The Q4 Tax Planning Checklist: Strategic Moves to Make Before December 31st

 

Nearly every lever that lowers an April tax bill expires on December 31. The fourth quarter is the last stretch of the year in which any of them are still yours to pull.

The tax bill you pay in April is determined in the fourth quarter, months before you file. Q4 tax planning is the last real window to change that number, and most business owners let it close without touching it.

The instinct is to wait, since the fourth quarter is already busy and taxes still feel like a spring problem. By the time spring arrives, the moves that actually reduce a tax bill, such as timing income or purchasing equipment, are no longer available. A good year-end tax strategy means building a short list of decisions before December 31, while the choices are still yours to make, instead of searching for a loophole once March arrives.

This is a working checklist that fits into your broader financial planning process. Each section below is a move worth reviewing with your accountant before the fourth quarter closes.

Why Business Tax Planning Belongs in Q4, Not April

Tax preparation and tax planning are different activities, even though they often get treated as one. Preparation happens after the year is over and mostly involves reporting what already occurred. Planning happens while decisions can still change the outcome.

Almost every meaningful lever, such as purchasing equipment or funding a retirement plan, has a December 31 deadline attached. Once the calendar turns, those levers lock in place for the year, and all that is left is documenting the result. Fourth-quarter taxes deserve attention specifically because this is the only quarter in which planning and the filing deadline are still far enough apart to act.

Waiting until tax season also removes your accountant’s ability to help. A preparer working from a stack of 1099s in March can find deductions you already qualify for. They cannot go back and have you buy equipment in October or fund a retirement plan that had to be in place by year-end.

Review Your Estimated Tax Payments

Start with the payments you are already required to make each quarter. If your Q3 estimated payment was based on outdated projections, your Q4 payment is the last chance to correct course before the IRS calculates an underpayment penalty.

Pull your year-to-date income and compare it to what you projected back in January. If the business had a stronger or weaker year than expected, your remaining estimated payment should reflect that shift. Businesses with uneven income can also use the annualized income installment method, which calculates estimated payments based on actual quarterly income rather than a flat quarterly assumption.

This single review often prevents the most common Q4 tax planning mistake: discovering an unexpected balance due in April that could have been smoothed out three months earlier.

Time Income and Expenses Strategically

If your business operates on a cash basis, timing is one of the more direct levers available before year-end. Prepaying certain expenses in December, such as rent or insurance, can accelerate this year’s deductions, while delaying December invoices until January can push income into the following tax year.

This only works within limits and applies only in the way most people assume it does under cash-basis accounting rather than accrual. Businesses using the accrual method recognize income and expenses when they are earned or incurred, rather than when cash actually changes hands, so the same December moves do not shift the same amount of taxable income. Confirm which method your business uses before assuming a timing strategy will work as expected.

Maximize Section 179 and Bonus Depreciation

Equipment and software purchases placed in service before December 31 can be deducted in full rather than depreciated over several years. For tax years beginning in 2026, the Section 179 deduction limit is $2,560,000, with the deduction beginning to phase out once qualifying purchases exceed $4,090,000.

The distinction that catches business owners off guard is the difference between purchasing and placing in service. Equipment ordered in December must also be delivered and placed into operation before December 31 to count toward a 2026 deduction. If equipment purchases are part of your year-end tax strategy, the delivery and installation timeline matters as much as the purchase date itself.

Bonus depreciation remains available at 100 percent for qualifying property placed in service in 2026, which can apply to costs that exceed the Section 179 limit or to property outside the scope of Section 179 rules.

Max Out Retirement Plan Contributions

Retirement contributions are one of the few year-end moves that reduce taxable income while also building a personal asset, rather than simply timing an expense. For 2026, the 401(k) employee contribution limit is $24,500, and SIMPLE plan participants can defer up to $17,000, with additional catch-up amounts available for employees 50 and older.

