The final months of the year give business owners an important opportunity to review taxable income before the books close. Decisions involving customer payments, vendor bills, equipment, payroll, retirement plans, and estimated taxes may affect both the company’s return and the owner’s personal return.
Year-end planning should begin with accurate financial information. Tax deductions are useful, but they should support the company’s cash flow and operating needs. The goal is to make informed decisions while there is still time to implement them.
Start With Current Financial Statements
Review a year-to-date profit and loss statement, balance sheet, accounts receivable, accounts payable, payroll reports, estimated tax payments, and major transactions. Then project revenue and expenses through December 31.
This forecast gives your CPA a working estimate of taxable income and helps identify unusual balances, missing expenses, incorrect owner transactions, or bookkeeping issues that should be corrected before tax preparation begins.
Review the Timing of Income and Expenses
Some businesses using the cash method may have flexibility over when they receive income or pay deductible expenses. Accrual-method businesses generally follow different recognition rules. Contracts, inventory, related-party transactions, and recurring expenses can add further limitations.
Before accelerating an expense or postponing a billing decision, compare the expected tax rates and cash needs for both years. Deferring income may provide a short-term benefit, but it can create a larger obligation next year. Likewise, prepaying an expense does not automatically make the full amount immediately deductible.
Plan Equipment Purchases Before the Deadline
Equipment, vehicles, furniture, computers, and certain improvements may qualify for accelerated deductions. For tax years beginning in 2026, the maximum Section 179 deduction is $2,560,000, subject to taxable-income limits and a phaseout when qualifying purchases exceed $4,090,000. Separate limits and special rules may apply to vehicles and other property.
Current federal rules also provide 100 percent bonus depreciation for eligible property acquired after January 19, 2025. Eligibility must be reviewed carefully. In most cases, property must be purchased and placed in service by year-end, which means it must be ready and available for business use. Ordering equipment or paying a deposit may not be enough. New Jersey and other states may not follow every federal depreciation rule, so the state tax effect should be reviewed separately.
A purchase should make sense for the business even without the tax deduction. Review financing costs, cash reserves, expected use, maintenance, and the effect on future depreciation before committing to a large year-end expense.
Review Payroll Retirement Plans and Estimated Taxes
Year-end is also the time to review owner compensation, employee bonuses, fringe benefits, retirement plan contributions, shareholder health insurance, and distributions. S corporation owners, partnerships, and closely held companies may have reporting or funding steps that must be completed on a specific schedule.
Compare federal and state estimated tax payments with the projected business and personal tax liability. A strong year, a new revenue source, investment gains, or an equipment sale can change the amount due. Identifying the difference early gives the owner more time to manage cash flow and avoid a surprise at filing time.
Make Tax Decisions With the Business Plan in Mind
Year-end tax planning works best when it supports the company’s larger goals. A deduction should not replace needed working capital, delay an important collection, or force a purchase the company does not need. The best strategy may involve acting this year, waiting until next year, or combining several smaller adjustments.
TKG Tax & Accounting can review your current financials, projected income, equipment plans, estimated payments, and business structure before year-end. That review can help connect the company’s tax decisions with the owner’s personal return and cash-flow needs.
For owners who also want to coordinate retirement, investment, insurance, and long-term financial planning, Gary S. Mannuzza Jr., CFP®, of our affiliate TKG Wealth Advisers, can help align those goals with the business plan. Contact TKG Tax & Accounting at (848) 235-5405 to schedule a year-end planning conversation.
This article is for general informational purposes and is not legal, tax, or investment advice. Estate planning documents should be prepared or reviewed by a qualified attorney, and individual tax and financial decisions should be evaluated based on your specific circumstances.
TKG Wealth Advisers is a New Jersey registered investment advisory under common control with TKG Tax & Accounting. TKG Wealth Advisers does not serve as an attorney, accountant, or insurance agent and does not prepare legal documents or tax returns.
