A profitable year is something every business owner hopes for—until they start thinking about the tax bill that comes with it. If your business is having a stronger year than expected, year-end tax planning may help you make informed decisions before December 31.
Tax preparation looks backward at what already happened. Tax planning looks forward and asks a more useful question: What can we still do about it? A conversation with your accountant now can help you estimate your tax liability, review potential strategies, and avoid surprises when your return is prepared next spring.
Start with a clear picture of your business results
Effective year-end tax planning starts with reliable information. Before deciding whether to make a purchase, adjust compensation, or change an estimated payment, work with your accountant to estimate where your business is likely to finish the year.
Look beyond your bank balance
Your taxable income can be very different from the cash in your bank account. Accounts receivable, inventory, debt payments, equipment purchases, owner distributions, and the timing of customer payments can all affect how your business looks financially.
A year-end projection can help estimate federal and state tax liabilities, identify potential underpayments, and show whether estimated tax payments are on track. It can also help you compare possible decisions before taking action, rather than relying on a rough estimate or a prior year’s results.
Finding out in November that you are headed for a large tax bill may leave time to consider your options. Finding out in March usually leaves you with a payment voucher. A projection gives you and your accountant a chance to identify the difference while the year is still underway.
Use the projection to guide decisions
A projection is most useful when it compares scenarios. For example, your accountant may be able to estimate how a planned equipment purchase, a change in owner compensation, or a retirement plan contribution could affect taxable income and cash flow.
That does not mean every strategy that lowers this year’s tax bill is automatically a good business decision. The projection should also account for the cash needed to operate, upcoming obligations, and whether a decision supports the company’s longer-term plans.
Review planned equipment and other investments
If your business is already considering machinery, vehicles, computers, or other qualifying property, the timing and tax treatment of the purchase may affect this year’s tax liability. Discuss year-end tax planning for major purchases before committing to an order or assuming the full cost will be deductible.
Understand depreciation options
Current federal law provides 100% bonus depreciation for certain qualifying property acquired after January 19, 2025. Section 179 may also allow a business to expense eligible property, subject to annual limits and other requirements. The rules depend on the type of asset, when it is acquired and placed in service, how it is used, and the business’s tax situation.
State tax treatment may differ from federal treatment. New York, for example, may not follow every federal depreciation provision. A deduction on a federal return does not automatically produce the same result on a New York return, so include state effects in the projection.
Make purchases for business reasons
A tax deduction reduces taxable income; it does not reimburse the business for the purchase. Spending $100,000 to save only a portion of that amount in taxes is not a good trade if the asset is not needed or the purchase strains cash reserves.
If the investment is already part of the company’s plans, timing may matter. Ask whether the property needs to be acquired, paid for, or placed in service by a particular date to qualify for the intended treatment. Confirm the answer before year-end rather than assuming that signing a purchase order is enough.
Consider retirement plans and New York Secure Choice
Retirement planning can help business owners save for the future while offering employees a valuable workplace benefit. It can also affect current-year taxes, but plan options and deadlines vary, so retirement decisions belong in a year-end tax planning discussion well before the final days of December.
Compare plan options and deadlines
Depending on the business’s size and structure, options may include a SEP IRA, SIMPLE IRA, 401(k), profit-sharing plan, or another qualified arrangement. Each plan has different contribution limits, eligibility requirements, administrative responsibilities, and setup deadlines. Some deadlines may fall before year-end, while others may allow more time. Do not assume a plan can be established after the tax return is prepared and still affect the prior year.
A plan may also help a business compete for employees and support retention. Compare the potential tax benefits with the cost of contributions, recordkeeping, administration, and any employer contribution requirements before choosing an arrangement.
Check whether Secure Choice applies
New York’s Secure Choice Savings Program generally requires employers with at least 10 employees in the state, who have been in business for at least two years and have not offered a qualified retirement plan in the preceding two years, to facilitate the program. Employees can save through automatic payroll deductions into their own Roth IRAs, and employers are not required to contribute to those accounts.
Employers should confirm whether the requirement applies to them, review any notice they receive, and check the program’s current registration instructions. Registration deadlines are phased, and some 2026 deadlines have already passed. A business that is subject to the requirement may also want to compare Secure Choice with establishing its own employer-sponsored plan.
Review S corporation owner compensation
If you operate as an S corporation, review how you have paid yourself during the year. Shareholders who perform services for their businesses generally must receive reasonable compensation through payroll before taking distributions.
Consider the work performed and the business
There is no single salary that works for every S corporation owner. Reasonable compensation depends on factors such as the owner’s role, responsibilities, experience, hours worked, industry, and what the business would pay someone else to perform similar work.
