Your tax bill is decided during the year, not when the return is typed up. By the time you are sitting with your accountant in March, almost every lever has already been pulled or missed. December is when you can still change the number — and a handful of the deadlines below cannot be fixed later at any price.
Key Takeaways
- Dec 31 is a hard wall for equipment placed in service, most retirement plan setups, and income/expense timing.
- Section 179 allows up to $2,560,000 of expensing for 2026, phasing out above $4,090,000 of purchases.
- 100% bonus depreciation applies and is now permanent — and it is automatic unless you elect out.
- Jan 15 Q4 estimated payment · Jan 31 1099s and W-2s · May 15 Texas franchise report.
- Clean books are the prerequisite. You cannot plan around numbers you do not have.
1. Get the books current — before anything else
Every item below depends on knowing your actual profit. If your books are three months behind, you are not doing tax planning, you are guessing. Reconcile every bank and credit card account, clear the uncategorised pile, chase outstanding invoices, and confirm that owner draws are recorded as draws rather than buried in expenses.
If you are behind, this is the one thing worth paying to fix in November rather than February. A December decision made on accurate numbers is worth more than the cost of catching up.
2. Time your income and expenses deliberately
If you are on the cash method — most small service businesses are — you control which tax year a dollar lands in by controlling when it moves.
- Expecting a lower-income year next year? Accelerate income into this year and defer deductions.
- Expecting a higher-income year next year? Delay December invoicing into January and prepay deductible expenses now.
Prepaying insurance, rent, subscriptions, or supplies before Dec 31 pulls the deduction forward. Two cautions: the expense must be genuine and the payment actually made, and there are limits on prepaying too far ahead. Do not invent expenses to chase a deduction — you are spending a real dollar to save a fraction of one.
3. Buy equipment before Dec 31 — "placed in service" is the test
This is the single largest lever most profitable small businesses have, and the deadline is unforgiving. The asset must be placed in service by Dec 31, not merely ordered or paid for. A machine sitting in a crate on Jan 2 is a next-year deduction.
For 2026:
- Section 179 lets you expense up to $2,560,000, with the cap reducing dollar-for-dollar once total qualifying purchases exceed $4,090,000. It is limited by your business income — it cannot create a loss.
- Bonus depreciation is 100% and was made permanent by the One Big Beautiful Bill Act. Unlike Section 179 it has no dollar cap and no income limit, so it can create or deepen a loss.
- Bonus depreciation is automatic unless you affirmatively elect out. That default catches people who wanted to spread deductions into future higher-income years.
Bigger deduction now is not automatically better. If this year is a loss and next year looks strong, taking a full deduction now can waste it. That is a conversation worth having in November.
4. Retirement contributions — watch the two different deadlines
This trips up owners every year, because setup and funding deadlines are not the same.
- Solo 401(k): the plan generally must exist by Dec 31 to make employee deferrals for the year. Miss that and the door closes on the deferral portion regardless of cash available.
- SEP-IRA: more forgiving — can generally be established and funded up to your filing deadline including extensions.
- Employer contributions can usually be made after year-end, up to the filing deadline.
If you have an S-corp, this interacts with your salary, since deferrals are based on W-2 wages. See LLC vs S-corp in Texas for how the salary decision works.
5. Line up 1099s and W-2s now, not in January
Both are generally due to recipients and the IRS by Jan 31, which arrives immediately after the holidays. December is when to do the boring part:
- Collect a W-9 from every contractor you paid. Chasing these in late January is miserable and penalties apply for late or incorrect filings.
- Confirm who genuinely needs a 1099-NEC — generally $600 or more to a non-employee for services.
- Sanity-check that anyone treated as a contractor really is one. Misclassification is expensive, and year-end is a sensible moment to review it. Our 1099-NEC and MISC guide covers the detail.
- Verify payroll totals and benefit amounts before the final run of the year, while corrections are still cheap.
