Year-End Tax Planning: Start Now, Not in December

Every December, I get a flood of calls from business owners asking "What can I do to lower my taxes before the year ends?"

Real talk: By December, your options are limited. The best year-end tax planning starts in September or October—while you still have time to actually implement strategies.

If you're reading this before November, you're ahead of the game. Here's what you should be doing now.

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Step 1: Know Your Numbers

You can't plan what you can't see.

Before anything else, run these reports (or have your bookkeeper run them):

• Profit & Loss (P&L) — Year-to-date
• Projected income — Estimate through December
• Last year's tax return — For comparison

The questions you're answering:

• How much profit am I looking at?
• How does this compare to last year?
• What's my estimated tax liability?

If you're a Plano consultant projecting $150,000 in profit, you're planning differently than if you're projecting $80,000.

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Step 2: Accelerate Deductions

This is the classic year-end move: push expenses into this year to reduce taxable income.

Things to consider:

Equipment purchases Planning to buy a computer, equipment, or vehicle? Do it before December 31 to deduct it this year. Section 179 and bonus depreciation let you write off the full cost immediately.

Prepay expenses Some expenses can be prepaid:

• January rent (if your landlord allows it)
• Annual software subscriptions
• Insurance premiums
• Professional dues and memberships

Stock up on supplies If you use supplies regularly, buying a reasonable amount before year-end is deductible.

Caution: Don't buy things you don't need just for the deduction. A $10,000 purchase only saves you $3,000 in taxes (at 30% bracket). You still spent $10,000.

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Step 3: Defer Income (If It Makes Sense)

If you can push income into next year, you delay the taxes on it.

How to defer:

• Delay invoicing until late December (collect in January)
• Wait to close a big deal until after January 1
• Defer bonuses or distributions to yourself

When this makes sense:

• You expect to be in a lower bracket next year
• You're having an unusually high-income year
• You need cash flow relief in April

When it doesn't make sense:

• You expect income to grow next year
• You need the cash now
• The client might not pay if you wait

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Step 4: Max Out Retirement Contributions

This is often the biggest lever DFW business owners have.

2026 limits:

• 401(k) employee contribution: $23,000 ($30,500 if 50+)
• SEP-IRA: Up to 25% of net self-employment income, max $69,000
• Solo 401(k): Up to $69,000 total ($76,500 if 50+)

Example: If you have $50,000 in profit you don't need, putting it into a SEP-IRA could save you $15,000+ in taxes.

Timing note: Solo 401(k)s must be established by December 31. SEP-IRAs can be set up and funded until your tax filing deadline (April 15 or October 15 with extension).

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Step 5: Review Your Business Structure

This is less about December and more about next year—but year-end is when you should decide.

The S-Corp question: If you're earning $60,000+ in profit as a sole proprietor or LLC, S-Corp election could save you $5,000-$15,000 in self-employment taxes.

But the deadline to elect for next year is March 15. If you wait until next fall to think about it, you've missed another year.

Year-end is the time to:

• Review this year's numbers
• Project next year's income
• Decide if a structure change makes sense
• Get it on the calendar for January/February implementation

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Step 6: Harvest Losses (Investment Accounts)

If you have investments outside of retirement accounts, check for losses.

Tax-loss harvesting: Sell investments that are down to realize the loss. Use those losses to offset gains—or up to $3,000 of ordinary income.

Example: You have $10,000 in gains and $8,000 in losses. Harvest the losses to reduce net gains to $2,000.

The wash-sale rule: You can't buy substantially identical investments within 30 days (before or after the sale). If you want to stay invested, buy something similar but not identical.

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Step 7: Make Charitable Contributions

If you're planning to donate anyway, doing it before December 31 gets you the deduction this year.

For business owners:

• Cash donations: Deductible up to 60% of AGI
• Donate appreciated stock: Deduct full market value, avoid capital gains

Bunching strategy: If your itemized deductions are close to the standard deduction, consider "bunching" multiple years of donations into one year to get over the threshold.

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Step 8: Use Your FSA/HSA

FSA (Flexible Spending Account): Most FSAs are "use it or lose it." Check your balance and spend it on eligible expenses before the deadline (usually December 31 or March 15 of next year).

HSA (Health Savings Account): Unlike FSAs, HSA funds roll over. But if you haven't maxed out your contribution ($4,150 individual, $8,300 family in 2026), do it before December 31 for the tax deduction.

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The Year-End Checklist

Here's what to do and when:

September-October:

• Run year-to-date P&L
• Project full-year income
• Calculate estimated tax liability
• Identify acceleration opportunities
• Review business structure for next year

November:

• Make equipment purchases
• Prepay eligible expenses
• Project and adjust final quarterly payment
• Set up retirement accounts (if needed)

December:

• Final retirement contributions
• Charitable donations
• Tax-loss harvesting
• FSA spending
• Invoice timing decisions

January:

• Set up S-Corp election (if decided)
• Implement new systems for next year

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The Biggest Mistake I See

Waiting too long.

By December 20, most strategies are off the table. Equipment needs time to be ordered and received. Retirement accounts need to be opened. Business structure changes need planning.

The business owners who pay the least in taxes aren't doing anything magical—they're just thinking about this in October instead of December.

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The Bottom Line

Year-end tax planning isn't a December activity—it's a fall activity.

If you're a business owner in Plano, Richardson, Frisco, or Dallas and you haven't done your year-end planning yet, there's still time. But not much.

Let's review your numbers and find the opportunities before they expire.

Haven't done your year-end planning yet? Let's review your numbers →

— Krystal Le, CPA

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LeCPA provides tax planning for small business owners across Plano, Richardson, Carrollton, Frisco, and Dallas. Schedule a free strategy session →