Year-end decisions business owners should review before December 31

Nov 6

By Affinity Wealth Management

Business owner reviewing year-end business tax planning in Delaware with an advisor

For a business owner, December 31 works less like a single deadline and more like a sorting date. Some decisions have to happen inside the calendar year to count for 2026. Others can wait until the return is prepared. Mixing the two up is how an owner ends up rushing a purchase in late December, or missing a contribution that could have been made calmly in the spring.

November leaves enough time to sort them. The goal is to know which decisions are actually due, so each one gets made with time to think. Your advisor, CPA, and often your attorney should be a part of the year-end meeting with you at the center of it.

Start with a current projection

Last year’s return shows what already happened. A projection built on this year’s results through October or November shows the picture while you can still make choices. If your business is an S corporation, partnership or sole proprietorship, business income flows to your personal return, so ask your CPA and advisor to create a projection that includes the business and the household together.

A projection also gives every other decision on this list a number to work from. Without one, it is hard to tell whether a purchase, a bonus or a larger retirement contribution is worth doing this year or next.

Decisions that generally need to happen by December 31

Owner pay and payroll come first. If you run your pay through the business, changes to your wages, bonus or retirement deferrals have to run through payroll before the final pay date of the year. For S corporation owners, the balance between wages and distributions affects payroll taxes and how much you can contribute to a retirement plan. Your wages still need to reflect reasonable pay for the work you do, so the balance deserves a deliberate decision with your CPA and advisor rather than a default.

Your own salary deferrals into an existing 401(k) come out of your paychecks. For 2026 the employee deferral limit is $24,500, with an additional $8,000 catch-up for those 50 and older and a higher $11,250 catch-up for ages 60 through 63. If you want to contribute more this year, check how many pay dates remain.

Payroll can also help if you have fallen behind on estimated taxes. If you have underpaid your estimates, you may owe an underpayment penalty. Tax withheld from wages is generally treated as paid evenly throughout the year, no matter when it is actually withheld, while an estimated payment counts on the date you make it. That means a year-end bonus payroll with extra withholding can reduce or even eliminate the penalty in a way a late estimated payment cannot. Whether that is worth doing depends on your numbers, so talk it through with your CPA and advisor before the final pay date.

Equipment and property purchases can also affect this year’s taxes. The One Big Beautiful Bill Act made 100% bonus depreciation permanent for qualifying property acquired after January 19, 2025, and raised the Section 179 expensing limits. The deduction generally depends on when the asset is placed in service, not only when it is ordered. A deduction reduces the tax on money you spend. It does not return the money, so a purchase still needs to make sense for the business on its own.

If you are 73 or older and still working in your business, look closely at required minimum distributions. The rule that lets many employees delay distributions from a workplace plan until they retire does not apply to someone who owns more than 5% of the business.

Decisions that can often wait for the return

Some retirement plan decisions have more time than owners expect. A new employer-funded plan, such as a profit-sharing plan, can generally be adopted as late as the business’s tax filing deadline, including extensions, and still count for the prior year. A sole proprietor with no employees can open a new solo 401(k) and make first-year salary deferrals up to the individual return due date, without extensions.

Individual IRA contributions for 2026 can be made until the April 2027 filing deadline. The 2026 limit is $7,500, plus a $1,100 catch-up for those 50 and older.

Estimated tax is a cash-flow item rather than a year-end deduction. The fourth-quarter 2026 estimated payment is due in January 2027. It belongs on the calendar, but it is not a reason to rush a December decision.

Look at the business and the household together

Many owner decisions affect more than one line of the return. The qualified business income deduction for pass-through owners was made permanent at 20%. Whether you receive the full amount can depend on your taxable income, the wages your business pays and the type of business you run. Medical, dental and other professional practices are treated as specified service businesses, so the deduction can phase out at higher incomes. Changing one number, such as your salary or a retirement contribution, can change another, so ask your advisory team to model them together.

New limits on itemized deductions also start this year. For taxpayers in the top federal bracket, the tax value of itemized deductions is now capped at 35 cents per dollar. For anyone who itemizes, charitable gifts now count only above 0.5% of adjusted gross income. If a year-end gift is part of your plan, include it in the same projection.

Keep the list short and specific

You do not need to settle every item in one meeting. Write down the decisions that must happen before December 31, who is responsible for each one, and the information they need from you. Then set aside the items that can wait for the return.

Our Owner’s December 31 Checklist organizes these decisions by what needs attention before year-end and what can wait, with questions to bring to your team of professionals. By setting up your final meeting this year, your advisor can coordinate with your tax professional and attorney to ensure that short and long-term decisions are made with the entirety of your financial picture in mind.

If you would like help connecting your business decisions to your household plan, schedule a Connect Meeting with Affinity Wealth Management. A Connect Meeting is 60 minutes, with no cost and no obligation.

Schedule a Connect Meeting

This information is provided for informational and educational purposes only and is not, in any way, to be considered investment, tax or legal advice. Tax treatment depends on individual circumstances and current law. Consult your tax and legal professionals before acting. Affinity Wealth Management LLC is a Registered Investment Advisor located in the State of Delaware. Form ADV and Form CRS are available at adviserinfo.sec.gov or by request.