Year-End Tax Planning: What to Do Before December 31

By Daniel Sabet · CFO & Financial Advisor, GreenGrowth CPAs · Tax Strategy & Growth Planning · Los Angeles, CA  |  Published September 2026  |  Tax Advisory

Most year-end tax planning advice repeats itself annually. Defer income, accelerate deductions, top up the retirement plan. None of that is wrong, and none of it is why this year is different. The One Big Beautiful Bill Act changed several rules that apply to a 2026 return for the first time, and one December 31 deadline carries no extension mechanism at all. So the useful list this year is short, specific, and mostly about things that stop being possible once the calendar turns.

Year-End Tax Planning: At a Glance

What Changed for 2026, and What Cannot Wait

• Bonus depreciation is permanent at 100%. Both the acquisition date and the placed-in-service date matter, and California does not conform.
• Opportunity Fund gains recognize December 31, 2026. Mandatory, with no deferral available, and a declined fund may justify an appraisal.
• Charitable deductions carry a new 0.5% AGI floor. Meanwhile non-itemizers gain a deduction they never had.
• S-corp reasonable compensation runs through payroll. Once the last pay date passes, the year is set.
• The 1099 threshold moved from $600 to $2,000. Vendor tracking should change before January, not during it.
• California PTET no longer voids on a missed payment. The election survives, at the cost of a credit reduction.
• GreenGrowth’s role: we model the options against your actual numbers. Book a year-end planning review →

Bonus Depreciation Is Permanent, and the Date Still Decides It

Previously, bonus depreciation was stepping down to 20% in 2026 and disappearing in 2027. The One Big Beautiful Bill Act made 100% permanent instead, which removes the pressure to rush a purchase before a phase-out. It does not remove the date test.

Two dates have to clear, not one. The property must clear two dates, acquisition and placed in service, both on or after January 19, 2025. A written binding contract signed before January 20, 2025 counts as acquisition on that earlier date, which can pull the asset back under the old rules.

Placed in service means operating. Ordering equipment in December does not qualify it. The asset has to sit ready and available for its intended use before the year ends. For anything requiring installation, that means working backward from the calendar rather than the invoice.

California does not conform. So a California business gets the federal deduction and a state add-back, and the planning question becomes whether the federal benefit justifies the state timing difference.

Section 179 Sits Alongside It

The Section 179 limit for 2026 is $2,560,000, and unlike bonus depreciation it is limited to taxable income. The IRS sets out the mechanics in Publication 946 and the Form 4562 instructions. Consequently a business with a loss year cannot use it, while bonus depreciation can create or increase a loss. Which of the two you elect changes the answer more than most owners expect.

For buildings rather than equipment, a cost segregation study reclassifies components into shorter recovery periods so bonus depreciation can reach them. On property already owned, a Form 3115 change of accounting method captures the missed depreciation in a single year rather than amending returns.

One December 31 Deadline Has No Extension

Anyone who rolled a capital gain into a Qualified Opportunity Fund, described on the IRS opportunity zones page, has been deferring that gain since the investment. Now, on December 31, 2026, the deferral ends.

You recognize the lesser of the original deferred amount or the fund’s fair market value less basis. That second figure matters, because a fund that has declined in value produces a smaller inclusion. Claiming it, however, means having a defensible valuation.

Therefore an investor whose fund is worth less than the deferred gain should be arranging a qualified appraisal now rather than in April. Furthermore the tax is due with the 2026 return, so the cash has to come from somewhere, and the fund itself is generally illiquid until the ten-year holding period completes.

Charitable Giving Changed in Both Directions

Two changes pull opposite ways, so which one applies depends on whether you itemize.

If you itemize, a floor now applies. A floor of 0.5% of adjusted gross income now cuts into charitable deductions under IRC 170(b)(1)(I). So on $800,000 of AGI, the first $4,000 of giving produces no deduction at all. Separately, taxpayers in the 37% bracket have the benefit of itemized deductions capped at 35%.

If you do not itemize, you gained a deduction. A new above-the-line deduction of $1,000 for single filers and $2,000 for joint filers starts with tax year 2026. It is permanent, cash only, and not indexed for inflation. Donor advised funds and most private foundations are excluded.

Corporations face their own floor. A 1% floor applies to corporate charitable deductions, on top of the existing percentage limitation.

The planning consequence is bunching. Since the floor applies annually, giving two years of donations in one year clears it once instead of twice. Also worth confirming: any single gift of $250 or more needs a contemporaneous written acknowledgment from the organization, obtained before you file.

S-Corporation Compensation Closes With Payroll

An S-corporation shareholder who works in the business must take reasonable compensation as W-2 wages. Where that wage sits too low relative to distributions, the IRS can recharacterize distributions as wages and assess payroll tax, interest and penalties.

Essentially, what makes this a year-end item rather than a filing item is mechanical. Wages run through payroll, payroll runs on dates, and once the final pay date of the year passes there is no clean way to add compensation retroactively. So the correction has to happen in December, usually through a final adjusting payroll run.

Two related items share the same constraint. Health insurance premiums for a more-than-2% shareholder must appear on the W-2 to qualify as deductible, and personal use of a company vehicle joins wages before the year closes.

