Year-End Tax Planning Checklist for Florida Contractors

The end of the year is one of the best times to review your tax situation, because it is the last point at which you still control the variables. Timing, purchases, payroll, and paperwork are all still moveable in November and December. By April they are history.

For Florida contractors, good year-end planning comes down to four things: timing income and expenses, capturing the deductions the 2026 rules actually allow, cleaning up payroll and worker classification, and getting records in order before filing season. Here is the checklist we run with clients — with the 2026 numbers attached, because several of them changed this year.

1. Review Your Income and Billing

• Look at outstanding invoices and decide whether to collect before year-end or let some payments land in January. This lever only exists if you are on the cash method — accrual-method contractors recognize income when the right to it is fixed, not when the check clears. If you are not sure which you are on, cash vs. accrual for contractors walks through the difference.
• Review large jobs in progress and how progress billings and retainage will be treated. Retainage is the line item that most often puts contractors in the position of owing tax on money they have not been paid — see retainage and progress payments.
• Confirm every deposit has been recorded and coded. Unrecorded income is the cheapest problem to fix in December and the most expensive to fix later.

2. Time Expenses Deliberately — and Know the 12-Month Rule

• Consider paying outstanding vendor bills, insurance premiums, and other deductible costs before year-end if the deduction is worth more to you this year than next.
• Evaluate whether major repairs or maintenance should be completed and paid in the current year.
• Do not assume a prepayment is deductible. Under the 12-month rule (Treas. Reg. §1.263(a)-4(f)), a prepaid expense is currently deductible only if the benefit does not extend beyond the earlier of 12 months or the end of the tax year following payment. Prepay 18 months of general liability coverage in December and you have not bought yourself an 18-month deduction — you have created a capitalization problem.

3. Equipment and Vehicles: Placed in Service, Not Just Purchased

This is where the biggest year-end dollars usually sit, and where the 2026 rules are genuinely favorable.

• Section 179 (IRC §179). For tax years beginning in 2026, the maximum expensing deduction is $2,560,000, phasing out dollar-for-dollar once §179 property placed in service exceeds $4,090,000. The cap for a sport utility vehicle is $32,000.
• Bonus depreciation (IRC §168(k)). The One Big Beautiful Bill Act restored 100% first-year bonus depreciation for qualified property acquired after January 19, 2025. Property acquired before that date is still on the 40% step-down schedule.
• "Placed in service" is the test, not "purchased." A machine that is bought and paid for on December 28 but still sitting on a truck — or a job trailer that is not yet ready and available for its intended use — does not generate a current-year deduction. Order early enough that the asset is actually in service.
• Confirm you have documentation supporting the business-use percentage on every vehicle. Listed property under IRC §274(d) requires contemporaneous records: date, business purpose, and miles.

One correction worth flagging, because it appears on nearly every generic year-end checklist: you cannot freely re-pick between the standard mileage rate and the actual expense method each year. Per IRS Publication 463, the standard mileage rate is unavailable for a vehicle on which you have claimed §179, bonus depreciation, or MACRS. If you took actual expenses with depreciation in year one, that vehicle is committed. The choice is real, but it is made in the first year the vehicle is in service — details in vehicle and mileage deductions for contractors.

Also note that 2026 has a mid-year mileage rate split: 72.5¢ per mile January 1–June 30, then 76¢ per mile July 1–December 31 (Notice 2026-10, revised effective July 1). Split your log at June 30 now rather than reconstructing it in March.

4. Retirement Contributions — Watch the Setup Deadlines, Not Just the Funding Deadlines

The contribution deadline and the plan establishment deadline are different dates, and in December that distinction decides what is still available to you:

• SEP IRA — can be established and funded as late as the due date of the return, including extensions. This is the flexible one, and usually the only one still fully on the table in December.
• SIMPLE IRA — must be established between January 1 and October 1. If it is December and you do not already have one, a SIMPLE is off the table for the current year (per IRS guidance on SIMPLE IRA plans).
• Solo 401(k) — a qualified plan generally must be adopted by the employer's tax-filing due date including extensions. Under SECURE 2.0, a sole proprietor with no employees can adopt a §401(k) plan after year-end and still make elective deferrals for that year, but only if the plan is adopted by the filing deadline without regard to extensions (Publication 560).

