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The tax decisions that actually reduce what a partnership owes are not made in March. They are made in October, November, and December, when there is still time to change the outcome. By the time the Form 1065 is being prepared, the year is over and the options are locked in. What the return captures is history, but what happens before December 31 is strategy.
Most partners do not think about taxes until they receive their K-1 and discover what they owe. The partners who consistently pay less are the ones who had a different conversation in Q4. This post outlines the specific moves worth making before the year closes, updated for 2026 and the changes that came with the One Big Beautiful Bill Act signed in July 2025.
The most valuable thing a partnership can do in October is project where the year is going to land. That means taking nine months of actual figures, layering in a reasonable estimate for Q4, and working backward from the projected taxable income to understand what decisions are still available.
That projection should specifically examine:
This analysis takes time, which is exactly why it needs to happen in Q4 and not on the way to filing.
Tip: If you do not have a Q4 check-in scheduled with your CPA, schedule one before November. The moves available in October are not available in January, and by March they are gone entirely.
The One Big Beautiful Bill Act restored 100 percent bonus depreciation permanently for qualifying property placed in service after January 19, 2025. For partnerships that purchased or are considering purchasing equipment, vehicles, machinery, or other qualifying property, this is one of the largest deductions available and it requires a deliberate decision before December 31.
The Section 179 expensing limit also increased to $2.5 million for 2026, with a $4 million phase-out threshold. That is double the prior limit, and it gives partnerships far more flexibility to expense purchases in the year of acquisition rather than depreciating them over several years.
Two things to understand about how these deductions work at the partnership level:
Tip: If your partnership is planning a significant equipment or property purchase in Q1 of next year, run the numbers on whether placing it in service before December 31 changes the tax outcome materially. In many cases it does, and that decision needs to be made before the year closes.
The pass-through entity tax election is one of the most underused tools available to partnerships and multi-member LLCs, and 2026 is a year where evaluating it is worth more than a passing glance.
The SALT deduction cap increased to $40,000 under the One Big Beautiful Bill Act, with a phase-out beginning above approximately $505,000 of modified adjusted gross income. But the PTET election bypasses the cap entirely. When a partnership makes a PTET election, it pays state income tax at the entity level, deducts that payment as a business expense, and passes a corresponding credit to each partner on their state return. The result is that state income taxes that would have been partially or entirely nondeductible at the individual level become fully deductible at the entity level.
Texas does not have a personal income tax, so PTET is less of a driver for partnerships operating solely in Texas. But for partnerships with partners in high-tax states or partnerships that operate across multiple states, the election can produce a 4 to 5 percent effective tax savings on income that is being earned in those jurisdictions.
Tip: PTET election rules vary significantly by state, including timing requirements that differ from the federal filing calendar. Some states require the election to be made before the end of the tax year; others allow a retroactive election. If your partnership operates in states other than Texas, confirm whether an election is available and when it must be made before December 31 passes.
The qualified business income deduction became permanent under the One Big Beautiful Bill Act, which changes how partnerships should think about it. It is no longer a deduction to maximize once, but a deduction to build a multi-year strategy around.
The QBI deduction allows eligible partners to deduct up to 20 percent of their share of qualified business income. For partners below the income thresholds, the deduction is automatic. For partners above the threshold, it becomes limited by W-2 wages paid by the partnership and the unadjusted basis of qualified property held.
A few year-end moves that affect every partner's QBI position:
Tip: Specified service trade or businesses, which include certain professional practices in health, law, accounting, and similar fields face stricter QBI limitations above the income thresholds. If your partnership operates in one of those categories and partners are above the phase-out range, the QBI deduction may be limited or eliminated regardless of other planning moves. Confirm your partnership's SSTB classification with your CPA before year-end.
Partners pay tax on their distributive share of partnership income whether or not the partnership distributed any money to them. And because the partnership withholds nothing from distributions the way an employer does from a paycheck, partners are responsible for making quarterly estimated tax payments on their own.
The IRS expects those payments when a partner anticipates owing $1,000 or more at filing. The quarterly deadlines for 2026 are April 15, June 15, September 15, and January 15. Missing any of them generates an underpayment penalty even if the full balance is paid by the April 15 filing deadline.
A Q4 review should check three things for every partner:
Tip: Partners who owe significantly more at filing than their quarterly payments covered are not just paying a penalty; they are also losing the use of cash they could have planned around. A mid-year projection in Q3 and a final check in Q4 removes most of that surprise.
Retirement plan contributions are one of the cleaner ways for self-employed partners and partnership owners to reduce taxable income before year-end, and they have hard deadlines that cannot be extended the way a tax return can.
For partners with SEP-IRAs, contributions can be made up to the Form 1065 filing deadline including extensions, which gives more runway than most people realize. But Solo 401(k) plans must be established by December 31 to accept contributions for the current year. If a partner wants the contribution limit that comes with a Solo 401(k), i.e. up to $70,000 in total contributions for 2026 depending on income, and does not already have the plan established, that decision needs to happen before December 31.
Tip: The contribution limits for Solo 401(k) plans are substantially higher than for SEP-IRAs at most income levels. If a partner is not already using one and is self-employed, it is worth modeling the comparison before year-end. The difference in deductible contributions can be significant enough that establishing the plan before December 31 pays for itself.
Every move described in this post has a deadline of December 31. Depreciation elections require property to be placed in service. PTET elections have state-specific timing requirements. Retirement plan establishment must happen before the year ends. QBI deduction position is set by income as of December 31. Estimated payments for the year are finalized with the January 15 installment.
None of this is available in March. March is when the return is prepared but December is when the return is shaped.
At TrueView CPA, partnership tax planning for the year ahead is part of what we do for every partnership we work with, not just during filing season but in Q3 and Q4 when there is still something to be done about it. If you are a partner or LLC member in the Dallas area and you have not had a year-end planning conversation yet this year, the time to start is now.
Want to maximize your tax savings before year-end? Schedule a call with our tax experts today.
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