $2,000 for payments made in 2026. Our 1099 filing guide covers who needs a form and how the change affects your vendor records. The 2026 Form W-2 also requires employers to report qualified overtime separately, and employers with tipped staff must report tips and occupation codes, which depends on how payroll tracked those amounts all year.
Energy Incentives That Have Ended
Several clean energy incentives closed during 2025 and 2026. The commercial clean vehicle credit ended for vehicles acquired after September 30, 2025, and the energy efficient commercial building deduction under Section 179D ended for construction beginning after June 30, 2026. Builders and contractors with projects already underway should confirm with their CPA which projects still qualify.
Year-End Tax Planning Moves to Make Before December 31
The table below summarizes the moves most businesses should review. Each one depends on current numbers, and each should be decided with your CPA.
| Action | Why it matters for 2026 |
|---|---|
| Place planned equipment in service | Bonus depreciation and Section 179 apply when an asset is ready for use, not when it is ordered. Equipment delivered in January counts toward 2027. |
| Time invoices and bill payments | On a cash basis, income is taxed when received and expenses are deducted when paid, so December timing decides which year they land in. |
| Set year-end bonuses | Businesses on an accrual basis can generally deduct bonuses paid within two and a half months of year-end if the amount is set by December 31. |
| Review retirement contributions | The 2026 401(k) deferral limit is $24,500, with an $8,000 catch-up at age 50. Employees aged 60 to 63 can contribute an extra $11,250, and catch-ups for those who earned more than $150,000 in 2025 must go into a Roth account. Some plans must be set up before year-end. |
| Write off bad debt and obsolete stock | Uncollectible receivables and damaged or obsolete inventory can often be written off in the year you identify them. |
| Decide on charitable gifts | The new 1% floor for corporations and 0.5% floor for itemizers change how much of a gift is deductible. |
| Review opportunity zone investments | Gains deferred through a qualified opportunity fund before 2027 must be recognized by December 31, 2026. |
| Plan the fourth-quarter estimate | The final 2026 estimated tax payment is due January 15, 2027. |
Accurate Books Make Every Decision Easier
Every year-end tax planning decision in the table above starts with a number from your accounting system. The depreciation decision needs a reliable profit projection, the bonus decision needs accurate payroll accruals, and the bad debt decision needs a receivables aging report you can trust.
If your books are behind, our clean-up accounting team can reconcile the backlog so your CPA works from actual results. For businesses that want ongoing support with forecasting and planning, a fractional CFO can build the projections your tax advisor needs and review them through the year. Growing companies with several entities often find that consolidating their numbers takes longer than the planning itself, which is where Intuit Enterprise Suite can help by bringing every entity onto the same system.
Start 2027 With Books You Can Plan From
Year-end tax planning decisions expire on December 31, but the books behind them take time to get right. If you want a second set of eyes on where your numbers stand before your CPA meeting, book 30 minutes with Nick Aloisio on our team.
Related reading:
- The 1099 Filing Guide for Small and Mid-Sized Businesses
- 1099 Deadlines and Penalties for 2027: A Year-End Timeline for Business Owners
This article is general information, not tax or legal advice. Out of the Box Technology is not a public accounting firm. Consult your CPA about how these rules apply to your business.
