What Should You Do Before the End of 2026 to Properly Plan Your Taxes?

Sep 8

6 min read

Tax planning for 2026 should not begin in the spring of 2027 when you gather your documents and send them to your accountant.

By then, the tax year is already over.

Your accountant can properly report what happened during 2026, identify deductions and credits you qualify for, and prepare an accurate return. But many decisions that could have changed your tax outcome may no longer be available after December 31.

That is the difference between tax preparation and tax planning.

Tax preparation looks backward. Tax planning looks forward.

For business owners in particular, the final months of the year are an important opportunity to review income, expenses, investments, payroll, major transactions, and other financial decisions before the year closes.

Here are several areas worth discussing with your tax professional before the end of 2026.

1. Review Major Business Purchases Before Year-End

If your business is planning to purchase equipment, computers, machinery, furniture, certain vehicles, or other business property, timing can matter.

Current tax law provides accelerated depreciation opportunities for certain qualifying business assets. For example, 100% bonus depreciation is available for certain qualifying property acquired after January 19, 2025, subject to applicable requirements.

Section 179 may also allow businesses to immediately expense qualifying property rather than recovering the entire cost through depreciation over a number of years.

However, simply purchasing an asset before December 31 does not automatically guarantee a deduction for 2026.

One important concept is “placed in service.”

Generally, for depreciation purposes, property is placed in service when it is ready and available for its intended business use.

For example, ordering equipment in December that is not delivered, installed, or available for business use until January may produce a different tax result than equipment that is operational before year-end.

This is why major purchases should be discussed with your tax professional before they are made — especially when the tax treatment is part of the decision.

And remember: a tax deduction alone is rarely a good reason to buy something your business does not actually need.

2. Make Sure Your Business Expenses Are Properly Recorded

Business owners sometimes focus on sophisticated tax strategies while overlooking ordinary expenses they incur throughout the year.

Advertising, software subscriptions, professional services, business insurance, payroll expenses, office costs, supplies, and many other ordinary and necessary business expenses may be deductible when the applicable requirements are satisfied.

The problem is often not whether an expense exists.

It is whether the business has properly recorded and documented it.

Year-end is a good time to review your bookkeeping, reconcile business accounts, identify missing transactions, and make sure supporting documentation is organized.

It is also important to maintain a clear distinction between personal and business spending.

Paying a personal expense from a business bank account does not automatically transform that expense into a business deduction.

The underlying nature and business purpose of the expense matter.

3. S Corporation Owners Should Review Reasonable Compensation

If you own an S corporation and perform services for the company, compensation deserves particular attention.

The IRS requires shareholder-employees to receive reasonable compensation for services provided to the corporation before certain non-wage distributions are made.

There is no single salary that is automatically “reasonable” for every S corporation owner.

The analysis can depend on factors such as the services performed, responsibilities, experience, time devoted to the business, industry compensation levels, and the financial circumstances of the company.

This is why reasonable compensation should not be treated as an afterthought discovered when the S corporation return is being prepared.

Payroll and owner compensation should be reviewed while there is still time to address potential issues before year-end.

4. Understand the Tax Consequences Before Major Transactions

Some of the most important tax decisions happen outside the accounting office.

Are you planning to:

Sell business property?
Purchase a vehicle?
Buy expensive equipment?
Sell an investment?
Acquire another business?
Make a significant investment in your existing business?
Change the way a major asset is used?

Before completing a significant transaction, understand its potential tax consequences.

The timing and structure of a transaction can sometimes affect when income is recognized, how an asset is depreciated, whether a gain or loss is recognized, and what documentation may be required.

Calling your accountant after a transaction closes may be too late to consider alternatives that were available beforehand.

A useful rule for business owners is simple:

Talk to your tax professional before the transaction, not after the money moves.

5. Don't Spend $10,000 Just to Get a $10,000 Deduction

This is one of the most misunderstood concepts in small-business tax planning.

