2026 Year-End Tax Planning Checklist for Businesses

Year-end tax planning is about checking eligibility, timing, business use, and records—not simply buying something before December 31. This 2026 year-end tax planning checklist for businesses highlights decisions to review with your tax professional before the year closes.

This checklist is educational, not individualized tax advice. Tax results depend on your facts, entity type, accounting method, and tax year; confirm current rules and filing requirements with your tax professional.

2026 year-end tax planning checklist for businesses

1. Review income and expenses before year-end

• Reconcile your bookkeeping to bank and credit-card statements, and investigate missing or duplicate transactions.
• Review open customer invoices, unpaid bills, deposits, and large or unusual transactions. Give your tax preparer the details so they can evaluate the appropriate tax treatment under your accounting method.
• Identify unpaid invoices or other amounts you may consider uncollectible. A write-off is not automatically a deductible business loss; ask your tax professional to assess the facts and records before making an adjustment.
• Review projected income and tax payments with your preparer. The right amount and timing of estimated payments depend on your situation.

For Spokane and Eastern Washington businesses, also consider state tax separately: Washington has no corporate or individual net income tax, but it does impose a gross-receipts business and occupation tax. Federal depreciation deductions such as Section 179 do not apply to that state tax base.

2. Identify equipment and other property placed in service

Make a list of business property acquired during 2026 and property you expect to put into use before year-end. Include the purchase date, cost, business-use percentage, and date it was ready and available for its intended business use.

For depreciation purposes, “placed in service” generally means ready and available for a specific use; it does not necessarily mean the property has already been used. A purchase alone therefore may not establish that an asset qualifies for a 2026 deduction.

Keep invoices, contracts, proof of payment, delivery and installation records, and evidence of the date the property became operational. If you use property for both business and personal purposes, record the business-use share. The basis used for depreciation generally reflects business or investment use and is reduced by deductions such as Section 179 and bonus depreciation.

3. Evaluate the Section 179 deduction

Section 179 may allow a business to deduct the cost of qualifying property in the year it is placed in service, rather than recovering that cost through depreciation over time. Eligible property includes certain tangible business property, off-the-shelf computer software, and—if the taxpayer makes the required election—some qualified improvements to nonresidential real property. The property generally must be purchased for use in the active conduct of a trade or business. Gifts, inheritances, and certain purchases from related persons do not qualify.

For tax years beginning in 2026, the maximum Section 179 deduction is $2,560,000. The deduction limit is reduced dollar for dollar when the total cost of qualifying Section 179 property placed in service during the tax year exceeds $4,090,000. That threshold measures the cost of qualifying property placed in service—not revenue or profit. The deduction is also limited by taxable income from the active conduct of trades or businesses; an amount disallowed by that income limit may generally carry forward. 

Before choosing an amount, ask your tax professional to compare the deduction with other available depreciation methods and your expected income. The decision can affect the asset’s remaining basis and deductions in later years. Partnerships and S corporations also need to consider the rules at both the entity and owner level; estates and trusts cannot claim Section 179.

4. Check eligibility for bonus depreciation

Bonus depreciation is a separate first-year deduction that may apply after any Section 179 deduction and before regular depreciation. For qualifying property acquired and placed in service after January 19, 2025, the federal allowance is generally 100%. Eligible property includes certain tangible property with a recovery period of 20 years or less, as well as specified software and other categories; property required to use the alternative depreciation system is excluded. Certain used property may qualify if the acquisition requirements are met, so do not assume that every new or used purchase is eligible.

A different phase-down generally applies to eligible property acquired before January 20, 2025: the schedule provides a 20% allowance for property placed in service in 2026. Special rules apply to certain long-production-period property and aircraft. A business may elect out of bonus depreciation for a class of property, but the election generally applies to all property in that class placed in service during the year and cannot be revoked without IRS consent. Confirm the acquisition date, placed-in-service date, property type, and any election with your preparer.

