Year-end tax moves for the self-employed: what has to happen by 31 December

Most of what changes a tax bill is already decided by the end of the year. A small number of things can still be done in December, and a few more can be done after it. The mistake is mixing the two up: rushing something that could have waited, or leaving until January something that could not.

Equipment is normally depreciated over several years rather than deducted when you buy it. Two rules let most of it be deducted in the first year instead.

Section 179 lets you elect to expense qualifying property. For tax years beginning in 2026 the limit is $2,560,000, reduced by the amount by which the property you place in service that year costs more than $4,090,000. The deduction is also limited to the taxable income from the active conduct of your trades or businesses for the year.

Bonus depreciation, which the IRS calls the special depreciation allowance, is a permanent 100% for qualified property acquired after 19 January 2025, under the 2025 tax law, P.L. 119-21.

The date that counts for both is when the property is placed in service: when it is ready and available for its use, not when you paid for it. Publication 946 gives the example of a machine delivered one year but not installed and working until the next. It was placed in service in the second year. A laptop ordered on 30 December that arrives on 4 January is a 2027 asset.

A one-participant 401(k), usually called a solo 401(k), is an ordinary 401(k) covering a business owner with no employees, or that owner and a spouse. The owner contributes in two roles: as the employee, through elective deferrals up to the annual deferral limit, and as the employer, on top of that, within an overall limit. The IRS publishes both limits for 2026 on its 401(k) contribution limits page.

The plan generally has to be set up by the last day of the year for contributions to count for that year. Publication 560 now adds an exception: for 2023 and later years, a sole proprietor with no employees can adopt a 401(k) after the year ends, as long as it is adopted by the tax filing deadline, not counting extensions.

In that first year, the deferrals have to be paid into the plan before the return is due, again without extensions, to be treated as made for the year.

An S-corp owner is in a different position. The plan belongs to the corporation, and the owner’s deferrals come out of salary, so they have to go through a 2026 payroll. That puts them on the December list.

How much to put in, and whether a solo 401(k) or another plan suits you, is a question for whoever prepares your return.

Most freelancers use the cash method. Under it, income counts in the year you actually or constructively receive it, and expenses count in the year you actually pay them.

“Constructively” matters in December. Income is constructively received when it is credited to your account or made available to you without restriction, so a payment made available to you on 30 December is 2026 income even if you do not deposit it until January.

Paying next year’s costs early has a limit. An expense paid in advance is generally deductible only in the year it applies to, unless it fits the 12-month rule: the benefit it buys does not extend beyond 12 months after it begins or the end of the next tax year, whichever comes first.

Moving income into next year moves the tax with it. It does not remove it.

For a sole proprietor, health insurance premiums are not a Schedule C expense. They are the self-employed health insurance deduction, figured on Form 7206 and taken on Schedule 1 of the personal return.

For a more-than-2% shareholder in an S-corp, the corporation pays or reimburses the premiums, and they go on the owner’s W-2 as wages: in Box 1, but not in Boxes 3 and 5, when the plan meets the IRS conditions. That only works through payroll, which is why it belongs on the December list.

Contributions to a health savings account for a year can be made after the year ends. Under the 2025 edition of Publication 969, contributions for 2025 could be made through 15 April 2026.

Publication 463 says to record a business use at or near the time it happens. A log kept weekly counts as timely. A log written months later from memory is the kind the IRS gives less weight to, because it was written when recall was worse.

Each trip needs its date, miles, destination and business purpose. The date matters more than usual for 2026: the IRS set one standard mileage rate for January to June and a higher one from 1 July, so a log that dates every trip can be valued correctly and an annual total cannot.

New York’s pass-through entity tax is an annual election made by an eligible partnership or S-corp. For 2026 it had to be made by 15 March 2026, so it cannot be made now. Single-member LLCs, unless they elected S-corp treatment for New York, and sole proprietorships are not eligible.

An entity that did opt in pays estimated PTET on 15 March, 15 June, 15 September and 15 December, online through its Business Online Services account. Payments can be scheduled in advance up to the 15 December due date. A payment between 16 and 31 December can still be made, but not scheduled ahead.

The owners may then be able to claim a PTET credit on their own New York returns. Whether the election paid off is a question for the accountant who prepares both returns.

A deduction returns a share of what you spent, at your tax rate. It never returns all of it. Equipment you did not need is still a cost after the deduction.

Do not record a December purchase as placed in service if it is still in its box. Do not prepay a year of something that the 12-month rule does not cover. And do not pick an S-corp salary to suit the deduction rather than the work.

The useful step is earlier and duller: get your numbers to your accountant in November, while the December moves can still be made.