Year-End Checklist for 2025: What Business Owners Should Do Before 2026
As we enter the final stretch of 2025, this is the moment when smart planning can make a meaningful difference in your tax outcomes. The year has brought several updates in tax law, shifts in deductions, and important reminders that apply to both growing small businesses and established companies.
At Virtual CPAs, our goal is to help you see beyond the numbers and understand what actions matter most right now.
Below is a clear and practical checklist to help you prepare for a smooth year-end and a stronger start to 2026.
1. Review Your Entity Structure
Your entity type affects almost everything about your tax strategy.
How you deduct vehicle use, reimburse expenses, pay yourself, or claim deductions all depend on whether you are a sole proprietor, an LLC, an S corporation, a C corporation, or a partnership.
Questions to ask yourself:
• Did your business grow this year and outgrow your current structure?
• Are you using an accountable plan or a reimbursement policy correctly?
• Are you mixing personal and business expenses without proper documentation?
If you are not sure, this is the perfect time to review it with your CPA because the right structure supports better tax outcomes and cleaner books.
2. Understand Key 2025 Tax Law Changes
Several updates that became effective this year may help you plan more strategically before December 31.
Here are a few highlights that matter for business owners:
Expanded opportunities to deduct research and experimental (R and E) expenses
Businesses under certain revenue thresholds can immediately deduct qualifying R and E expenses in 2025. If your business invests in product development, software, testing, or process improvements, this change may lower your taxable income.
Depreciation planning for equipment and asset purchases
2025 continues to offer strong deduction opportunities for eligible fixed assets. Depending on what you need for your business, placing certain equipment in service before year-end may provide an immediate tax benefit.
If you are planning any purchases, review your timing so you maximize available deductions.
Updated deduction thresholds for individuals who own businesses
SALT limitations, standard deduction changes, and income thresholds adjusted in 2025 may affect business owners who combine business and personal tax planning. This is especially important for those operating flow-through entities.
These changes can influence whether you accelerate or defer income and expenses before year-end.
3. Complete Key Year-End Action Steps
Here are the most important tasks to complete before closing out the year:
Track business use and documentation
Your deductions only hold up if your records do.
Sections 162A and 274D require proper support for business expenses, including mileage logs, receipts, and clear documentation of business purpose.
Make sure your logs and receipts are updated before December 31.
Decide on timing for major purchases
If you plan to buy equipment, software, or vehicles, check whether placing them in service this year provides a better deduction than waiting. Your CPA can model this for you.
Review payroll and owner compensation
Ensure your wages, draws, distributions, and reimbursements are handled correctly. This is especially important for S corporations with required reasonable compensation.
Evaluate retirement contributions
If you plan to contribute to SEP, SIMPLE, or other retirement plans, confirm deadlines and contribution limits for 2025.
Check your accountable plan or reimbursement policy
Corporations must reimburse business expenses through an accountable plan.
Partnerships must use a reimbursement policy.
Sole proprietors do not need either one, but they still need clean records.
If this has not been set up or updated, year-end is the best time to fix it.
4. Begin Planning for 2026
The best time to prepare for next year is right now.
Strong planning helps you reduce surprises, protect cash flow, and make confident decisions as your business grows.
Here are a few things to start thinking about for 2026:
• Will your business need a different entity structure next year?
• Do you expect revenue to rise or expenses to change?
• Are you planning investments or expansions that need tax modeling?
• Have your personal or family goals changed since the start of 2025?
A short year-end meeting can help you align both business and personal tax strategy before the busy season begins.
Final Thoughts
Year-end is not just about closing your books. It is about creating clarity for your next steps and preparing your business for a stronger, more confident 2026.
If you want one-on-one support, simply click the button below to book your session.