The end of the year can be a chaotic time for business owners. It is a time to compile data, review the numbers, evaluate strengths and weaknesses, and determine growth opportunities for the future. A business owner would be keen to review several factors in preparing year-end documents and preparing for the following year. Here are five tips that may assist with organizing a strategy.
1. Capitalize on Asset Expensing & Depreciation
- 100% Bonus Depreciation
Consider taking advantage of the permanent 100% bonus depreciation for the cost of qualified new and used assets (purchased and placed into service by December 31). - Section 179
Revisit Section 179 expensing options for equipment and heavy machinery. Ensure you have the proper documents including the business purpose documents and the exact placed-in-service dates documents in case of an audit.
2. Tax Planning
Have necessary steps been taken toward filing required business and individual tax returns, so they get filed on time? The type of business will determine the tax consequence. There are five general types of business taxes and tax changes that can be applied.
- Income Tax
All businesses aside from partnerships file an annual income tax return. Partnerships file an information return. - Estimated Tax
This tax comes from income generated by interest, dividends, alimony, self-employment income, capital gains, prizes, and awards. - Self-employment Tax
Owed if earnings were $400 or more or church employee income was $108.28 or more. - Employment Taxes - These taxes include:
o Federal income tax withholding
o Federal unemployment (FUTA) tax
o Social security and Medicare taxes - Excise Tax
o Manufacture or sell certain products
o Operate certain kinds of businesses
o Use various kinds of equipment, facilities, or products
o Receive payment for certain services
3. Review Qualified Business Income Deductions & Loss Limitations
- Qualified Business Income (QBI) Deductions & Loss Limitations
Pass-through entity owners (Sole Proprietorships, LLCs, and S-corps) can claim the QBI deduction (Section 199A). - Excess Business Loss
Track your noncorporate loss limitations to ensure they stay below the annual inflation-adjusted caps. Before offsetting your non-business income, review current-year business losses to establish whether they were kept within the annual threshold limits. For 2026, the maximum excess business loss thresholds are $256,000 for single filers and $512,000 for married couples filing jointly. If your combined business losses surpass this threshold, the excess amount is disallowed in the current year. It must be treated as a Net Operating Loss carryforward to subsequent years, and is generally capped at offsetting 80% of taxable income.
4. Assess Your Financial Condition and Capital Structure
- Acquire and Review Pro-Forma Returns
Contact your CPA and request pre-year end or mid-year pro forma tax returns to estimate your safe-harbor estimated tax payments to avoid unnecessary penalties.
5. Understanding the value of Life Insurance
Life insurance is not just about preserving lost wages for surviving family members and evaluating how loved ones may transfer the business to them. Life insurance cash values can potentially become an asset that can be used to, for example, finance a buy-out or borrow against the policy or multiple policies to help cover business expenses.
6. Cybersecurity is a way of life now. Are you staying on top of new threats and measures to lower the possibility of attacks?
Breaches within the cyberspace of companies have become a real threat. Hackers are sophisticated and regularly create innovative techniques to break into company databases. What steps are being taken to stay updated with the evolving threats and means of protection against cyberattacks?
7. Whether to defer or accelerate income?
Smaller businesses often use the cash method of accounting on their books and tax returns. If the business is expected to be in a lower tax bracket the following year, consider deferring income to the following year. However, if the expectation is that the business will be in a higher tax bracket, consider accelerating income into the current year, for example, sending invoices and attempting to get paid sooner so income will be taxed at the current tax rate.
8. Record of Out-of-Pocket “Business” Expenses
• Mileage log – A record of tracking miles to show to the IRS
• Money spent out of personal accounts
• Cash receipts (Gas, Uber or taxi cab, and other expenditures.)
Important Disclosures
This material is for general information only and is not intended to provide specific advice or recommendations for any individual.
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
Please keep in mind that insurance companies alone determine insurability and some people may be deemed uninsurable because of health reasons, occupation, and lifestyle choices. Guarantees are based on the claims paying ability of the issuing company.
All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.
This article was prepared by LPL Marketing Solutions
Tracking # 1-05341284
Footnotes:
[1]End-of-Year Planning for Business Owners | J.P. Morgan
[1]Self-employment tax (Social Security and Medicare taxes) | Internal Revenue Service
[1]Qualified business income deduction | Internal Revenue Service
[1]Godfrey & Kahn: Key Business Tax Changes in the One Big Beautiful Bill Act
[1]Financial year-end planning: 10 actions to take before 2026 | J.P. Morgan Private Bank Asia
[1]How Can I Borrow Money From My Life Insurance Policy? (investopedia.com)
[1]6 Ways Cybercrime Impacts Business (investopedia.com)
[1]Reimbursable out-of-Pocket Costs Definition (investopedia.com)