Year-End Tax Moves to Make Before December 31

Year-end tax planning has a shrinking window and a growing list of candidates competing for attention. The mistake most owners make is treating December as one big to-do list instead of a sequence of moves that close in a specific order. Some elections are only available before your fiscal year ends. Some purchases only help if the asset is placed in service, not merely ordered. Some cash moves need a full pay cycle to land correctly. Working backward from December 31, rather than forward from a generic checklist, is what separates a plan that actually executes from a list that gets skimmed once and forgotten.

Start with income and expense timing. Cash-basis businesses have real flexibility here: accelerating deductible expenses (prepaying rent, stocking supplies, settling vendor invoices) and deferring discretionary invoicing can shift taxable income between years. The right direction depends on your marginal rate this year versus next, whether you expect a large one-time gain, and whether accelerating expenses would distort your books in a way that confuses lenders or investors reading interim financials. Timing decisions should never be made on tax impact alone, check the operating consequence first.

Retirement contributions are the highest-use lever most owners under-use. SEP-IRA and solo 401(k) contributions can often be made after year-end (up to the extended filing deadline for SEPs), but the compensation and plan-adoption decisions that determine your contribution room need to be locked in before December 31 in many cases, solo 401(k) elective deferrals, in particular, generally must be elected by year-end even though the deposit can follow. If you have not compared SEP, SIMPLE, and solo 401(k) limits for your specific income level this year, that comparison belongs at the top of the list, not the bottom.

Equipment and technology purchases deserve a real cash-flow conversation, not just a bonus-depreciation reflex. Section 179 and bonus depreciation can accelerate large deductions into the current year, but only for property placed in service, not simply ordered or invoiced, by year-end. If a vendor's lead time puts delivery into January, the deduction moves with it. Before you accelerate a purchase purely for the write-off, model whether you actually want the cash outflow now, and whether the deduction is more valuable this year or next based on your bracket trajectory.

Owner compensation and distribution timing deserve a dedicated review, especially for S corporations. Fourth-quarter payroll runs are usually the last chance to true up reasonable compensation, fund a health insurance add-back correctly, or true up retirement plan compensation calculations. If your officer compensation has drifted from what a defensible comparability analysis would support, a Q4 adjustment is far less disruptive than a prior-year amendment discovered during an exam.

State and local tax elections carry real deadlines that are easy to miss because they live outside the federal calendar. Many states now offer a pass-through entity tax (PTET) election that lets partnerships and S corporations pay state tax at the entity level, converting an itemized deduction that is capped at the individual level into a full above-the-line business deduction. Election windows, payment deadlines, and estimated payment requirements vary by state and are frequently tied to the calendar year, miss the window and the benefit is gone for the year, not deferred.

Charitable giving benefits from a strategy, not just a checkbook. Bunching multiple years of giving into a single year, often through a donor-advised fund, can push you over the standard deduction threshold in the bunched year while retaining flexibility to grant funds out over time. Appreciated stock or business interests, when eligible, can also provide a deduction while avoiding capital gains recognition. Get the valuation and substantiation paperwork right before December 31, after-the-fact receipts are a common audit friction point.

Loss harvesting and gain planning belong on the same page as charitable and retirement moves, not in a separate investment conversation. Realized losses can offset realized gains dollar for dollar, and up to $3,000 of net losses can offset ordinary income annually, with the remainder carried forward. If you are also expecting a large capital event, a business sale, a real estate disposition, coordinate the timing so loss harvesting and gain recognition are evaluated together, not discovered separately by your investment advisor and your CPA after the fact.

Documentation and 1099 readiness is the least exciting item on this list and the one that causes the most January scrambling. Confirm W-9s are on file for every contractor paid $600 or more, reconcile 1099-eligible vendor payments against your books before the calendar closes, and resolve any missing taxpayer ID numbers now while vendors are still responsive. The IRS penalty structure for late or incorrect information returns is not trivial, and it is entirely avoidable with a two-week head start.

OICPA runs year-end planning as a working session in November, not a form letter in December: we review your actual numbers, flag the elections and purchases that are still available, and sequence the moves so nothing gets missed in the holiday compression. If you want a prioritized list built around your entity type and current-year performance, reach out before the calendar makes the decision for you.

The businesses that handle year-end well are not the ones with the longest checklist. They are the ones that know which five items matter most for their specific facts and execute them on time. A shorter list, done completely and on schedule, beats a full list that gets half-finished in the last week of December. That is the standard we plan against.