6. Q4 estimated payment — Jan 15
The fourth-quarter federal estimated payment is due Jan 15. If profit ran ahead of expectations, a top-up now limits underpayment penalties. If profit fell short, you may be able to reduce the payment rather than overpaying and waiting for a refund. Our 2026 estimated tax calculator works through the safe-harbour rules, and this guide explains who has to pay.
7. Entity structure — decide now, elect early
If your profit has grown to the point where an S-corp election makes sense, the timing rule matters: Form 2553 generally must be filed within 75 days of the start of the tax year you want it to apply to. For a calendar-year business, that means acting in the first weeks of the year, not in the autumn when you file. December is when to make the decision so the paperwork goes in on time.
8. Texas-specific items
Texas has no state income tax, but it is not nothing:
- Franchise tax report, due May 15. Most small businesses owe no tax, but a report is still required — see who actually owes Texas franchise tax.
- Sales tax. Confirm your filing frequency and that you are collecting at the right rate.
- Property renditions. Business personal property renditions are generally due in the spring — worth calendaring while you are already in planning mode.
The short version
| Deadline | What has to happen |
|---|---|
| Dec 31 | Equipment placed in service · income/expense timing · solo 401(k) established · charitable giving |
| Jan 15 | Q4 federal estimated tax payment |
| Jan 31 | 1099-NECs and W-2s to recipients and the IRS |
| Mar 15 | S-corp and partnership returns (calendar year) |
| ~Mar 15 | Form 2553 for a calendar-year S-corp election — 75 days from Jan 1 |
| Apr 15 | Individual and C-corp returns · Q1 estimate · IRA contributions |
| May 15 | Texas franchise tax report |
Figures above reflect 2026 amounts. Inflation-adjusted limits change annually, so confirm current-year numbers before acting on them.
Want to go through this list on your actual numbers?
A short year-end call in November or December is worth more than any conversation in April. We will tell you which of these moves is worth making for your business.
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Frequently Asked Questions
What is the Section 179 deduction limit for 2026?
For tax years beginning in 2026 the maximum Section 179 deduction is $2,560,000, and the deduction begins to phase out dollar-for-dollar once total qualifying purchases exceed $4,090,000. Section 179 is also limited by your business income, so it cannot be used to create a loss. These limits are adjusted annually for inflation.
Is bonus depreciation still available in 2026?
Yes. Bonus depreciation is 100% for 2026 and was made permanent by the One Big Beautiful Bill Act, so there is no longer a phase-down schedule. Unlike Section 179 it has no dollar cap and no income limitation, meaning it can create or deepen a net operating loss. Importantly, it applies automatically unless you affirmatively elect out of it.
Do I have to buy equipment by December 31 to deduct it?
The test is when the asset is placed in service, not when it is ordered or paid for. Equipment must be in service and available for use by December 31 to be deducted for that tax year. Something delivered but still boxed in early January is a deduction for the following year, which is why late-December purchases need to account for delivery and installation time.
When are 1099s and W-2s due?
Both are generally due to recipients and to the IRS by January 31. The practical work should happen in December: collecting a Form W-9 from every contractor you paid, confirming who needs a 1099-NEC (generally $600 or more for services to a non-employee), and verifying payroll totals before the final payroll run of the year, while corrections are still straightforward.
What is the deadline to set up a solo 401(k) for this tax year?
For employee deferrals, the plan generally needs to exist by December 31 of the tax year. That deadline cannot be made up later. A SEP-IRA is more flexible and can generally be established and funded up to your filing deadline including extensions, and employer contributions to a solo 401(k) can also usually be made after year-end up to the filing deadline.
Sources: IRS, Publication 946 (How To Depreciate Property) and Section 179 limits for 2026, retrieved 2026-07-30, irs.gov; IRS, Instructions for Forms 1099-NEC and 1099-MISC, retrieved 2026-07-30, irs.gov; IRS, About Form 2553, retrieved 2026-07-30, irs.gov; Texas Comptroller of Public Accounts, Franchise Tax, retrieved 2026-07-30, comptroller.texas.gov. Inflation-adjusted limits change annually — confirm current-year figures before acting. This article is general information, not individualized tax advice.
