As the year draws to a close, many business owners are focused on sales goals, Q4 performance, and preparing for the holiday rush. But if you want to finish strong, now is also the time to think about taxes. Waiting until January or February to review your numbers can mean missed deductions, last-minute stress, and higher bills than necessary.

Year-end tax planning is about being proactive. It helps you make strategic decisions while there’s still time to act. The entrepreneurs who get ahead now often find themselves saving thousands of dollars while entering the new year with clarity and confidence.

This guide walks through how to prepare your business for year-end, review deductions and credits, align spending with your tax strategy, and create a smoother, more profitable start to 2026.

Review Your Financials Before the Year Ends

Start with your financial foundation. Before you make any last-minute tax decisions, you need an accurate picture of your business performance.

1. Update Your Bookkeeping
Ensure all income and expenses are entered and categorized correctly. Many missed deductions come from unrecorded transactions or misclassified expenses. Review your accounting software or speak with your bookkeeper to reconcile all bank accounts, credit cards, and loan balances.

2. Analyze Profit and Loss Statements
Compare revenue and expenses month by month. This reveals trends, identifies areas where you may have overspent, and helps forecast whether your taxable income is higher or lower than expected.

3. Assess Cash Flow and Receivables
If clients owe you payments, now is the time to follow up. Collecting outstanding invoices before December 31 not only improves cash flow but also gives you flexibility in timing future expenses.

Maximize Deductions Before December 31

One of the most effective ways to reduce your taxable income is by maximizing deductions before year-end. The key is to spend intentionally—every purchase should support your business goals while lowering taxes.

Common Deduction Opportunities:

• Equipment and Technology Upgrades: Computers, software, and office equipment can qualify for Section 179 expensing or bonus depreciation.
  

• Marketing and Advertising: Campaigns, website development, and client gifts are deductible if they directly relate to business promotion.
  

• Professional Services: Fees paid to accountants, consultants, or marketing professionals are deductible business expenses.
  

• Education and Training: Courses, certifications, or conferences that improve your skills are tax deductible.
  

• Travel and Meals: Business-related travel and client meals qualify for partial deductions. Make sure you document dates, amounts, and the business purpose.

Keep receipts organized and logged in your accounting software to simplify documentation at tax time.

Take Advantage of Section 179 and Bonus Depreciation

Section 179 allows you to deduct the full purchase price of qualifying business equipment or software in the year it’s placed in service, rather than depreciating it over several years. In 2025, the maximum deduction is $1,220,000, with a spending cap of $3,050,000.

Bonus Depreciation allows you to deduct a percentage of the cost of new or used equipment that exceeds your Section 179 limit. For 2025, the rate is 60 percent.

If your business needs equipment upgrades, vehicles, or technology improvements, now is an ideal time to make those purchases. You’ll not only improve operations but also enjoy a significant tax reduction for 2025.

Review Tax Credits You May Qualify For

Tax credits directly reduce the amount of tax owed and are often more powerful than deductions. Common opportunities for small business owners include:

• Work Opportunity Tax Credit (WOTC): For hiring employees from targeted groups, such as veterans or long-term unemployed workers.
  

• Research and Development (R&D) Credit: For companies investing in innovation, product development, or process improvement.
  

• Energy Efficiency Credits: For installing energy-saving systems or equipment.
  

• Paid Family and Medical Leave Credit: For eligible employers providing paid leave to employees under a qualifying policy.

Review eligibility now so you can take advantage of these credits before the year closes.

Time Your Revenue and Expenses Strategically

Timing matters. Strategic timing of revenue and expenses can create tax advantages without changing your overall profitability.

Consider the following strategies:

• Delay Income: If possible, invoice late in December so payments arrive in January, pushing income into the next tax year.
  

• Accelerate Expenses: Prepay rent, insurance, or vendor costs to increase deductions this year.
  

• Defer Bonuses: Pay employee or owner bonuses in January if your income is already high in 2025.
  

• Invoice Early: If you expect higher taxes next year, collect payments now to shift income into the current year at a lower rate.

Work with your tax professional to determine which timing strategy aligns best with your business goals and projected income.

