Year-End Tax Planning for Business Clients: The Firm Playbook

Year-end tax planning for business clients looks different this season. Last December, firms were planning on top of months-old legislation with guidance still landing. This year the OBBBA framework is settled law with final 2026 numbers: permanent 100 percent bonus depreciation for qualifying property acquired after January 19, 2025, restored Section 174A expensing, the enlarged Section 179 limits, and a higher SALT cap that changes the PTET math. The firms that treat Q4 as a planning season rather than an extension-cleanup season will walk into February with fewer surprises and better client relationships.

This is the playbook: what to review for every business client before December 31, roughly in order of dollars at stake.

Why year-end tax planning changed for 2026

For most of the last decade, year-end planning meant racing a phase-down. Bonus depreciation was scheduled to step down each year, Section 174 capitalization was bleeding cash from R&D-heavy clients, and the 20 percent QBI deduction had a sunset date. OBBBA removed all three pressure points. Bonus depreciation is back to 100 percent on a permanent basis for property acquired after January 19, 2025. Domestic research expensing returned under new Section 174A. The QBI deduction is permanent.

Permanence cuts both ways for planners. There is less artificial urgency to buy equipment before a cliff, which means the honest advice is sometimes "wait until January." The planning value now comes from matching deductions to the client's actual bracket picture across 2026 and 2027, not from beating a statutory deadline. That is a better conversation, but it requires running the numbers client by client.

Depreciation: the placed-in-service deadline still rules

Permanent bonus does not change the one hard rule: property must be placed in service, not just ordered or paid for, by December 31 to hit the 2026 return. Backordered equipment that arrives in January is a 2027 deduction no matter when the deposit cleared.

The 2026 numbers, per Rev. Proc. 2025-32:

Three planning notes:

• With bonus at 100 percent, Section 179 matters mainly where bonus does not reach or where the client wants asset-by-asset control. Section 179 is an election on specific assets; bonus applies class-wide unless elected out. Use 179 to fine-tune, bonus to bulk-deduct.
• Elect out of bonus by class where a full write-off wastes deductions in a low-bracket year. A loss-limited or NOL-bound client may get more lifetime value from MACRS spread into higher-rate years.
• Check state conformity before promising a number. California and other nonconforming states still run their own, much lower limits, so the state benefit can be a fraction of the federal one. And confirm the acquisition date: qualifying property acquired before January 20, 2025 stays on the old phase-down, which means a 2026 placed-in-service date can carry a 20 percent rate, not 100.

For the full federal detail, see our 2026 Section 179 limits guide.

Section 174A: make sure the catch-up is handled

Clients with domestic research costs are generally eligible to expense them under Section 174A for tax years beginning after December 31, 2024, unless they elected capitalization and amortization over at least 60 months. For current-year costs, confirm the client's Section 174A method is still appropriate. A taxpayer that has not previously elected capitalization may elect to capitalize and amortize domestic research expenditures over at least 60 months, but once made, that method generally continues in subsequent years unless the taxpayer obtains consent to change. For the remaining capitalized 2022 to 2024 amounts, the year-end job is largely confirmation: verify how those amounts are being recovered, and whether the transition treatment adopted for 2025 has been properly carried into 2026. If the 2025 return handled this cleanly, the 2026 file should follow it. If it did not, this is the quarter to fix it. The mechanics are covered in our Section 174A expensing guide.

PTET elections: the SALT cap math is new

The 2026 SALT cap is $40,400, but it phases back down toward a $10,000 floor for high earners, and the higher cap reverts after 2029. Two consequences for year-end work:

• PTET can still produce a significant federal benefit for many owners of profitable passthroughs, particularly those whose individual SALT deduction remains constrained. As MAGI moves through the phase-out range, the benefit of the higher individual cap shrinks, and the entity-level deduction carries more of the planning weight.
• The election and payment calendar is state law, not federal. Several states require the election, or at least an estimated payment, during the taxable year. Separately, confirm the entity's federal deduction timing under its accounting method, including the Section 461 all-events and economic-performance rules and any applicable recurring-item exception. Pull the calendar for each state where a client files and diary the dates now.

Accruals, compensation, and the 2.5-month rule

For accrual-method clients, year-end is when bonus accruals get real. Confirm the accrual satisfies the all-events and economic-performance rules under Section 461. Compensation paid within 2.5 months after year-end generally avoids treatment as deferred compensation, while accrued compensation owed to related parties (including S corporation shareholders) is generally not deductible until paid. While you are in the compensation file, true up S corporation owner wages against the reasonable compensation standard before the final payroll runs; fixing it in December is cheap, fixing it on exam is not.

