Year-end tax planning for home service owners

Why plan in November

For many home service companies, the last quarter is when the year's profit becomes clear and when the biggest decisions are still open: whether to buy a truck or equipment, when to pay bonuses, how to handle inventory and how much to set aside for taxes. Wait until March and the options are mostly gone. Meet your CPA in November with a projection and a short list of questions, and you have six weeks to act on the answers.

Start with a year-end projection

1. 01

   Close October properly

   Reconcile bank and card accounts, record all bills and invoices, and review receivables so the numbers through October are reliable.

2. 02

   Project November and December

   Use booked work, seasonal patterns from last year and known costs to estimate revenue and expenses for the rest of the year.

3. 03

   Estimate taxable income

   Ask your bookkeeper or CPA to turn the projection into an estimate of taxable income, including owner pay and distributions.

4. 04

   List pending decisions

   Equipment and vehicle purchases, bonuses, retirement contributions, inventory and any large prepaid expenses.

5. 05

   Check cash

   Compare each decision with your cash forecast. A deduction is not worth a cash shortage in February.

Section 179 basics

Section 179 lets a business elect to deduct the cost of qualifying property, such as many vehicles, tools and equipment, in the year it is placed in service rather than depreciating it over several years. According to the IRS instructions for Form 4562, for tax years beginning in 2025 the maximum Section 179 deduction was $2,500,000, and that limit is reduced by the amount by which the cost of Section 179 property placed in service during the year exceeds $4,000,000^[1].

The deduction is also limited by business income: an amount disallowed under the trade or business income limitation can generally be carried forward^[1]. Dollar limits are adjusted over time, so ask your CPA for the figures that apply to the current tax year, and whether electing Section 179 makes sense for each asset.

Bonus depreciation basics

Bonus depreciation, called the special depreciation allowance in IRS forms, is a second way to write off qualifying property quickly. The 2025 law commonly known as the One Big Beautiful Bill Act reinstated the 100% special depreciation allowance for certain qualified property acquired and placed in service after January 19, 2025^[1]. Property acquired earlier may fall under different rates and elections.

• Ask your CPA how Section 179 and bonus depreciation interact for your business, and which to use for which assets.
• Ask how state tax rules treat each, since many states do not follow the federal rules in full.
• Ask whether accelerating deductions now is better than spreading them, given your expected income in coming years.

Placed in service: the date that matters

For both Section 179 and bonus depreciation, the key date is generally when property is placed in service, meaning ready and available for its intended use in the business. A van ordered in December but delivered in January usually belongs to next year. Equipment sitting in a crate in the shop may not count until it is set up and ready to use.

1. Confirm delivery dates in writing before you count a purchase in this year's plan.
2. Keep the bill of sale, delivery receipt and the date the asset was first ready for use.
3. For vehicles, keep the registration date and a record of business use.
4. For financed purchases, ask your CPA how financing affects timing and deductions.

Vehicles need extra care

Trucks and vans are the largest purchases for most home service companies, and they come with their own tax rules. Limits can depend on vehicle type and weight, how much the vehicle is used for business and whether it is used personally at all. Do not assume a vehicle qualifies for a full write-off because a dealer says so. Bring the vehicle details, expected business use and your mileage records to your CPA before you sign.

Customer credits: what changed

HVAC and energy contractors used the federal Energy Efficient Home Improvement Credit, section 25C, as a selling point. The credit equaled 30% of qualified expenses from January 1, 2023^[3], capped at $1,200 a year for most improvements and $2,000 a year for qualified heat pumps, water heaters and biomass stoves or boilers^[4]. The IRS says it applies to property placed in service before December 31, 2025, so it does not cover later installs^[2].

Review your website, proposals, sales scripts and ads now. Remove or correct any language that suggests customers can claim the 25C credit on installs after 2025, and check state and utility rebates separately. Accurate claims protect customers and your reputation.

Payroll, bonuses and labor costs

Year-end bonuses are common in the trades, and their timing can matter for taxes as well as morale. Ask your CPA whether bonuses paid in December or early next year are better for your accounting method, and make sure payroll taxes are included in the cost. Labor costs keep climbing: average hourly earnings of production and nonsupervisory employees at specialty trade contractors reached $39.05 in September 2026, up 4.7% on a year earlier^[5], and benefits made up 30.0% of private employer compensation costs in June 2026^[6]. Use these trends in next year's budget, not just this year's tax plan.

Questions to bring to your CPA

1. What is our projected taxable income, and what estimated payments are still due?
2. Which planned purchases should be placed in service this year, and which can wait?
3. Should we use Section 179, bonus depreciation or regular depreciation for each asset, federally and for our state?
4. What retirement plan contributions can we still make for this year, and by when?
5. How should we time bonuses and owner distributions?
6. Do we have inventory, prepaid expenses or deposits that need special treatment?
7. Is our entity type still the right one for our size and profit?
8. What records do you need from us by January, and in what format?

Example: the December van decision

Example (fictional): an HVAC company expects a strong year and is considering a new service van. The owner's first instinct is to buy before December 31 for the deduction. At the November meeting, the CPA asks three questions: will the van be delivered and ready for use before year-end, does the company need the van for the spring workload anyway, and what does the purchase do to cash in February? The dealer can only promise delivery in mid-January, and the company's winter reserve is still below target. The owner decides to order the van for January delivery, keep the cash reserve intact and make a planned retirement contribution instead.

Do not buy just for the deduction

A deduction reduces tax on money you spend. It does not make an unneeded purchase free. Buy equipment because it earns its keep: more capacity, lower repair costs, safer work or better service. Check every year-end purchase against your cash plan for the slow months; see managing seasonal cash flow. Then use the review to set targets for next year in your annual plan and budget.