5. Confirm the correct depreciation classification

If a cost is not fully deducted under Section 179 or bonus depreciation, the remaining eligible basis may be recovered over time using the Modified Accelerated Cost Recovery System (MACRS), the federal depreciation system for most business property. MACRS uses an asset’s type to determine its recovery period and method. Common examples include computers and many vehicles at five years, office furniture at seven years, residential rental buildings at 27.5 years, and nonresidential buildings at 39 years. The correct classification depends on the property and, in some cases, the business activity in which it is used.

Do not assume that equipment, building improvements, and land improvements share the same treatment. Land itself is not depreciable. Keep a separate record of each asset, its classification, its in-service date, and any Section 179 or bonus depreciation claimed.

6. Review vehicles and other listed property

For a vehicle or other listed property used for both business and personal purposes, maintain records supporting total use and business use. Commuting is not business use for these rules. Listed property generally must be used more than 50% for qualified business use to qualify for Section 179, bonus depreciation, or accelerated MACRS treatment. If qualifying business use later falls to 50% or less, prior deductions may have to be included in income.

For 2026, the Section 179 deduction for a qualifying heavy SUV is limited to $32,000. This limit applies to certain four-wheeled vehicles primarily designed or used to carry passengers on public roads, with a gross vehicle weight rating over 6,000 pounds and not more than 14,000 pounds. There are exceptions for certain vehicles with specified seating or cargo-area features. Passenger-car depreciation limits are a separate rule, so confirm the applicable 2026 limit before calculating a deduction.

7. Review losses, bad debts, and estimated payments

Provide your tax preparer with a list of outstanding receivables, disputed invoices, damaged or obsolete property, and other potential losses. Include the relevant contracts, communications, collection steps, and accounting entries. Whether an amount or loss is deductible depends on the facts and applicable tax rules, so document it for professional review rather than assuming a year-end write-off will reduce taxable income.

Ask your preparer to review your projected tax liability and payments already made. Do not rely on a prior-year estimate without checking how your 2026 income, deductions, and business structure compare.

8. Organize records and elections

Before the year closes, assemble:

• Purchase records and proof of when assets were ready for business use.
• Business-use logs for vehicles and other mixed-use property.
• Records supporting employee expense reimbursements.
• Documentation of depreciation decisions and any elections.

For an employee reimbursement arrangement to qualify as an accountable plan, it must require expenses to have a business connection, require employees to substantiate expenses within a reasonable time, and require return of excess payments within a reasonable time. Payments that do not meet accountable-plan requirements may be treated as wages and subject to employment taxes.

Section 179 elections identify the property and the portion of its cost elected for expensing. Form 4562 is used to report Section 179 deductions and depreciation in applicable cases. Confirm the filing and election requirements for your return with your tax professional.

Common year-end tax planning mistakes

• Buying an asset without checking when it will be ready for use. The purchase date and the placed-in-service date are not necessarily the same.
• Assuming every purchase qualifies for Section 179 or bonus depreciation. Property type, business use, acquisition rules, and other restrictions matter. 
• Treating all vehicle use as business use. Commuting and personal miles do not count as business use for listed-property tests. Keep reliable records.
• Forgetting Washington’s separate tax base. A federal depreciation deduction does not automatically reduce Washington B&O tax. 
• Making a tax-driven purchase without considering future deductions and cash flow. Accelerated deductions reduce the remaining basis available for later depreciation. 
  
  

When to contact a CPA

Contact your CPA before year-end if you are planning a significant equipment or vehicle purchase, have assets that may be placed in service near the end of the year, expect a major change in business income, or need help distinguishing federal deductions from Washington B&O tax. A CPA can also help organize records, compare depreciation choices, review reimbursement documentation, and evaluate estimated payments. For Spokane-area businesses, timely review can help you make decisions with a clearer picture of both tax reporting and business cash needs.

Conclusion

A practical year-end tax planning checklist for businesses focuses on timing, eligibility, business use, elections, and documentation—not just accelerating expenses. Review those details before making year-end decisions, and remember that federal depreciation rules and Washington B&O tax do not work the same way. Whether you need help organizing records, comparing depreciation options, or preparing for your business tax filing, BSK Tax Advisors can help. Schedule a consultation with our Spokane team to discuss your year-end tax planning needs.