Most of what lowers a business owner’s 2026 tax bill has to happen by December 31. After that, the return can only report what already happened. This checklist covers the moves that matter most for a trade or service business, in the order we work through them with clients.
Greg Neilsen, JD, LLM (Master of Laws in Taxation), reviews our tax guides. Last reviewed: September 30, 2026.
Twelve things. Each one is explained below.
Only if the business needs it. A $60,000 truck that saves $13,000 in tax still costs $47,000.
If you do need it, timing matters. Equipment and vehicles acquired after January 19, 2025 qualify for 100 percent bonus depreciation. That means the whole cost can come off this year’s profit. The rule is now permanent.
The truck has to be placed in service by December 31. Paying for it is not enough. Ordering it is not enough. It has to be delivered and ready to work. A financed truck counts the same as one paid in cash.
Trucks and vans over 6,000 pounds gross vehicle weight rating are not held to the passenger-car depreciation limits. Most work pickups and cargo vans clear that weight. Check the sticker inside the driver’s door.
Writing it all off this year is not always the best move. If next year’s profit will be higher, spreading the deduction can save more tax over two years. That is the decision a year-end plan settles with real numbers.
Example: A roofing company orders a $14,000 dump trailer on December 18. It arrives January 6. The deduction lands in 2027, not 2026, because the trailer was not ready to work by December 31. Ordered in November, the same trailer would have counted this year.
Trade examples: landscaping, roofing, and plumbing companies all face this decision every fall.
If your business is an S corporation, the IRS expects you to pay yourself a reasonable salary before taking distributions. Reasonable means close to what you would pay someone else to do your job.
Year end is the time to fix a salary that is too low, through the last payroll runs of December.
One more S corporation rule: health insurance the business pays for an owner of more than 2 percent has to appear on the owner’s W-2. If it is missing in December, it is a correction in January.
Example: A plumbing company earns $220,000 of profit. The owner takes a $30,000 salary and the rest as distributions. A manager who did the owner’s job would cost about $70,000. In December the company runs the extra $40,000 through payroll, with the payroll taxes withheld and paid, before the year closes.
Example: The same company pays $1,000 a month for the owner’s health insurance. The $12,000 goes in box 1 of the owner’s W-2, but not in the Social Security and Medicare boxes. The owner then deducts it on the personal return.
The IRS charges a penalty when tax is paid late during the year, even if the full bill is paid in April. You avoid it by paying at least 100 percent of last year’s tax across the year. If last year’s adjusted gross income was over $150,000, the safe number is 110 percent.
The last 2026 estimated payment is due January 15, 2027.
S corporation owners have a better tool. Federal tax withheld from your paycheck counts as paid evenly through the year, even if it is withheld in December. A larger December paycheck withholding can cover a shortfall from earlier in the year.
Example: An owner’s 2025 tax was $30,000, and 2025 adjusted gross income was under $150,000. The safe number for 2026 is $30,000. The owner paid $12,000 in estimates through September. Adding $18,000 of federal withholding to the December paycheck brings the total to $30,000 and avoids the penalty.
If the business reports on the cash basis, income counts when it is received and expenses count when they are paid. That gives you some control in December.
Prepaying an expense can work if the benefit lasts 12 months or less, like an insurance premium. Prepaying years of rent does not.
Holding an invoice until January moves that income to next year. It also moves the cash. Do not starve the business of cash to save tax.
The $2,500 expense rule lets you deduct small purchases right away instead of depreciating them. Any item or invoice of $2,500 or less qualifies, as long as the business applies the rule consistently and makes the election on the return.
Example: A landscaping company on the cash basis pays its $9,600 liability insurance premium on December 20 for a policy that runs January through December 2027. The policy lasts 12 months, so the $9,600 is deductible in 2026.
Example: A painting company finishes a $15,000 job on December 26. If the customer pays in January, the $15,000 counts in 2027. That only makes sense if the company can carry its December payroll without the cash.
