The most valuable tax planning happens before December 31 — not after. Once the calendar year closes, most tax-reducing strategies become unavailable. The deductions you did not claim cannot be retroactively added. The income that came in cannot be un-recognized. The retirement contributions that were not made are simply gone for that year. Yet many small business owners treat tax planning as something that happens in March or April, when their accountant prepares the return. By then, they are filing history, not making decisions. This year-end tax planning checklist gives you a structured framework to review your tax position in the final quarter of the year — when you still have time to take meaningful action.
Start With a Tax Projection
Before taking any action, you need to know where you stand. A tax projection — an estimate of your likely taxable income and tax liability based on actual year-to-date figures plus estimated income and expenses through December 31 — gives you the information needed to make strategic decisions.
Your accountant should be able to prepare a basic tax projection for you in October or November using your year-to-date QuickBooks or Xero data. If you have clean, current books, this process is straightforward. If your books are months behind, the projection is less reliable and your options narrow accordingly.
The projection should estimate: total business income for the year; total deductible expenses; net profit subject to self-employment or payroll taxes; any other significant income sources (investment income, rental income, spouse’s income for joint filers); and estimated total tax liability compared to estimated tax payments already made.
With this projection in hand, you can identify whether you are on track for a manageable tax outcome, significantly over-paying (with refund coming), or significantly under-paying (with a large April balance due). Each scenario calls for different strategies.
Maximize Retirement Plan Contributions
Retirement plan contributions are among the most powerful year-end tax planning tools available to small business owners. Every dollar contributed reduces taxable income by one dollar and grows tax-deferred until withdrawal.
Solo 401(k) employee deferrals: if you have a Solo 401(k), the employee deferral election must be made before December 31 for the current tax year. The deferral limit for 2024 is $23,000 ($30,500 if you are 50 or older). This is the highest-priority year-end action for Solo 401(k) participants.
Solo 401(k) employer contributions: these can be made up to the tax filing deadline, including extensions.
SEP-IRA: contributions can be made up to the tax filing deadline, including extensions. No year-end action is required for SEP-IRA, but if you have not set one up and are considering it, now is the time to establish the account.
SIMPLE IRA: employee deferrals must generally be withheld from payroll throughout the year. Year-end is an opportunity to ensure you have maximized contributions.
Accelerate Deductible Expenses Before December 31
Under cash basis accounting, expenses paid before December 31 are deductible in the current tax year. Expenses paid after January 1 are deductible in the following year. If your tax rate is similar in both years, there is no net tax difference — but if you expect a lower rate next year (perhaps because income will be lower, or because a major change will affect your tax bracket), pulling expenses into the current year reduces your higher-rate tax bill.
Deductible expenses to consider accelerating: Vendor invoices: pay outstanding vendor bills before year-end. Professional development: pay for any courses, conferences, or subscriptions in December rather than January. Supplies and materials: purchase needed business supplies in December. Insurance premiums: prepay insurance if the coverage extends through next year (limited to 12 months of prepaid coverage for cash-basis taxpayers). Professional fees: pay your accountant’s fees before December 31.
Consider Equipment Purchases Under Section 179
If you need business equipment — computers, software, office furniture, machinery — purchasing before December 31 and placing the equipment in service allows you to claim the full deduction in the current year under Section 179 or bonus depreciation.
The asset must be placed in service — actually used in the business — before December 31. Ordering equipment in late December and receiving it in January does not qualify for the current year.
The tax savings from a Section 179 deduction at a 25% effective rate are 25 cents for every dollar of qualifying equipment purchased. On a $10,000 equipment purchase, that is a $2,500 current-year tax saving. But remember: you still spent $10,000. The deduction should not drive purchases you would not otherwise make — it should inform the timing of purchases you had already planned.
Timing of Year-End Income
For cash basis taxpayers, income is recognized when received. If you have control over when you receive income — for example, whether to issue a year-end invoice in late December or early January — timing matters.
Deferring income: if your current-year tax rate is higher than expected next year, delaying year-end invoices until after December 31 pushes the income recognition (and associated taxes) into next year. This works only for cash-basis taxpayers and only when you have genuine control over the timing.
Accelerating income: if you expect a higher tax rate next year (perhaps due to a major project, a business sale, or a change in circumstances), accelerating income into the current year — billing for work completed in December before year-end — may reduce the overall tax cost.
For accrual-basis taxpayers, income is recognized when earned, not when received. Timing strategies around invoice issuance are generally not available under accrual accounting.
Review Your Entity Structure
Year-end is an excellent time to assess whether your current entity structure remains optimal. The S-Corp election generally must be in place by March 15 of the year you want it to apply. If you want an S-Corp election for next year, you must act before that date — making a year-end review important.
Key questions: has your net profit grown to the threshold where an S-Corp election would produce meaningful savings ($60,000-$70,000 or more)? Has your business changed in ways that affect the optimal structure? Have there been changes in the tax law that affect your analysis?
Verify Estimated Tax Payments and Avoid Penalties
Review your estimated tax payment history for the year. Have you made all four quarterly payments? Do the total payments satisfy either the prior year safe harbor (100% or 110% of prior year tax) or the current year 90% test?
If you are short, make an additional payment before January 15 (the Q4 estimated tax deadline) to minimize or eliminate underpayment penalties. Consult your accountant to determine exactly how much additional payment, if any, is needed.
Year-End Charitable Contributions
If you are itemizing deductions on your personal return and make charitable contributions, those contributions must be made by December 31 to be deductible in the current year. Cash, check, or credit card contributions made by December 31 qualify. Pledges that are not paid until next year do not.
Donations of appreciated securities (stock held for more than one year) allow you to deduct the fair market value and avoid capital gains on the appreciation. This is particularly valuable in years when capital gains are significant.
Conclusion
Year-end tax planning is not a passive activity. It requires actively reviewing your financial position, making strategic decisions, and taking action before December 31. The checklist above covers the most impactful opportunities for most small businesses.
The best approach is to work through this checklist with your accountant in October or November — early enough to have time for thoughtful action, not so late that only scrambling remains. The difference between a business owner who plans proactively and one who files reactively is not knowledge — it is timing. Make the time, take the action, and the savings follow.