Year-End Tax Moves for LA Small Businesses Before Dec. 31

With about two months left in 2026, Los Angeles business owners have a short window to make decisions that will shape next spring's tax bill. This is the first full year under the federal law commonly called the One Big Beautiful Bill Act, signed in July 2025, and several of its business provisions change the math on equipment purchases, contractor paperwork and pass-through income. California, as usual, does not follow all of them. Here is what to review with your accountant before December 31.

This article is general information, not tax advice. Your numbers, entity type and cash position should drive every decision.

Equipment purchases: the federal write-off is generous again

The law restored 100% bonus depreciation for qualifying property acquired after January 19, 2025, and made it permanent, according to the IRS summary of the business provisions. It also raised the Section 179 expensing limit to $2.5 million, with a phase-out that starts once qualifying purchases top $4 million, and indexed both figures for inflation after 2025. One tax planning guide puts the 2026 Section 179 maximum at $2,560,000.

For a café buying a new espresso machine, a production company upgrading cameras or a contractor replacing a truck, that can mean deducting the full cost on the 2026 federal return. Two cautions are worth keeping in mind:

• Timing matters. The asset generally has to be placed in service in your business by year-end, not just ordered. A delivery that slips into January moves the deduction to 2027.
• It is a timing benefit. As the Ohio Society of CPAs notes, a full write-off now can be recaptured if you later sell the asset. Buy what the business actually needs.

California plays by different rules

This is where Los Angeles owners often get surprised. California does not conform to the federal Section 179 limits. The Franchise Tax Board's instructions for Form FTB 3885 put the state's maximum Section 179 deduction at $25,000, reduced when total Section 179 property placed in service tops $200,000, and list federal bonus depreciation under IRC Section 168(k) among the provisions California does not follow.

In practice, a big federal deduction can sit alongside a much smaller state deduction for the same purchase, which means separate depreciation schedules and a state tax bill that may be higher than the federal picture suggests. Ask your preparer to model both before you commit to a large year-end purchase.

Contractor paperwork: a higher 1099 threshold

If you pay freelancers, designers, editors or other independent contractors, the reporting line has moved. For payments made in 2026, the threshold for Forms 1099-NEC and 1099-MISC rises from $600 to $2,000, according to IRS Publication 15, and it will be adjusted for inflation after 2026. Payments made in 2025 still used the old $600 line.

That reduces filing volume for many small shops, but it does not change two habits worth keeping. Collect a Form W-9 before the first payment, since you may not know in advance whether a contractor will cross the threshold. And keep an eye on worker classification, which California applies strictly. The PKF tax guide also notes that the law reinstated the $20,000 and 200 transactions threshold for Form 1099-K, the form payment platforms issue.

Pass-through owners: QBI and the state PTE tax

Many LA small businesses are LLCs, partnerships or S corporations whose profits flow to the owners' personal returns. The qualified business income deduction, which lets eligible owners deduct up to 20% of that income, was made permanent under the new law, per the PKF planning guide.

On the state side, California's pass-through entity elective tax has been extended. The Franchise Tax Board says the election is available for taxable years beginning on or after January 1, 2026, and before January 1, 2031. Partnerships and S corporations that elect pay a 9.3% tax on qualified net income at the entity level, and owners receive a state credit. The election is made on a timely filed original return and cannot be revoked, so it belongs on your year-end agenda now rather than in April.

A short year-end checklist

These are our suggestions for conversations with your tax professional, not requirements:

1. Project 2026 profit now. You cannot decide whether to accelerate expenses until you know roughly where the year will land.
2. List planned equipment purchases and confirm realistic delivery and in-service dates before December 31.
3. Run federal and California numbers side by side for any large purchase, since the deductions can differ sharply.
4. Clean up your contractor list. Confirm W-9s on file and flag who was paid $2,000 or more in 2026.
5. Ask about the PTE election if you own a partnership or S corporation with significant California income.
6. Check your City of Los Angeles business tax status. The Office of Finance says businesses with global gross receipts under $100,000 that renew on time can qualify for the Small Business Exemption, so put the renewal date on your calendar.

The bottom line for Los Angeles owners: the federal rules reward well-timed investment, but California's separate rules mean the state return deserves just as much attention. A one-hour planning meeting in November usually costs less than the surprises it prevents.