Example: A $1,800 pressure washer falls under the $2,500 rule and is deducted this year with no depreciation schedule. A $3,200 drain jetter is over the line, so it goes on the depreciation schedule. Bonus depreciation usually still deducts it in full this year.
It depends on how the business keeps its books. A business on the accrual basis counted the invoice as income when it billed. When the debt is truly uncollectible, it can write it off before year end.
A business on the cash basis never counted the unpaid invoice as income. There is nothing to write off, because the income was never taxed.
Example: An electrical contractor on the accrual basis billed a builder $8,000 in March. The builder closed its doors in October. The contractor writes off the $8,000 in December and keeps the records that show it tried to collect. The same unpaid invoice at a cash-basis company produces no deduction, because the $8,000 was never counted as income.
Retirement contributions are one of the few deductions that also build something for you. Some plans have to be set up before the year ends. Others can wait.
A 401(k) plan is easiest to set up by December 31, because owner salary deferrals have to come out of 2026 pay. A SEP IRA can be opened and funded up to the return’s due date, including extensions.
If you have employees, the plan has to cover them too. That changes the cost, and it is worth working through before you sign anything.
Example: An S corporation owner with no employees pays a $60,000 salary. Through a 401(k), the owner defers $24,500 from salary, and the company adds 25 percent of salary, or $15,000. That is $39,500 deducted for 2026. At a 22 percent federal bracket, about $8,700 less tax, and the money stays the owner’s.
Three changes matter most for trade and service businesses.
Example: A remodeler paid a drywall sub $1,500 and a tile sub $2,400 in 2026. Only the tile sub gets a 1099-NEC. Both still filled out a W-9 before the first check.
Example: An HVAC tech earns $30 an hour and works 10 overtime hours at $45. The overtime premium is $15 an hour, so $150 for those 10 hours. That $150 is the number payroll has to track and report.
Example: A pool service company owns $40,000 of equipment besides its licensed trucks: vacuums, pumps, tanks, and shop tools. The first $25,000 is exempt, so the county taxes $15,000 of value. Without the April 1 return, the company can lose the exemption and owe a penalty.
Illustration only. The numbers are made up. A Tampa HVAC company runs as an S corporation. It has four technicians and $180,000 of profit through November. The owner’s salary is $40,000.
Florida has no personal income tax, so every one of these decisions is federal math.
More on how we work with HVAC companies.
When it means buying what the business does not need. When it means holding income the business needs for payroll. When next year’s profit will be much higher than this year’s. Year-end planning is about timing. It is not about spending.
Example: An owner buys a $60,000 truck the business does not need to save $13,200 in tax. The business is still out $46,800, and now it pays insurance, tags, and upkeep on a truck that sits.
In our Planned plan, the written tax plan is included. It lists the moves, the dollar estimate for each, and the deadline. We run the year-end numbers in the fall, so the decisions happen in October and November, not on December 30.
Read more about our tax planning service, or see the trades we serve.
Related guides: bonus depreciation, Section 179 vs. bonus depreciation, the 2026 tax planning guide, and how to build a business tax plan.
It is an IRS safe harbor that lets a business deduct items or invoices of $2,500 or less right away, instead of depreciating them. The business makes the election each year on its return and applies it to every qualifying purchase.
No. A financed truck qualifies the same as one paid in cash. What matters is that it is placed in service, delivered and ready to work, by December 31.
A little. SEP IRA contributions can be made until the return is filed, including extensions. Most other moves, like equipment, owner pay, and prepaid expenses, have to happen by December 31.
January 15, 2027. S corporation owners can also cover a shortfall with extra federal withholding on a December paycheck.
For payments made in 2026, a 1099-NEC is required when you paid a subcontractor $2,000 or more for services. Most payments to corporations are exempt. Collect a W-9 from everyone before you pay them, so the information is ready in January.
This guide is educational and is not tax advice for your situation. Tax rules change, and the right move depends on your numbers. Talk to a tax professional before you act.
Greg Neilsen, JD, LLM (Master of Laws in Taxation), reviews our tax guides. Last reviewed: September 30, 2026.
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