Year-End Tax Planning Tips for HVAC Business Owners

As the year winds down, HVAC business owners have more than just winter service calls and end-of-season maintenance on their minds — it’s also the perfect time to focus on year-end tax planning. Strategic tax moves now can significantly reduce your tax liability come April, improve your cash flow, and set your business up for financial success in the new year.

Whether you’re a solo operator or running a multi-crew company, here are key tax-saving strategies to consider before December 31st.

1. Leverage Section 179 and Bonus Depreciation for Equipment Purchases

HVAC businesses often invest in expensive tools, service vans, and diagnostic equipment — all of which can be depreciated for tax purposes. But instead of spreading that depreciation out over several years, Section 179 allows you to deduct the full cost in the year of purchase (up to the annual limit).

In 2025, the Section 179 deduction limit is $1.22 million, and 100% bonus depreciation is still available for qualifying assets. If you've been thinking about upgrading trucks, adding new diagnostic tools, or buying software, doing so before year-end could create a major tax break.

Pro Tip: The equipment must be purchased and put into service by December 31st — not just ordered.

2. Review Your Estimated Taxes and Withholdings

If your HVAC business had a profitable year, you may need to adjust your estimated tax payments to avoid underpayment penalties. Review your net income and compare it to previous years. If your income jumped significantly due to increased demand or new service offerings, you could owe more in taxes than expected.

Consult your tax advisor to:

• Adjust your Q4 estimated tax payment (due January 15).

• Withhold additional amounts if you’re paying yourself via W-2 payroll.

• Explore setting up a SIMPLE IRA or Solo 401(k) to reduce taxable income.

3. Maximize Retirement Contributions

Year-end is a great time to contribute to retirement plans and reduce your tax liability. If you don’t already have one, setting up a retirement plan for your HVAC business can benefit both you and your employees.

Options include:

• SEP IRA – Contribute up to 25% of compensation (up to $69,000 for 2024).

• Solo 401(k) – Ideal for owner-operators with no full-time employees.

• SIMPLE IRA – Great for small teams with fewer than 100 employees.

These contributions are tax-deductible and grow tax-deferred, making them a smart dual-purpose tool for saving and reducing taxes.

4. Defer Income & Accelerate Expenses

One classic year-end tax strategy is to defer income and accelerate expenses if you operate on a cash basis.

• Defer income by postponing large invoices until January (if possible).

• Accelerate expenses by prepaying rent, insurance, subscriptions, or stocking up on supplies before December 31st.

This strategy can push more deductions into this tax year while deferring income to the next, which helps lower your current-year taxable income.

⚠️ Just be cautious: This tactic only shifts taxes, not eliminates them. It’s best used in years where you anticipate being in a lower tax bracket the following year.

5. Write Off Bad Debts

If you’re carrying unpaid invoices from customers who’ve gone dark, now’s the time to clean up your books and write off bad debts.

For accrual-basis HVAC businesses, you can deduct bad debts that are uncollectible. This applies to services rendered or parts installed that were billed but never paid.

Make sure you’ve made a good faith attempt to collect, document it, and consult your tax advisor before writing it off.

6. Check for Qualified Business Income (QBI) Deductions

Most HVAC companies are structured as pass-through entities (like LLCs or S Corporations), making them eligible for the 20% Qualified Business Income Deduction (QBI) under Section 199A.

However, your ability to claim the full 20% may phase out if your income exceeds certain thresholds. Year-end planning strategies — like contributing to retirement accounts or increasing business expenses — can help reduce taxable income to maximize your QBI deduction.

7. Clean Up Your Books and Records

Year-end is a great time to tighten up your accounting records. Clean financials will:

• Make tax filing easier and more accurate.

• Help uncover deductions you may be missing.

• Provide insights for planning next year’s growth.

Use this time to reconcile accounts, verify fixed asset listings, and make sure your payroll and 1099 records are accurate. If you haven’t yet, consider investing in accounting software like QuickBooks or working with a fractional CFO or bookkeeping service.

8. Plan for 1099 Filings

If you’ve paid independent contractors or subcontractors $600 or more during the year, you’re required to file Form 1099-NEC. The deadline to send these to contractors and the IRS is January 31st.

Now is the time to:

• Verify contractor information (name, address, and TIN).

• Make sure you have completed W-9 forms on file.

• Review payments to ensure proper classification.

9. Consider Entity Structure Changes

If your HVAC business has grown significantly, it might be time to review whether your current business structure is still tax-efficient.

• Should you elect S Corporation status to reduce self-employment taxes?

• Would a C Corporation or multi-member LLC better suit your long-term goals?

These changes have tax implications and require planning — but reviewing them before year-end gives you time to prepare and file the right paperwork for the new tax year.

10. Meet With Your Tax Advisor

Last but not least: don’t go it alone. A tax professional with experience in HVAC businesses can help you create a personalized strategy to minimize taxes and keep more cash in your business.

A proactive planning session before year-end can uncover opportunities you may not have considered and ensure you avoid costly mistakes.

Final Thoughts

Your HVAC business works hard all year — don’t let poor tax planning eat into your profits. Taking time in November and December to implement smart, strategic tax moves can significantly reduce your tax bill and help set the stage for a stronger financial year ahead.

Whether it’s investing in equipment, setting up retirement accounts, or simply cleaning up your books, these actions add up to big savings and peace of mind.

Need help with your HVAC business taxes?

Reach out to a qualified tax advisor who understands the HVAC industry and can tailor a strategy to your goals. Book a Strategy Session with one of our expert Here