Year-End Tax Planning for Small Business: The November Checklist
Year-end tax planning for a small business happens in November, from books closed through October. That’s when there’s still time to place equipment in service, fix the owner’s salary on a real payroll, open a retirement plan, build a fourth-quarter estimate from actual numbers, and set January prices. After December 31, every one of those choices is gone, and all that’s left is reporting what happened.
We run an accounting firm, and every April we sit across from someone asking what they could have done. The honest answer is usually “several things, in November.” Here’s the list.
What should a small business do for year-end tax planning?
Five moves. Each one has a deadline of December 31 or earlier, each one needs a real profit number to decide, and each one gets more expensive the longer it waits. Take them in order.
When should I buy equipment for the tax deduction?
Only when you need the equipment, and then, before December 31. The deduction doesn’t make a bad purchase good. It changes the timing of a good one.
For 2026, the rules are generous. 100% bonus depreciation applies to qualifying property acquired after January 19, 2025, so the full cost of a truck, a machine, or a build-out can be deducted in the year it’s placed in service. Section 179 does the same job with a dollar limit well above what most small businesses spend in a year, and it lets you pick which assets to expense. The difference that matters: Section 179 can’t create a loss, since it’s limited to business income, while bonus depreciation can. Which one you use depends on where the profit number lands, which is why this is a November question and not a December 30 one.
“Placed in service” means delivered, installed, and ready to use. Not ordered. Not paid for. A truck on a dealer’s lot on December 31 is next year’s deduction. If lead times are long, the decision has to be made now.
Owner pay
If you’re an S-corp owner, your salary is decided on the last payroll of the year, and it can’t be changed after that. Two things to get right in November:
- Reasonable compensation. The salary has to be defensible for the work you actually do, roughly what you’d pay someone else to do your operating job. If distributions have run far ahead of salary all year, the final December payroll is where a catch-up happens. It costs payroll tax. It’s cheaper than the alternative.
- Health insurance on the W-2. For a more-than-2% shareholder, premiums the company pays have to run through payroll and appear on the W-2, or the deduction is lost. This is one of the most common things we fix in a first year with a new client, and it has to be done before the last payroll.
The salary decision also interacts with the 20% qualified business income deduction, now permanent, so the right number isn’t just the lowest defensible one. It’s the one that works across the whole return.
What is the deadline to open a solo 401(k)?
December 31, to make an employee deferral for the year. The plan has to exist before the year ends; the employer contribution can wait until the return is filed, including extensions. A SEP-IRA is more forgiving, since it can be opened and funded up to the filing deadline, but it doesn’t allow the employee deferral, which is the larger piece for most owners.
For an S-corp owner, the deferral has to come out of a paycheck, which is one more reason the December payroll matters. No paycheck, no deferral.
The estimate
The fourth-quarter individual estimate is due January 15, 2027, and it’s the single biggest cash decision on this list. Most owners pay the safe harbor: enough to match last year’s tax and avoid the penalty. That protects you from a penalty. It doesn’t protect you from being wrong.
Built from four real quarters of closed books, the estimate is a twenty-minute calculation: year-to-date profit, projected through December, run through the tax, minus what’s already been paid. Sometimes it’s smaller than the safe harbor, and you keep the difference. Sometimes it’s larger, and you find out in January instead of April. Either way, it’s a number, not a guess.
One related item for 2026: the state and local tax deduction cap is $40,000 this year, phasing down at higher incomes. If your state offers a pass-through entity tax election, November is when to decide whether it still helps, because most states require the election and the payment before year end.
Prices
Not a tax move, but it belongs on the same checklist because it has the same deadline. Price changes take effect January 1 and get communicated in December. That means the decision, and the margin analysis behind it, happens in November. A price change decided in February has already given away another year at the old rate.
What a CFO does with this number
A fractional CFO runs all five moves in one meeting, in about an hour, from October’s closed books. The order matters, because the moves affect each other.
Equipment first, because it sets the profit number. Then owner salary, because the profit number sets what’s reasonable and what the health insurance and retirement pieces look like. Then the retirement contribution, which depends on the salary. Then the estimate, built from the profit after all of that. Then prices, which set up next year’s version of the same conversation.
Done in that order, each decision feeds the next and the estimate comes out right. Done in April, none of them are available.
Where we come in
The November planning meeting is part of our advisory tier, and it’s built on the monthly close: October closed by November 10, the five moves decided that week, the December payroll set, the estimate delivered before January 15. Books, payroll, and the return are all ours, so the salary true-up and the health insurance actually happen on the payroll instead of being discovered at tax time. If you’ve ever asked in April what you could have done, reach out. This year, ask in November.
Frequently asked questions
What does year-end tax planning include?
Equipment timing, owner salary and health insurance through payroll, retirement plan setup, a real Q4 estimate, and January price changes, all decided in November.
When must equipment be placed in service?
By December 31, meaning delivered and ready to use, not ordered, to be deducted this year.
When must a solo 401(k) be opened?
By December 31 to take a contribution for the year; the employer contribution itself can wait until the return.