Retirement plans run on a split calendar. An employer can generally adopt a qualified plan retroactively up to the due date of the return, including extensions, and deductible employer contributions are generally due by that deadline. Defined benefit plans, including cash balance plans, run on separate minimum-funding deadlines. Employee elective deferrals are different: aside from a narrow first-year rule for certain new solo 401(k) plans, compensation cannot be deferred retroactively. A client who establishes a 401(k) in November or December can still run deferrals from compensation paid after the plan and deferral elections are in place; a client who only wants an employer contribution has until filing.

Timing income and deductions: the unglamorous core

The classic levers still move the most dollars for small and mid-sized clients:

• Cash-method clients can, where commercially appropriate, delay billing to defer receipt of income and accelerate deductible payments, including prepaying qualifying expenses under the 12-month rule. Billing date itself does not control: amounts actually or constructively received by year-end are generally income even if collection or paperwork is delayed.
• Accrual-method clients should scrub for economic performance: deductions they have booked that have not yet been earned, and liabilities they can fix before year-end.
• Loss-year clients need the excess business loss limitation modeled before anyone accelerates deductions. The Section 461(l) limitation is now permanent, and a deduction that converts into a carryforward may provide no current-year federal benefit.
• Check the Q4 estimate while the file is open. For passthrough clients that usually means the owners' individual Q4 estimates; C corporations run on their own Section 6655 calendar. Recompute the safe harbor and current-year liability before the January payment date. A Q4 payment can address the fourth-period requirement, but it does not necessarily eliminate penalties from underpayments in earlier periods; consider the annualized income method where income was earned unevenly during the year. The IRS estimated taxes page covers the mechanics if a client asks for a reference.

Set up January now: the new $2,000 1099 threshold

Information reporting changed for 2026 payments. The principal Form 1099-NEC and 1099-MISC reporting threshold rises from $600 to $2,000 for payments made in 2026, with inflation indexing from 2027, per the 2026 instructions for Forms 1099-MISC and 1099-NEC. The 1099-K threshold for third-party network transactions is again more than $20,000 and more than 200 transactions. The corresponding backup-withholding threshold for those payments also rises to $2,000.

The year-end move is vendor file hygiene: have clients pull a vendor payment report now, identify potentially reportable payees under the applicable 2026 thresholds (royalties and several other 1099-MISC categories keep their own, lower floors), and chase missing W-9s in December while vendors still answer email. January filing season is too late to start collecting TINs.

Run it as a process, not a scramble

The difference between a firm that does year-end planning and a firm that talks about it is a list. Tier the business clients: full planning meetings for the complex passthroughs and anyone with a liquidity event, a 30-minute call for the middle tier, and a checklist email for the rest. Every client file gets the same pass: depreciation and placed-in-service status, PTET calendar, accruals and compensation, estimate true-up, 1099 readiness. Document the advice in a short memo, even for the checklist tier. The memo is what turns December work into February efficiency and, candidly, into a billable planning engagement instead of free hallway advice.

Most of the time cost in year-end planning is not the client meeting, it is the research behind it: confirming a state's PTET election date, checking conformity on bonus depreciation, or rereading the economic performance rules for one unusual accrual. Marble's Intelligence agent is built for exactly that layer: ask federal or state questions in plain English, get citation-backed answers, and turn the conclusion into a client-ready memo in the same sitting. Sign up for Marble and run your next planning file through it.

Frequently asked questions about year-end tax planning

Is there still a reason to buy equipment before December 31 now that bonus depreciation is permanent?

Only if the client wants the deduction in 2026, and only if the asset will actually be placed in service by year-end. Permanence removes the use-it-or-lose-it pressure, so the right answer depends on the client's 2026 versus 2027 bracket picture, loss limitations, and state conformity, not on the calendar alone.

When does a PTET election have to be made?

It depends entirely on the state. Some states require the election during the tax year, some by the return due date, and several effectively require an estimated payment before year-end for the deduction to work as intended. Build a state-by-state calendar for your client base rather than assuming one deadline.

Does the new $2,000 1099 threshold apply to forms filed in January 2027?

Yes. Forms filed in early 2027 report 2026 payments, so the $2,000 threshold applies to nonemployee compensation and the other affected payment categories, with inflation indexing starting in 2027. The forms filed in early 2026 reported 2025 payments under the old $600 threshold. Other categories keep their separate floors, including the $10 royalty threshold and the $600 threshold for gross proceeds paid to attorneys.

Can a client still set up a retirement plan after December 31 and deduct it for 2026?

Generally yes for employer-funded plans: a profit-sharing or cash balance plan can usually be adopted up to the extended due date of the 2026 return. Employee deferral features generally cannot be retroactive, aside from the special first-year rule for certain new solo 401(k) plans, so a 401(k) with 2026 deferrals for common-law employees had to exist before those deferrals were run through payroll. Defined benefit and cash balance plans also carry separate minimum-funding deadlines distinct from the deduction deadline.