As the year winds down, most of us are thinking about holiday plans, family gatherings and getting through the last few weeks of work. Taxes rarely make the top of that list. Yet the decisions you make before December 31 can have a meaningful effect on what you owe when you file. By the time tax season arrives, some of your best opportunities have already passed.
Whether you own a small business or earn a W-2 paycheck, start by reviewing your financial situation. Did your income increase, did you change jobs, start a side business, sell investments or earn more business profit than expected? These changes deserve attention while there is still time to plan.
For business owners, begin with accurate books. Your bank balance does not reflect taxable profit because loan payments, owner withdrawals and purchases affect cash differently than taxes. Reconcile accounts and review your profit and loss statement and balance sheet to identify missing expenses, incorrect classifications and transactions needing attention. Gather receipts, complete mileage records and collect contractor W-9s. Current records support legitimate deductions, simplify January reporting and allow your tax advisor to focus on planning rather than reconstructing transactions.
Retirement savings offer opportunities for employees and business owners. Traditional pretax contributions can reduce current federal taxable income while building future savings. For 2026, the basic employee 401(k) contribution limit is $24,500, with additional catch-up contributions available to eligible participants. Roth contributions do not provide the same current-year tax reduction but can diversify your wealth strategy.
Business owners should evaluate whether a SEP IRA, SIMPLE IRA or solo 401(k) fits their income, employees and long-term goals. Setup and contribution deadlines vary, so waiting until filing can limit options. Eligible health savings accounts can also reduce taxable income while funding qualified medical expenses, depending on eligibility, coverage and existing contributions.
Depreciation requires thoughtful planning, too. We often hear, “I heard I can write off a G-Wagon.” Significant depreciation may be possible, but can you afford the vehicle? Does it make business sense, and is it truly used 100% for business? The goal is to create a plan that works for both your budget and your business.
Charitable giving deserves attention. Beginning in 2026, eligible taxpayers taking the standard deduction can deduct up to $1,000 in qualifying cash donations, or $2,000 on a joint return.
Investment reviews may uncover additional opportunities. In taxable accounts, realized capital losses can offset capital gains, and limited remaining net losses may reduce other income. However, buying back substantially identical investments around a loss sale can trigger wash-sale rules that disallow the deduction. Coordinate decisions with your advisors and investment goals.
Finally, review withholding and estimated payments. Raises, bonuses, second jobs or stronger business profits can increase your tax bill. Adjusting payments will not reduce taxes owed, but it can help prevent unexpected balances and underpayment penalties.
At The Profit Firm, we combine proactive tax strategy with SMART Accounting because good decisions depend on accurate numbers. Year-end planning connects those numbers with your business and family goals. Schedule a conversation while there is still time to act. You worked hard for your money, and a thoughtful plan can help you keep more of it.
This is not tax advice. Please consult your tax specialist or tax accountant.
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