Taking little or no salary while receiving significant distributions can invite IRS scrutiny. On the other hand, paying substantially more salary than the facts support may increase payroll taxes. A review before the final payroll of the year can help identify whether an adjustment is appropriate.
Document the reasoning behind compensation decisions. Job duties, time spent on business activities, comparable wages, and the company’s financial condition can help support the amount paid. Do not make a last-minute change based only on a desired tax result; consider payroll procedures and the effect on the business as well.
Evaluate New York’s Pass-Through Entity Tax
For eligible partnerships and New York S corporations, the Pass-Through Entity Tax (PTET) may be part of the year-end tax planning conversation. It allows an eligible entity to pay New York tax at the entity level, with a corresponding credit generally available to eligible owners on their New York personal income tax returns.
Revisit the election and estimated payments
The federal treatment of state and local tax deductions changed under recent legislation, making it important to evaluate PTET based on the business and its owners rather than automatically repeating last year’s approach. The value may depend on factors including owner income, other deductions, state tax liability, and whether the owners itemize.
New York PTET is an annual election that eligible entities generally must make by March 15 for that calendar year. If an eligible entity did not make the election by the deadline, it generally cannot opt in retroactively at year-end. Businesses that already elected PTET should review estimated payments and projected income; those considering it for the next year can discuss the decision before the next election deadline.
The election is only available to certain entity types. Sole proprietorships and single-member LLCs that have not elected S corporation treatment, for example, are not eligible to opt in. Review the entity’s eligibility, owner-level effects, and filing requirements with a tax adviser. Bowers also explains the basics of New York’s Pass-Through Entity Tax.
Look at the company’s broader plans
Tax decisions can affect more than the current return. A planned hire, new location, building purchase, ownership change, business sale, or major investment may change which strategies make sense now and which may be better considered later.
Balance tax savings with business needs
The strategy that produces the lowest possible tax bill is not always the best business decision. Preserving cash, maintaining borrowing capacity, funding growth, and preparing for future opportunities may be more important than maximizing a deduction in the current year.
Consider how a decision affects the company after taxes. A large purchase might reduce taxable income but also leave less cash for payroll or operating expenses. A retirement plan could offer tax benefits while adding ongoing administrative costs. A compensation change may affect payroll taxes and cash available to the company.
Coordinate federal, New York, and local considerations
Business owners should review federal and New York rules together, since the same decision may receive different treatment on each return. Local incentives, sales and use taxes, and other state requirements may also affect investment decisions. For broader context on federal provisions affecting business investments, see EY’s overview of recent federal tax changes for businesses.
For more on how tax decisions can support business goals, see Bowers’ article on using tax strategy to support growth. Coordinating the timing, tax treatment, and business purpose of a decision can help avoid surprises later.
Make time for year-end tax planning before December 31
By the time your accountant prepares your tax return, many decisions that could have affected the result may already be behind you. A year-end meeting gives you time to review your projected income, discuss strategies, and understand which actions are still available before the calendar turns.
Bring current financial statements, year-to-date payroll information, details about planned purchases, estimated tax payments, and questions about retirement plans or owner compensation. The more complete the information, the more useful the discussion can be.
A strong year in business is worth celebrating. A little year-end tax planning can help you understand the tax bill ahead, protect cash flow, and make thoughtful decisions while there is still time to act. Bowers’ tax planning and compliance team works with businesses to evaluate tax obligations and planning opportunities.
Frequently asked questions about year-end tax planning
These common questions can help business owners prepare for a year-end discussion with their accountant. The right steps depend on the business’s entity type, financial results, and the tax rules that apply.
When should a business start year-end tax planning?
Start before December 31, while there is still time to review projected income and consider decisions that may affect the current tax year. Earlier planning generally provides more time to compare options and confirm deadlines.
Can buying equipment reduce my tax bill?
Potentially. Qualifying property may be eligible for bonus depreciation or Section 179 expensing, but eligibility depends on the asset, timing, business use, and applicable federal and state rules. A purchase should make business sense apart from its tax treatment.
Can I set up a retirement plan after year-end?
Some plans allow more time than others, but deadlines vary by plan type and business structure. Confirm the applicable setup and contribution deadlines before assuming a plan established later will affect the prior tax year.
Does every New York business have to use Secure Choice?
No. The requirement generally applies to eligible employers with at least 10 New York employees, at least two years in business, and no qualified retirement plan offered during the preceding two years. Employers should verify the current rules and any program notices they receive.
Can a business elect New York PTET at year-end?
Generally, no. Eligible entities must make the annual election by March 15 for that calendar year. At year-end, businesses can review payments under an existing election and evaluate whether to elect for the next year.