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Year-End Tax Planning for Small Business Owners.

A forward-looking checklist of the decisions worth making before December 31 — entity structure, QBI, retirement plans, depreciation, gain/loss timing, and charitable giving.

Tax preparation looks backward. Tax planning looks forward. The decisions with the biggest impact on what you owe next April are made before December 31 — not after. This guide walks through the six categories of year-end moves business owners should review every fall.

The Checklist

Six Year-End Decisions Worth Making

1. Revisit Your Entity Structure

Your entity (Sole Prop, LLC, S-Corp, C-Corp) determines how income flows and how it's taxed. As revenue grows, the structure that made sense at $200k often costs you at $800k. Before year-end is the right time to model what an S-Corp election, a holding company, or an entity change would save next year — most changes require action before January 1 to apply cleanly.

Confirm reasonable compensation if you're an S-Corp owner
Model whether an S-Corp election would reduce self-employment tax
Evaluate whether a management or holding company makes sense
Document intercompany agreements and reimbursements

2. Maximize the QBI Deduction

The 20% Qualified Business Income deduction is one of the most valuable — and most easily lost — small-business benefits. It phases out at higher income levels and disappears entirely for many service businesses above the threshold. Year-end is when you can still shift income, accelerate deductions, or fund retirement plans to stay under the cliff.

Calculate projected taxable income against the QBI threshold
Accelerate deductible expenses if you're near the phaseout
Increase retirement plan contributions to reduce taxable income
Review whether SSTB classification is hurting your deduction

3. Fund Retirement Plans Strategically

Retirement contributions are the cleanest, highest-leverage way to reduce current-year tax. The right vehicle depends on your structure and income: Solo 401(k), SEP-IRA, SIMPLE, defined benefit, and cash balance plans all have different limits and deadlines. A defined benefit plan can shelter $100k–$300k+ for the right business owner, but only if it's adopted before year-end.

Maximize employee deferrals to your Solo 401(k) or 401(k) by December 31
Decide on employer profit-sharing contributions
Evaluate a defined benefit or cash balance plan if income is high and stable
Make HSA contributions if you have a qualifying high-deductible plan

4. Plan Major Purchases and Depreciation

Section 179 expensing and bonus depreciation let you deduct qualifying equipment, vehicles, and certain real-estate improvements in the year they're placed in service. The asset must be in use — not just ordered — before December 31. Real estate owners should also review cost segregation studies, which can accelerate depreciation on buildings purchased or improved during the year.

List qualifying equipment, software, and vehicle purchases planned for this year
Confirm assets are placed in service before year-end
Commission a cost segregation study on recently acquired real estate
Review state conformity to bonus depreciation rules

5. Harvest Gains, Losses, and Income Timing

If you have appreciated investments, year-end is when you decide whether to realize gains in a lower-bracket year, harvest losses to offset gains, or defer income into next year. Business owners with control over invoice timing, bonuses, and distributions can shift hundreds of thousands of dollars across the December–January line.

Run a tax-loss harvest on taxable investment accounts
Decide whether to accelerate or defer December invoicing
Time owner bonuses, distributions, and dividends intentionally
Consider Roth conversions if this is a lower-income year

6. Charitable Giving and Family Wealth Transfer

Donor-advised funds let you take a deduction this year and grant the money out over future years. Bunching multiple years of giving into a single high-income year often unlocks itemizing for taxpayers who'd otherwise take the standard deduction. Annual gift tax exclusions ($19,000 per recipient in 2026) also expire on December 31 — they don't carry over.

Open or fund a donor-advised fund for the giving you'd planned
Donate appreciated stock instead of cash where possible
Use the annual gift exclusion for children and grandchildren
Review whether a qualified charitable distribution makes sense from your IRA

Build vs. Backward-Looking Reporting

A good CPA tells you what happened. A good planner changes what happens. For business owners, the gap between those two roles is measured in five and six figures every year. If you've never had a real planning conversation — not a tax-return debrief — this is the time of year for it.

Schedule a Year-End Planning Call →

Don't Wait Until April to See What You Owe.

A 30-minute planning conversation before year-end is the difference between learning what happened and changing what happens.

Talk to a Planner →