Model the contribution against your actual year-to-date profit and your cash needs for Q1 before committing.

5. Review S-Corp Payroll and Owner Compensation

Payroll is the one item that genuinely cannot be fixed after December 31 — there is no retroactive W-2.

• Confirm owner-employees have taken reasonable compensation subject to payroll taxes for the work actually performed. How much should you pay yourself from your S-Corp covers how that figure gets defended.
• Review year-to-date payroll against the profit picture and run any correcting payroll before the final run of the year.
• Make sure more-than-2% shareholder health insurance premiums are included in Box 1 of the W-2. Miss this and the above-the-line deduction on the personal return is not available — see health insurance options for S-Corp owners.
• Confirm any owner vehicle or home office reimbursements ran through an accountable plan rather than showing up as distributions.

6. Worker Classification and 1099s — the Threshold Changed

• Review everyone you paid this year and confirm the employee vs. independent contractor call. Misclassification is a payroll tax exposure, not a paperwork issue, and it compounds with workers' comp — see workers' compensation and payroll tax pitfalls.
• The reporting threshold is now $2,000, not $600. The One Big Beautiful Bill Act raised the Form 1099-NEC and 1099-MISC threshold to $2,000 for payments made after December 31, 2025, the first change since 1954. The $2,000 figure applies to 2026 payments and is inflation-adjusted starting in 2027. Most checklists still say $600.
• Gather or refresh Form W-9 for every subcontractor now. Chasing a taxpayer ID in late January is how filing deadlines get missed.
• Collect current certificates of insurance from subcontractors. In Florida this is also what keeps an uninsured sub from landing on your workers' comp policy.

7. Check Estimated Tax Payments Against the Safe Harbor

• Compare year-to-date income and payments against the safe harbor: generally 90% of the current year's tax, or 100% of the prior year's tax — 110% if your prior-year AGI exceeded $150,000 ($75,000 married filing separately).
• The penalty is computed per installment period, so an underpaid Q2 is not cured by overpaying in Q4. Make the January 15 payment count.
• Reset next year's estimates off this year's actual results rather than carrying last year's numbers forward. Quarterly estimated taxes covers the mechanics.

8. Organize Records and Supporting Documents

• Complete mileage logs, job cost records, and home office calculations while the year is still fresh.
• Reconcile every bank and credit card account through December 31.
• Move any remaining personal expenses out of business accounts. Commingling is the single most common reason a clean deduction becomes hard to support — see how to reduce your risk of IRS scrutiny.

9. Florida-Specific Items — "No Income Tax" Is Only Half True

Florida has no personal income tax, which is why federal planning drives most of this checklist. But the common shorthand that Florida has "no income tax" is wrong in a way that matters to some contractors:

• Florida imposes a 5.5% corporate income tax. Every corporation, and every LLC classified as a corporation for federal and Florida purposes, files Form F-1120. If you are a C corporation, or an LLC that elected corporate treatment, you have a Florida return and a Florida rate.
• S corporations are generally outside it — the Florida Department of Revenue requires an F-1120 from an S corporation only when it pays federal income tax on Line 23c of Form 1120-S (built-in gains or excess net passive income). Most contractor S-corps never file. Most is not all. If your entity type is unsettled, C-corp vs. S-corp and LLC taxation lays out the comparison.
• Sales and use tax. Review collection and remittance on taxable sales, and — more often the issue for contractors — use tax you owe on materials you pulled into a job without paying tax at purchase. See Florida sales tax for contractors.
• Tangible personal property tax. Your DR-405 return is filed with the county property appraiser by April 1, based on what you owned on January 1. Each return is eligible for an exemption of up to $25,000, and filing on time is how you claim it. Tools, equipment, trailers, and office furnishings all count — a December equipment purchase changes what you own on January 1.

Take Action While You Still Have Control

Year-end planning works because of the calendar, not because of complexity. A handful of targeted moves — placing equipment in service on time, running a correcting payroll, funding the right plan, cleaning up 1099 records — can meaningfully change what you owe. All of them expire on December 31.

If you would like help working through this checklist for your contracting business, contact KDM Accounting Services. We will help you rank the highest-impact items and get them done while they still count.