Every December, someone buys a truck they didn’t need to save tax they could have saved another way.
The math behind that decision is simple and usually ignored: spending $60,000 to save roughly $18,000 in tax still leaves you $42,000 poorer. A deduction is a discount, not a refund. Your accountant should say this every December, ideally before the dealership does.
The last quarter of the year is the most valuable planning window you get. After December 31, most of these moves are gone. These five are worth your attention for 2026. We’ve listed them in the order we’d tackle them.
1. Get a projection before you spend a dollar
You can’t plan around a number you don’t have. A year-end projection estimates your 2026 tax from your actual books through September or October, then shows what each decision changes.
It answers the questions that matter: Am I in a higher bracket than last year? Are my estimated payments on track? Would a deduction save me 12 cents on the dollar, or 32?
That last question decides everything below. The same purchase is a good move in one bracket and a mediocre one in another.
The catch: a projection is only as good as the books under it. If your bookkeeping is three months behind, step one is catching it up.
2. Equipment: buy what you need, put it in service by December 31
The 2025 tax law (opens in a new tab) made 100% bonus depreciation permanent for qualifying property acquired after January 19, 2025. It also raised the Section 179 expensing limit to $2.5 million, now indexed for inflation. For most small businesses, that means equipment you need can be deducted in full the year you start using it.
Three details trip people up:
- “In service” means in use, not ordered or paid for. A machine sitting in a crate on January 3 is a 2027 deduction. Tax law does not care how shiny it is.
- Vehicles have their own rules. Business-use percentage, vehicle weight and personal use all change the answer. Keep a mileage log.
- Arizona doesn’t follow federal bonus depreciation. Arizona does follow the higher Section 179 limit. Which method you use can change your state result, so the choice is worth a look.
If you were going to buy it in February anyway, buying it in December may be smart. If you weren’t going to buy it at all, it’s not a tax strategy. It’s a purchase.
3. S corporation owners: run your own payroll before year-end
If you own an S corporation and work in it, the IRS expects you to pay yourself reasonable compensation through payroll. Distributions alone don’t count.
Before December 31:
- Confirm your 2026 salary is reasonable for your role and your company’s profit. Too low invites IRS scrutiny. Too high wastes the payroll tax savings that made the S corp worth it.
- Put owner health insurance on your W-2. For owners above 2%, premiums the company pays must be included in W-2 wages to be deductible. This is one of the most common S corp errors we see.
- Run any year-end bonus through payroll in December, with withholding, if you need it to reach your target salary.
Payroll can’t be backdated. (People ask. Every year.) Miss December and the fix gets messier.
4. Decide on a retirement plan while you can still fund it
Retirement contributions are often the best deduction available: you keep the money and cut the tax. For 2026 (opens in a new tab), an employee can defer up to $24,500 into a 401(k), plus $8,000 more at age 50 or older ($11,250 at ages 60 to 63).
Timing depends on the plan:
- SEP-IRA: can be opened and funded up to your return due date, extensions included. Flexible, but contributions come only from the employer side.
- Solo or small-business 401(k): usually lets you put away more at moderate income, because you contribute as both employee and employer. Employee deferrals for S corp owners have to run through 2026 payroll, which means deciding now.
If you have employees, the rules change again. Coverage and nondiscrimination requirements apply, and the choice deserves a real conversation, not a December scramble.
5. Get your 1099s ready now, not January 30
There’s good news here. For payments made in 2026, the Form 1099-NEC threshold (opens in a new tab) rises from $600 to $2,000 per contractor. Fewer forms for most small businesses.
The deadline didn’t move. Forms are due to contractors and the IRS by January 31; in 2027 that falls on a Sunday, so the practical deadline is February 1, 2027.
Do this in December:
- Collect a Form W-9 from every contractor you’ve paid, before you need it.
- Pull a 2026 vendor report from your books and flag anyone at $2,000 or more.
- Note how you paid. Payments by credit card or through a payment app are generally reported by the processor, not by you.
Chasing a W-9 in late January is how a 15-minute task becomes a penalty, plus an awkward text to a contractor you haven’t spoken to since April.
The move people regret
None of the above includes prepaying a year of rent, stockpiling supplies, or buying a vehicle you won’t use. Some prepayments are deductible, many aren’t, and the ones that are often just pull next year’s deduction into this year.
The owners who come out ahead in December aren’t the ones who spend the most. They’re the ones who know their number by Halloween. (Costume optional. Marley, our Chief Barketing Officer, goes as an accountant every year. Nobody can tell the difference.)
If you’d like a hand
MCR’s Year-End Projection estimates your 2026 tax from your actual books and puts each decision in dollars, with a written summary of what to do and by when. If your books need catching up first, we’ll tell you that too.
This post is general information, not tax advice for your situation. Rules current as of October 2026.