A $10,000 tax deduction is not the same as $10,000 in tax savings.

A deduction generally reduces taxable income. It does not normally reduce your tax liability dollar-for-dollar.

If a business spends money solely because someone says, “You can write it off,” the business is still spending real money.

The right question is not:

“Can I deduct this?”

It is:

“Does this expense make business sense, and if I make it, what is the correct tax treatment?”

Good tax planning should support good financial decisions — not encourage unnecessary spending simply to generate deductions.

6. Review Income Before the Year Ends

Expenses are only one side of year-end tax planning.

Business owners should also understand where their income stands for 2026.

Compare actual year-to-date results with earlier projections. Look at expected revenue through December and consider other sources of taxable income.

This can help identify whether estimated tax payments remain appropriate and whether an unexpectedly strong or weak year has changed the overall tax picture.

For pass-through business owners, this can be especially important because business income may ultimately flow through to the owner's individual tax return.

Waiting until the return is prepared to discover that income was substantially higher than expected is not tax planning.

It is tax reporting.

7. Review Your Bookkeeping Before Tax Season

Clean books are not simply an administrative convenience.

They are the foundation of an accurate business tax return.

Before year-end, consider reviewing:

Bank and credit card reconciliations
Accounts receivable and payable
Payroll records
Owner contributions and distributions
Fixed assets and equipment purchases
Loans and interest
Business versus personal expenses
Large or unusual transactions

Finding problems now gives your accountant more time to understand what actually happened.

Trying to reconstruct an entire year from bank statements during tax season is a very different process.

8. Don't Choose a Tax Strategy in Isolation

The lowest possible taxable income is not always the best financial outcome.

This is particularly important for business owners who expect to apply for a mortgage, obtain business financing, bring in investors, sell a company, or make another significant financial move.

A tax return is not only a document sent to the IRS. It can also become part of the financial picture reviewed by lenders and other third parties.

That does not mean you should intentionally pay more tax than legally required.

It means tax decisions should be made in the context of your broader financial goals.

The objective should be to use every legitimate tax opportunity available to you without losing sight of what you are trying to accomplish outside the tax return.

Tax Preparation and Tax Planning Are Not the Same Thing

A tax professional preparing your 2026 return in 2027 is largely working with events that have already happened.

The business earned the income.

The expenses were incurred.

The assets were purchased or sold.

The payroll was processed.

The transactions closed.

At that stage, the job is to determine the correct tax treatment and prepare the return accurately.

Tax planning happens earlier.

It asks:

What decisions are we expecting to make? What will their tax consequences be? Is there a legitimate opportunity we should consider before year-end? And does that strategy make sense for the client's overall financial situation?

That conversation should happen while there is still time to act.

The Bottom Line

Good tax planning is not about finding a way to “write off everything.”

It is not about making unnecessary purchases in December.

And it is not simply about producing the lowest tax bill possible.

Good tax planning means understanding your financial position, using the tax provisions legally available to you, maintaining proper documentation, and making decisions that support both your tax position and your broader financial goals.

After December 31, your accountant can properly report what happened during 2026.

Before December 31, there may still be an opportunity to influence what happens.

That is why the best time to discuss 2026 tax planning is before 2026 is over.

Need to Review Your 2026 Tax Strategy?

If you own a business or expect significant financial changes before year-end, consider reviewing your tax position before December 31.

A year-end tax planning meeting can help identify issues that need attention, evaluate legitimate tax opportunities, and make sure your tax strategy aligns with your business and financial goals.

Accounting & Beyond provides tax planning, tax preparation, accounting, and business advisory services for individuals and businesses.

This article is for general informational purposes only and does not constitute tax, legal, investment, or financial advice. Tax rules are complex and their application depends on individual facts and circumstances.

Sources: Internal Revenue Service (IRS). The uploaded planning guide also highlights year-end review areas including bonus depreciation, Section 179, business assets, and S corporation compensation, although individual strategies should be verified against current law before implementation.