If your business does not yet have a retirement plan in place, this is also the deadline that matters most. Certain plan types must be established and funded before December 31 to count for the current tax year. Waiting until tax season to consider a retirement plan means waiting until the option has already expired for this year.

Review Bonus and Compensation Timing

If year-end bonuses are part of your compensation structure, when they are paid and how they are structured affects both the business’s deduction and the employee’s tax timing. Accrual-basis businesses have more flexibility here than cash-basis businesses, since accrued bonuses can sometimes be deducted in the current year even if paid shortly after year-end, within specific IRS timing rules.

This is also a reasonable time to review owner compensation more broadly, particularly for S-corporation owners balancing salary against distributions. That balance affects payroll tax exposure in ways that are easier to adjust before December 31 than to unwind afterward.

Don’t Overlook Lesser-Known Deductions

Standard deductions get reviewed every year, while the provisions that actually get missed tend to be less obvious ones that apply narrowly but legitimately.

The Augusta Rule, for example, allows a business to rent space from its own owner for up to 14 days a year, such as for a board meeting or planning retreat, with the rental income excluded from the owner’s personal taxes.

Some businesses will find that these rules do not apply to their situation, and a fourth-quarter tax-planning review is exactly the moment to check whether any of them do. Most of them require the activity to actually occur before year-end, which is another reason this checklist belongs in Q4 rather than April.

Reconcile Your 1099 Reporting Obligations

Before the calendar turns, confirm you have W-9 forms on file for every contractor paid $600 or more during the year. Chasing down a missing W-9 in January, when a contractor has moved on to other work, is far harder than requesting it now while the relationship is still active.

This is a small administrative step, and a missed 1099 filing creates real penalty exposure with very little upside for having skipped it. It belongs on every December tax moves checklist, even though it has nothing to do with directly reducing your tax bill.

Build a Tax Planning Calendar for Next Year

The businesses that handle Q4 well every year rarely do anything more sophisticated than those that scramble at the last minute. The difference is that they built a tax-planning calendar the year before, with specific checkpoints in Q2 and Q3 to catch issues while there is still time to act.

A simple version works fine: a mid-year estimated payment review, a September check on equipment and retirement plan decisions, and a final December review to close out the list above. The goal is to ensure December is a review of decisions already made, rather than the first time anyone looks at the year’s tax position.

Where to Start

You do not need to work through every item on this list in one sitting to get value from it. You need to know which two or three apply to your business this year, and whether the deadlines for those specific items have already passed or are still open.

If April tends to bring surprises, that pattern is worth breaking before this December closes. Our guide to last-minute tax moves covers what is still possible after year-end, but the strongest position is not needing that list at all. Reach out to the CPA Department to schedule a Q4 tax planning session before the window closes.

Frequently Asked Questions

When should Q4 tax planning start?

Ideally, by early October, since several strategies, such as equipment purchases and retirement plan decisions, require sufficient lead time to complete the transaction before December 31.

What is the difference between tax planning and tax preparation?

Tax preparation reports what already happened during the year now closing. Tax planning happens before year-end, while decisions like timing income or purchasing equipment can still affect the final tax outcome.

Can I still reduce my 2026 tax bill after December 31?

Some options remain, such as retirement contributions to certain plan types that can be funded up until the filing deadline. However, most of the highest-impact moves, including equipment purchases and the establishment of a new retirement plan, must occur before year-end.

Does Q4 tax planning apply differently to cash-basis and accrual-basis businesses?

Yes. Cash-basis businesses can shift taxable income by timing when they pay expenses or collect payments during the year. Accrual-basis businesses recognize income and expenses when earned or incurred, so the same December timing moves do not have the same effect.

How much can I contribute to a 401(k) before year-end in 2026?

The 2026 employee contribution limit is $24,500, with additional catch-up contributions available for employees aged 50 and older. Employer contribution deadlines can extend beyond December 31, depending on the plan type.