With certain tax provisions taking effect in 2026, private companies have an opportunity to take a fresh look at their tax strategy and identify ways to reduce tax liability, improve cash flow and position the business for long-term growth. Below we offer an overview of key planning areas and opportunities business owners and financial leadership should evaluate before year-end.
Accounting methods can significantly influence when an entity recognizes income and expense. Businesses that qualify for the cash method of accounting will often have a greater ability than an accrual basis taxpayer to defer income and accelerate deductions, giving them greater control over taxable income.
Companies should also review their current inventory accounting methods, including lower of cost or market elections, inventory write-offs and uniform capitalization calculations. These areas can create opportunities to accelerate deductions and reduce taxable income.
Other opportunities to accelerate deductions include identifying deductible bad debts, evaluating the deductibility of prepaid expenses, and paying year-end compensation accruals within 2.5 months of year-end to allow current-year deductions.
Pass-through entity owners will continue to benefit from the Section 199A Qualified Business Income Deduction. Income thresholds and wage limitations may limit this 20% deduction, but careful planning can help maximize the tax benefit.
Businesses should review their capital expenditures in light of accelerated depreciation opportunities. The restoration of 100% bonus depreciation and expanded Sec. 179 expensing limits allow companies to immediately deduct qualifying equipment, vehicles and certain building improvements. For many taxpayers, these provisions can significantly improve cash flow by reducing current-year tax liability. For some, electing out of these provisions may be more beneficial, especially if future deductions will provide greater tax benefit.
Interest expense limitations under Sec. 163(j) continue to affect many entities, particularly those leveraged businesses. Even though OBBBA provisions now provide greater ability to deduct interest expense, planning may be required to ensure the maximum deduction of interest expense.
Businesses with overseas subsidiaries have tax reporting requirements with significant potential penalties for noncompliance. Furthermore, there have been changes to the anti-deferral regime formerly known as global intangible low-taxed income (GILTI). It has been renamed net CFC tested income (NCTI), and various provisions have changed beginning with tax years beginning in 2026.
Likewise, the foreign-derived intangible income (FDII) deduction has been replaced by the foreign-derived eligible income (FDDEI) deduction, creating potential opportunities for C Corporations generating export-related income.
Companies operating abroad should also review their activities to ensure they do not create income and/or indirect tax exposure for potential permanent establishment risks. In some jurisdictions, employee activities can unintentionally create local tax filing obligations.
Many businesses overlook valuable tax incentives that can generate tax savings. These savings are typically permanent ones, meaning the benefit achieved will not reverse in the future.
The research and development (R&D) tax credit remains one of the most underused incentives. Businesses developing new products, processes, software or improvements may qualify, even if they do not consider themselves research-intensive organizations.
The OBBBA expanded the eligibility of Sec. 1202 Qualified Small Business Stock (QSBS) benefits, allowing for more planning opportunities for businesses and investors.
Export-focused businesses may benefit from an IC-DISC structure, which can create meaningful tax savings for qualifying export income by converting highly-taxed ordinary income into qualified dividend income.
For businesses considering a sale, acquisition or capital raise, tax planning should begin well before a transaction is underway. Deal structure can dramatically affect after-tax proceeds, with buyers and sellers often favoring different deal structures. Modeling various deal structures can help ensure buyers and sellers are aware of the after-tax cash results of the transaction, helping them make informed decisions as part of the deal process.
Various steps can reduce risk, improve valuation and strengthen negotiating positions during a transaction. Potential sellers should consider obtaining a Quality of Earnings (QofE) analysis, which can improve transaction readiness and reduce potential surprises during buyer due diligence.
If you’re a prospective acquirer, consider performing tax due diligence on potential targets. By evaluating the target company’s historical tax positions, filings and potential exposures, the tax due diligence process can reduce uncertainty and help your buyer make a more informed acquisition decision.
The Corporate Alternative Minimum Tax (CAMT) can increase the effective tax rate of large companies subject to this tax regime. Applicable companies, including those approaching the applicable thresholds, should model the impact of book-tax differences and significant transactions before year-end.
Corporations should also evaluate opportunities available in accounting methods, state and local income tax, international tax, and credits and incentives to determine if they are taking advantage of all applicable benefits.
Additional planning opportunities continue to be available to real estate owners and developers. Cost segregation studies offer substantial value, especially with the return of 100% bonus depreciation. Businesses should also revisit repair regulations and evaluate abandoned project costs to accelerate deductions.
OBBBA provisions allow taxpayers to claim a 100% immediate depreciation deduction for qualified production property, including U.S. production facilities. Careful design and planning can maximize the portion of property qualifying for immediate expensing.
State tax planning has become increasingly complex as nexus standards continue to evolve. It is important to regularly evaluate state income tax exposure and related filing obligations, as well as state incentives. The lack of state conformity to recent federal tax legislation can create unexpected state tax liabilities.
Pass-through entity tax (PTET) elections remain a valuable planning tool in many states, even with recent increases to the federal state and local tax deduction limitation. Each state has its own specific rules regarding who can participate and how to make the election.
Businesses should review procedures for determining which purchases are subject to sales tax. They should also create and continually review sales tax exemption collection procedures to minimize sales tax exposure.
The most effective tax planning happens before year-end, not after it. With significant changes taking effect in 2026, work closely with your tax advisers to identify opportunities, minimize surprises and strategically position your organization from a tax perspective.
Access our practical year-end planning checklist and take a deep dive into tax planning insights in our comprehensive guide: “2026 Year-End Tax Planning Guide for Private Companies.”
Contact Ray Polantz, Robert Venables or a member of your service team to discuss this topic further.
In this blog Cohen & Co is not rendering legal, accounting, investment, tax or other professional advice. Rather, the information contained in this blog is for general informational purposes only. Any decisions or actions based on the general information contained in this blog should be made or taken only after a detailed review of the specific facts, circumstances and current law with your professional advisers.