Prepare Payroll and Retirement Contributions

Payroll planning is another area where early preparation pays off. Review year-end payroll reports to confirm all wages, benefits, and withholding are accurate. This ensures proper W-2s and 1099s are filed without delay.

Retirement Contributions:
Contributing to retirement plans reduces taxable income while building long-term wealth. Options include:

• Solo 401(k): Allows high contributions and can include a Roth option for tax-free growth.
  

• SEP IRA: A flexible option for small business owners or those with irregular income.
  

• Defined Benefit Plans: Ideal for high-income entrepreneurs who want large deductions and steady retirement funding.

Contribute before December 31 to maximize the benefit for this tax year. Employer contributions can often be made up until the tax filing deadline, but planning early ensures your cash flow can support the commitment.

Organize Your Records Before Tax Season

A smooth tax season starts with organization. Collecting and organizing records now will save hours later and reduce the chance of errors or missed deductions.

Checklist for Year-End Recordkeeping:

• Bank and credit card statements
  

• Receipts for deductible expenses
  

• Payroll reports and 1099 forms
  

• Business loan and interest statements
  

• Equipment and asset purchase records
  

• Home office documentation (if applicable)

Keeping everything in digital format through accounting software or cloud storage makes it easier to share with your CPA when filing time arrives.

Plan for Quarterly Estimates and 2026 Projections

Many entrepreneurs overpay or underpay estimated taxes because they do not review their financials regularly. Before the year ends, review your 2025 tax payments and adjust the final quarter estimate due in January.

This is also the perfect time to project 2026. Use your current data to forecast next year’s income and plan for cash flow, investments, and tax strategies in advance. Proactive planning now ensures a smoother, more profitable year ahead.

Case Study: The Power of Early Year-End Planning

Susan, an independent marketing consultant, used to wait until March to gather her tax documents. Each year, she found herself overwhelmed, missing deductions, and paying more in taxes than necessary.

Last year, she changed her approach. In October, she scheduled a year-end tax review and discovered opportunities to save thousands:

• She purchased new computer equipment using Section 179.
  

• She prepaid her office lease for January and February to increase deductions.
  

• She set up a Solo 401(k) and contributed $20,000, reducing her taxable income significantly.
  

When filing season arrived, her taxes were organized, stress-free, and her savings funded new marketing campaigns for the next year.

This simple shift—planning in October instead of rushing in March—transformed how Susan managed her finances.

Tools to Simplify Year-End Planning

You do not have to handle everything manually. Technology can make tax readiness easier and more accurate.

• QuickBooks or Xero: Automate bookkeeping, track expenses, and generate reports.
  

• HubDoc or Expensify: Store and categorize digital receipts.
  

• Gusto or ADP: Streamline payroll and benefits tracking.
  

• Tax Projection Tools: Use CPA-approved software to forecast liability before year-end.

These tools not only save time but also ensure that data is accurate, which makes collaboration with your accountant more efficient.

Year-End Tax Readiness Checklist

1. Reconcile all accounts and update your books.
   

2. Review revenue and expenses to identify deduction opportunities.
   

3. Consider Section 179 and bonus depreciation purchases.
   

4. Time income and expenses for maximum tax efficiency.
   

5. Confirm payroll accuracy and retirement contributions.
   

6. Collect all receipts, statements, and supporting documents.
   

7. Review quarterly tax payments and make adjustments.
   

8. Schedule a year-end planning session with your tax advisor.

Completing these steps before December ensures that you are not scrambling in January—and that you start 2026 with confidence and cash flow strength.

Final Thoughts

Year-end tax planning is not about rushing to spend or making last-minute changes. It is about acting strategically with full awareness of your numbers. When you plan ahead, every decision becomes intentional and every dollar works harder for your business.

The entrepreneurs who prepare early avoid the chaos of tax season and position themselves to grow faster in the new year. By aligning your Q4 financial strategy with smart tax moves, you protect your profits, save time, and gain peace of mind.

📅 Schedule your Year-End Tax Planning Session with Bernstein Tax Group today and discover how to finish 2025 strong while preparing for a successful 2026.