With the 2025 filing season behind us, now is the time to begin planning for 2026 and beyond. For most businesses, that planning should start well before year-end. Decisions being made right now, including when to place equipment in service, how much inventory to carry, and whether the current entity and state tax structure still fits, can have a meaningful impact on next year’s tax outcome.
The goal is not to chase last-minute deductions. It is to give management and their advisors time to model options, align tax strategy with operating plans, and avoid leaving value on the table.
This is especially relevant for manufacturers and retailers, where capital spending, margins, and multistate activity often evolve faster than the tax conversation. Bonus depreciation and Section 179 deductions can change the after-tax cost of machinery and equipment. Ongoing Section 199A (Qualified Business Income deduction) planning and state and local tax (SALT) or pass-through entity tax strategy can affect how much income ultimately reaches owners.
For businesses already working with an advisor, the question is straightforward: what should we be evaluating today while there is still time to act?
Inventory Planning: Start Now
For manufacturers, retailers, and distributors, inventory is a core operational asset that drives both book and tax results. How inventory is managed and valued can materially impact taxable income, particularly as inventory is sold, becomes obsolete or damaged, or as the company applies its costing method.
If the business is uncertain about on-hand quantities, it should begin cycle counts now to identify and correct discrepancies well before year-end. This is also a good time to reassess whether the current costing method, whether last-in first-out (LIFO), first-in first-out (FIFO), or weighted-average cost, still fits the business’s operations and supports its financial reporting and tax goals.
Improvements and Equipment Purchases: Plan Now
With 100% bonus depreciation and Section 179 deductions currently available, businesses should be continuously evaluating the timing and scope of significant capital purchases. For many interior improvements to warehouse or office space, as well as equipment acquisitions, these provisions may help accelerate deductions and reduce the after-tax cost of investment.
If the business has capital spending needs, now is the time to model how those expenditures will be funded, whether through financing, available cash, or capital contributions, so that the tax strategy, cash flow, and operational plan stay aligned.
Research and Development: Track Now
Starting in 2026, new reporting requirements apply to the federal research credit claimed on Form 6765. Section G is now required in most cases, with two exceptions: taxpayers who are qualified small business electing the reduced payroll tax credit, or taxpayers with total qualified research expenses (QREs) of $1.5 million or less, average annual gross receipts for the prior three years of $50 million or less, and a research credit claimed on an original return.
Section G requires additional detail beyond basic entity information. This includes each business component, the component type, whether software is involved, a description of the information sought to be discovered, and the QREs associated with each component.
Businesses should begin tracking projects, components, and related QREs now to avoid missed opportunities at filing time. A formal R&D study is also recommended if one has not been completed or refreshed in several years.
State Tax Exposure: Review Now
Evolving state nexus standards can pull more entities and their owners into multistate filing requirements than anticipated, particularly as sales, payroll, property, and remote activity expand across state lines. Businesses and their advisors should proactively review nexus footprints now so that registration, estimated payments, and filing positions do not become last-minute surprises at extension or filing time. A system to track out-of-state activity helps identify potential nexus issues early.
It is also important to consider state pass-through entity (PTE) tax elections sooner rather than later. These elections can provide a workaround to the federal SALT deduction cap for eligible owners. Key considerations include who can elect, when and how the election must be made, and how related credits or adjustments flow through to owners, so the benefit is captured without creating unintended compliance or cash flow issues. Some states require an election or payment to be made by a specific point during 2026, so we do not want to leave any available deductions on the table.
The Case for Acting Now
Addressing these planning items now gives businesses time to review options, align tax decisions with operations, and avoid rushed year-end decisions. A brief check-in with your advisor now can surface opportunities early and keep potential issues from becoming surprises.
The goal is to enter year-end with more intentional, predictable tax outcomes.
To discuss your 2026 planning priorities, contact your HBK advisor or reach out to our Manufacturing Solutions team.
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