Year-End Tax Planning Checklist for Small Businesses: 2026 Edition

With the end of 2026 in sight, now is the time to look at your tax picture, while there is still time to act on it. This is also the first full year under several federal rule changes from the One Big Beautiful Bill Act, signed on July 4, 2025, so a plan from last year may not be the right plan this year.

Below is a checklist of the year-end moves that tend to matter most for small businesses, plus the mistakes we would steer you away from. It is general information, not tax advice for your situation, so talk to your CPA before you act on any of it.

1. Start with a year-end tax projection

Before you buy anything or move any income, find out where you stand. Pull your year-to-date profit, estimate the rest of the year, and project your taxable income for 2026. That number decides whether it makes sense to speed up deductions, defer income, or leave things alone.

A projection also shows whether you are on track for the estimated payments the IRS expects, so you can avoid an underpayment penalty. The fourth-quarter federal estimated payment for calendar-year taxpayers is due in mid-January, and November is a much better time to learn you are short than January.

Tip: ask for the projection in November. Waiting until after the holidays leaves no room to act.

2. Equipment and asset purchases: use the bigger deductions wisely

The federal rules for equipment have become much more generous:

• 100% bonus depreciation is now permanent for qualifying property acquired and placed in service after January 19, 2025.
• Section 179 lets you choose to deduct up to $2,560,000 of qualifying equipment for 2026, with the deduction phasing out once total purchases pass $4,090,000. The Section 179 limit for heavy SUVs is $32,000 for 2026, though bonus depreciation can often cover the rest.
• The de minimis safe harbor lets you deduct smaller items, generally up to $2,500 per invoice or item, instead of depreciating them. The limit is $5,000 for businesses with audited financial statements, and you make the election each year with your tax return.

Timing matters: the property generally has to be placed in service by December 31, not just ordered. A truck on order in December does nothing for your 2026 return.

Avoid: buying equipment you do not need just to get a deduction. A deduction only saves a portion of what you spend, and the cash outlay is real. Also remember that states do not always follow the federal rules. Virginia, for example, has historically not conformed to federal bonus depreciation, so your state deduction can differ from your federal one. Ask about Maryland and DC if you file there.

3. Retirement contributions and owner pay

Retirement plans are one of the most dependable ways to reduce taxable income while building something for yourself. Some contributions and plan elections have a December 31 deadline, while others can be made up to the tax filing date, so find out which applies to your plan before assuming you have time.

If you own an S corporation, year-end is also the time to check that your salary is reasonable for the work you do. Paying yourself too little is a common audit trigger, and payroll has to actually run through the end of the year to count.

4. Pass-through owners: the 20% deduction and the entity-level tax election

If your business is a sole proprietorship, partnership, S corporation or LLC taxed as one of those, two items belong on your list:

• The qualified business income (QBI) deduction. The 20% deduction was set to expire after 2025 and is now permanent. Income limits, wages and the type of business all affect how much you get, so it is worth confirming that your planned year-end moves, such as owner pay, do not shrink it.
• The pass-through entity tax election. Federal law raised the cap on deducting state and local taxes, to $40,000 for 2025 and about $40,400 for 2026, with a phase-down for higher incomes and a return to $10,000 in 2030. Even so, the elective entity-level tax in states like Virginia (at a 5.75% rate) and Maryland can still be worth a look for some owners. The timing rules differ by state, and in some cases the election has to be made before you file, so ask early. The availability of these elections has also changed from year to year, so confirm what applies to your tax year.

5. Contractors, vendors and 1099s

This is the first year of a new reporting threshold. For payments made in 2026, you only have to issue a Form 1099-NEC or most 1099-MISC forms to a payee you pay $2,000 or more, up from $600. Those forms are due in early 2027, and because January 31 falls on a Sunday that year, the 1099-NEC deadline is Monday, February 1, 2027.

• Collect W-9s now. It is much easier to get a form from a contractor before the final payment than after the year closes.
• Remember what is not reported. Payments made by credit card or through payment apps are generally reported by the processor on a Form 1099-K, whose threshold has returned to $20,000 and 200 transactions, instead of by you on a 1099.

Avoid: skipping the W-9 because a contractor is probably under $2,000. You still need documentation, and amounts have a way of creeping past the line in December.

6. Clean up your books before December 31

Every tax decision above depends on accurate numbers. Before the year closes, make sure you have:

• Reconciled every bank and credit card account
• Categorized all transactions and cleared out anything sitting in an uncategorized account
• Reviewed what customers owe you and written off anything uncollectible
• Confirmed your payroll tax deposits match what your books show
• Made a list of fixed assets, which also supports local property tax returns

If your books are behind, our bookkeeping and accounting services can get them current before tax season.

Mistakes we see at year-end

1. Waiting until January. By then most of the planning options are gone.
2. Chasing deductions for their own sake. Spending a dollar to save thirty cents is still spending.
3. Mixing personal and business spending. It makes the books harder to trust and the deductions harder to defend.
4. Ignoring the state. A federal strategy can work differently, or not at all, on your Virginia, Maryland or DC return.
5. Poor records. Mileage logs, receipts and written explanations matter if you are ever asked to support a deduction.
6. Forgetting local filings. Federal planning gets the attention, but local business taxes have their own dates.

Local rules to keep in mind

Local business tax rules vary a lot across our region, and year-end is when local filings begin to come due. In Virginia, the business license is generally due March 1, but each locality has its own rules, and the business personal property return and payment dates differ too. DC has its own franchise tax and a July 31 personal property return, and Maryland has an April 15 annual report and property return. For the full list of dates, see our 2027 business tax deadlines calendar.

If you want to see how this plays out where you are, we have local guides for businesses working with a CPA firm in Fairfax, VA, Arlington, VA, Alexandria, VA, Reston, VA and Vienna, VA, as well as Washington, DC and Bethesda, MD.

Next steps

If you would like a year-end tax projection or help with business tax planning, get in touch or call us at (703) 865-4565. If you are also thinking about budgeting for 2027, our outsourced CFO services can help you plan.

This article is for general information only and is not tax, legal or accounting advice. Tax rules, thresholds and deadlines change, and how they apply depends on your circumstances.