What I'm Telling Clients About Q4 Right Now

By Frank Gramlich, CPA | Xavier Financial Services

First off, welcome back football! Let's Go Birds!

If you've been paying attention to a lot of our blog and social media content, you're familiar with the notion that "Q4 planning doesn't happen in December, by December, most of the meaningful moves have already closed". Clients who finish the year well are those who started their planning conversation in September or October. This is the point when your annual numbers are real and tax saving options are still open.

Here's how I think about it. The first thing I'm looking at is where income and deductions are expected to land. For cash-basis businesses, there's more timing flexibility than most people realize. You have control over revenue that hasn't been invoiced yet, and expenses you were planning to make anyway. Each can be timed in a tax advantageous manner. Accelerating a deductible purchase into this tax year, or timing a payment to arrive after January 1, can shift the outcome meaningfully. This isn't exotic planning, but it requires a conversation and a current look at the numbers.

The second point of focus is on your entity structure. The question is whether what you're operating in today is still the right fit for where the business is heading. Certain structural changes need to be set up well in advance of the tax year they apply to. Q4 is when that conversation has to happen to matter for 2027. I've had several of these discussions this summer. The most significant impact is on 2027 and beyond, but we also left ourselves time in the second half of the year to identify strategies to help with 2026.

For clients who've had a significant year (a business sale, real estate activity, a meaningful unexpected windfall) the planning gets more interesting.

Opportunity Zones. If you realized a substantial capital gain this year, reinvesting those gains into a Qualified Opportunity Fund can defer the federal tax on that gain. Depending on how long you hold the investment, future appreciation in the fund may be partially or fully excluded from tax. The rules are specific and the timing matters, but for the right situation, the numbers are compelling.

1031 Exchanges. For clients who own investment real estate, this remains one of the most effective tools available. A properly structured exchange allows you to sell a property and reinvest the proceeds into a like-kind property without recognizing the gain at sale. The timelines are strict 45 days to identify a replacement, 180 days to close which is why this conversation belongs in September, not November.

Cost Segregation. If you own a commercial building or real estate used in your business, a cost segregation study can accelerate a meaningful amount of depreciation into the current tax year. It's an engineering-based analysis that reclassifies building components into shorter depreciation categories, which reduces taxable income now. For the right asset, the first-year impact is substantial.

Finally, retirement contributions to a Solo 401(k) or SEP IRA round out the picture. These are more common strategies, and we covered them in detail two weeks ago.

This summer, we've invested significant time formalizing how we deliver this kind of planning at XFS. We're introducing the XFS Tax Health Check and the XFS Tax Planning Session. The XFS Tax Health Check is a free consultation for returning and new clients, and available at a modest fee for non-clients. It's a focused conversation about where you stand and what moves are worth considering before December 31. Our XFS Tax Planning Session goes deeper. It culminates in a detailed, custom written tax plan which you can work from, built around your specific situation.

Remember if you've had a strong year and haven't started this conversation, September is still the right time. We still have options at our disposal. By December, some of them won't be available any longer.