Year-End Tax Moves for Profitable Businesses
Some moves close on December 31. Several close earlier. Running this in November is what makes it a plan.
Year-end tax planning for a profitable business is the process of taking actions before the tax year closes that change what the return will report. It is constrained by the calendar: some items remain available through December 31, several close earlier, and a few required action in the first half of the year. Running the review in November rather than December is what separates a plan from a report.
Start in November, Not December
Several of the highest-value year-end items need lead time that a late December review does not leave. An actuarial study for a cash balance plan takes weeks. Equipment must be placed in service, not merely ordered. A cost segregation study needs a site visit and a report. A PTET election may require an estimated payment by a specific date.
By late December the list of available moves has narrowed to the few that can be executed in days. Most of the value has already closed.
Moves With Deadlines Before December 31
Retirement plan installation. A new defined benefit or cash balance plan generally must be established before the end of the plan year to generate a deduction for that year. Missing this forfeits the largest single deduction on the list, with no remedy.
PTET elections and payments. State rules vary widely, and several require an election and an estimated payment during the tax year rather than at filing. A missed payment date can invalidate the election entirely.
Placing property in service. Bonus depreciation requires the asset to be placed in service, meaning ready and available for its intended use, not merely purchased or delivered. Equipment sitting in a crate on December 31 does not qualify.
Moves Available Through December 31
Equipment and vehicle purchases. With 100 percent bonus depreciation permanent under the OBBBA for property acquired after January 19, 2025, qualifying purchases placed in service before year-end are fully deductible. Vehicles have their own weight and use rules that need checking before relying on the deduction.
Timing income and expenses. A cash-basis business can defer December invoicing into January or prepay deductible expenses before year-end. Useful at the margin, and worth checking against next year's expected position rather than applied reflexively.
Bonuses and reasonable compensation true-ups. Where the compensation figure has drifted from the documented analysis, year-end is when it gets corrected.
Charitable contributions. Including appreciated securities, which avoid the capital gain while generally deducting at fair market value, and donor advised funds where the deduction is wanted this year but the grants are not yet decided.
Harvesting capital losses. Against realized gains, watching the wash sale rules on repurchase.
Moves Still Available After Year-End
A short list survives into the following year and is worth knowing so it is not rushed in December:
- Solo 401(k) employer contributions, generally fundable up to the extended filing deadline.
- SEP IRA contributions, on a similar timeline.
- Form 3115 depreciation catch-ups, which can be filed with the current year return to recover prior-year amounts.
- A cost segregation study on a property already placed in service, whose benefit can be caught up rather than lost.
The Review Itself
A useful November review projects full-year profit against the last quarter's actuals, recalculates the effective rate on that projection, confirms every election deadline still open, reconciles the retirement plan funded to date against its capacity, and tests whether any depreciation being contemplated will actually be usable given passive activity constraints.
It ends with a dated list of actions and deadlines, not a summary. The output of a planning review is decisions with dates attached.
Key Takeaways
- Run the review in November; by late December most high-value moves have already closed.
- New defined benefit and cash balance plans generally must be installed before year-end.
- Property must be placed in service, not merely purchased, to earn bonus depreciation.
- Solo 401(k) employer contributions and Form 3115 catch-ups survive past December 31.
- The output of a real review is dated decisions, not a summary of the year.
Start With the Pillar Guide
Frequently Asked Questions
When is the deadline to set up a retirement plan for this tax year?
It depends on the plan. A new defined benefit or cash balance plan generally must be established before the plan year ends. Solo 401(k) rules differ between the employee deferral and the employer contribution, with the employer portion generally fundable up to the extended filing deadline. Confirm the specific deadline for your plan type well before December.
Does buying equipment in December still work?
Only if it is placed in service by December 31, meaning ready and available for its intended use. Ordering, paying for, or taking delivery of equipment is not sufficient. Equipment still in its packaging on December 31 does not qualify for that year.
Is deferring income into next year worth doing?
Sometimes, and it should be checked rather than assumed. Deferring helps if next year's rate will be lower or equal. If the business is growing into a higher bracket, deferral moves income into a worse year. It is a timing decision that requires a projection, not a default.
What if I have already missed the year-end deadlines?
Several routes remain: employer retirement contributions up to the extended deadline, Form 3115 catch-ups for missed depreciation, and cost segregation on property already in service. Prior-year errors can also be recovered through amended returns, which is where a three-year lookback often pays for itself.
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