Year-End Tax Planning for Small Business Owners in 2026

Equipment: federal expensing is generous, North Carolina is not.

For federal purposes, 100% bonus depreciation is now permanent for qualified property acquired after January 19, 2025. Section 179 expensing for 2026 is limited to $2,560,000, reduced once total purchases pass $4,090,000. Depreciation starts when property is placed in service, not when it is ordered, so equipment has to be in use by December 31 to count for 2026.

North Carolina did not follow. State law requires adding back 85% of the federal bonus depreciation and then deducting 20% of that add-back in each of the next five years. For Section 179, the state uses a $25,000 limit and a $200,000 investment limit, with a similar 85% add-back. A Fuquay-Varina business that writes off a $60,000 piece of equipment federally will see a smaller deduction on the North Carolina return for 2026.

Small purchases: the $2,500 de minimis election.

Businesses without an applicable financial statement, such as audited financials, can elect to deduct items costing up to $2,500 per invoice or item instead of depreciating them. The IRS tangible property guidance explains the election, which is made each year with the return.

The QBI deduction is permanent, with a new floor.

The 20% qualified business income deduction no longer has an end date. Starting in 2026, owners with at least $1,000 of qualified business income get a minimum deduction of $400. The 2026 income range where limits phase in starts at $201,750, or $403,500 on a joint return, and the range is wider than before.

Retirement plans: more time than you might think.

A SEP-IRA can be set up and funded as late as the return due date, including extensions. A sole proprietor with no employees can also open a new solo 401(k) after year-end for the prior year and make first-year deferrals until the return due date, not counting extensions. For 2026, the deferral limit is $24,500 and the overall contribution limit is $72,000. IRS Publication 560 covers both plans.

Two items you can cross off.

FinCEN's final rule, effective August 14, 2026, permanently removed beneficial ownership reporting for U.S. companies and U.S. persons. Domestic research costs are again deductible right away for federal purposes, though North Carolina adds back 80% and spreads the deduction over four years.

Close the year with the January payment in view.

The fourth 2026 estimated payment is due January 15, 2027. To avoid an underpayment penalty, payments generally need to cover 100% of your 2025 tax, or 110% if 2025 adjusted gross income was over $150,000. If you paid contractors this year, read our guide to 1099s at the new $2,000 threshold before January. For a decision that is still open, business consulting and tax planning is the place to run the numbers.