Four More Items Worth Handling Before January

1. Fourth quarter estimated tax, due January 15, 2027. Underpayment penalties accrue by quarter rather than annually, so a large fourth quarter payment does not fully cure an underpaid first quarter. Where income arrived unevenly, the annualized income installment method on Form 2210 often reduces the penalty.

2. The 1099 reporting threshold rose to $2,000. Payments made after December 31, 2025 report at $2,000 rather than $600 under OBBBA section 70433, as reflected in the Form 1099-MISC and 1099-NEC instructions. Vendors between the two figures no longer need a form, though collecting a W-9 before the first payment remains the sensible practice. Read our guide to 1099 filing requirements for the full picture.

3. California pass-through entity tax under SB 132. For tax years from 2026, missing the June 15 prepayment no longer voids the election. Instead each owner’s credit is reduced by 12.5% of that owner’s share of the shortfall, which turns a cliff into a priced option.

4. Retirement plan deadlines split. A new 401(k) generally has to exist before year end, while a SEP-IRA can be set up and funded as late as the extended filing deadline. Confusing the two costs a year of contributions.

The Year-End Tax Planning Calendar

Working backward from December 31, since several of these need lead time that a December start does not allow.

How GreenGrowth CPAs Approaches Year-End Tax Planning

A checklist tells you what exists. However it cannot tell you which items are worth acting on, because that depends on this year’s projected income, next year’s expected rate, your state, and your entity structure.

So a year-end planning review starts with a projection rather than a list. We model the current year against next, then test which of the items above actually change the outcome. Frequently the answer is two or three of them rather than all nine.

GreenGrowth CPAs has served clients since 2016 across cannabis, technology, real estate, life sciences, nonprofits and professional services. Each of those carries its own year-end questions, so see our tax planning and compliance services for the wider calendar.

One Note for Cannabis Operators

2026 is the first full year in which state-licensed medical activity sits outside Section 280E while adult-use remains inside it. That makes the year-end inventory count and the cost allocation between the two considerably more consequential than usual, since the split determines which deductions survive. Our cannabis accounting practice handles that work.

Year-End Tax Planning Questions Answered

Timing and Deadlines

When should year-end tax planning start?+

October, because several items need lead time that December does not allow. Equipment has to be delivered and installed before year end, appraisals take weeks, and the reasonable compensation figure must be known before the final payroll is scheduled. Starting in late December generally limits you to the few items that can still be executed in a fortnight.

Can I still buy equipment in December and deduct it?+

Only if the asset reaches service before December 31, meaning ready and available for its intended use. Ordering or paying for equipment does not qualify it. For anything requiring delivery, installation or commissioning, work backward from the calendar rather than the invoice date, since a December order frequently becomes a January deduction.

What happens to Opportunity Fund gains on December 31, 2026?+

You must recognize the deferred gain, and no extension exists. Included in income is the lesser of the original deferred gain or the fund’s fair market value less basis, so an investment that declined produces a smaller inclusion. Claiming that lower figure requires a defensible valuation, which is why an appraisal belongs in autumn rather than filing season.

Deductions and Giving

Is bonus depreciation still being phased out?+

No. The One Big Beautiful Bill Act made 100% bonus depreciation permanent, replacing a schedule that would have dropped it to 20% in 2026 and to zero in 2027. Two date tests still apply, since the property must clear both acquisition and placed-in-service on or after January 19, 2025. A written binding contract signed earlier can also pull an asset under the old rules. California does not conform, so a state add-back applies there.

How did charitable deductions change for 2026?+

In two directions. Itemizers now face a floor of 0.5% of adjusted gross income under IRC 170(b)(1)(I), and taxpayers in the 37% bracket have the benefit of itemized deductions capped at 35%. Corporations face a separate 1% floor. Meanwhile non-itemizers gained a new above-the-line deduction of $1,000 single and $2,000 joint, cash only and permanent, although donor advised funds and most private foundations are excluded from it.

Should I always accelerate deductions into this year?+

Not automatically. A deduction is worth the tax it saves, so its value depends on the rate you would otherwise pay. Businesses expecting a stronger next year may do better taking depreciation then, at a higher marginal rate. That calculation became live again once bonus depreciation was made permanent, because there is now a next year in which to take it.

Entity and Payroll Items

Why does S-corp compensation have to be fixed before year end?+

Because wages run through payroll and payroll runs on dates. Once the final pay date of the year passes, adding compensation retroactively stops being clean. Shareholder health insurance premiums for a more-than-2% owner and personal use of a company vehicle share the same constraint, since both have to appear on the W-2. The usual solution is a final adjusting payroll run in mid-December.

Can I still open a retirement plan for this year?+

It depends which plan. A new 401(k) generally has to exist before the year ends, so plan documents need executing in early December at the latest. By contrast a SEP-IRA can be set up and funded as late as the extended filing deadline. Confusing the two costs a full year of contributions, which is a common and avoidable mistake.

Working With GreenGrowth CPAs

What does a year-end planning review involve?+

It starts with a projection rather than a checklist. We model the current year against next year, then test which items actually change your outcome given your entity structure, your state and your expected rate. Frequently that narrows nine possible actions to two or three worth taking. GreenGrowth CPAs has served clients since 2016 across cannabis, technology, real estate, life sciences, nonprofits and professional services.

Note: This article is general information rather than tax advice. Thresholds and limits are inflation-indexed and change annually, and state conformity varies. Confirm current figures with the IRS, your state revenue department, or your tax adviser before acting.