Think Your Year-End Tax Plan is Complete? Think Again.

As year-end tax planning is on the horizon, many businesses are focused on the federal changes introduced under the new One Big Beautiful Bill. But here’s what’s often missed: the state tax impact. Just because a tax benefit applies at the federal level doesn’t mean your state agrees. We strongly encourage you to never assume, as it can lead to surprise liabilities and missed opportunities.

Whenever there’s a significant change in federal tax law, states must decide how (or whether) to follow suit. These decisions can significantly affect your bottom line, sometimes favorably, sometimes not. And if you’re not actively planning for the state implications, the costs can sneak up fast.

Why Year-End State Tax Planning Can’t be an Afterthought

Here’s where things get complicated: not all states follow the same rules. Some states adopt federal changes automatically—this is known as “rolling conformity.” Others take a wait-and-see approach, incorporating changes selectively and on their own timeline – this is called “static conformity.” As a result, a federal deduction might be reduced or disallowed altogether at the state level.

Adding another layer to the complexity, some states choose to “decouple” from specific provisions entirely. That means for businesses operating across multiple states, you’re dealing with varied tax treatments that can impact your filings and your liabilities.

Despite all this, state tax planning often falls off the radar during year-end reviews. Whether it’s due to time constraints, complexity, or simply assuming your advisor has it covered, the consequences of overlooking these issues can be costly in terms of both compliance and opportunity.

So, what should you do? The Value of a Broader Perspective

When you sit down with your tax advisor for year-end planning, don’t just talk federal. Make sure you address state-level issues by asking the following questions:

This level of planning is critical for overall strategic planning. Waiting until filing season to sort through state issues is too late for effective planning and adjustments. That’s why it’s essential to consult with professionals who focus specifically on state tax matters.

As you prepare for year-end, expand your planning conversations beyond your general tax advisor to include a state tax advisory expert. These professionals can look into how each of the states you operate in handles the One Big Beautiful Bill Act, review conformity status, identify any decoupled provisions, and ensure you’re filing in the required states correctly and strategically. Without taking this step, you could be in for a surprise, state tax bills or missed savings. You’ve planned federally—now be certain your plan is complete with state-level considerations.

Accelerating Success with State Tax Planning

When it comes to tax planning, a federal strategy is only half of the picture; state tax planning completes it. By taking a comprehensive approach, you position your business to overcome challenges, drive growth, and enhance performance for long-term value. For much more on this topic, join me and my colleagues, Kimberley Tarnakow, CPA, and Jennifer Nelson, CPA, MBA, for our upcoming webinar, Strategic Year-End Tax Planning: Integrating State Advisory Services. We’ll explore proactive steps you can take to assess the state-level impact of your federal tax planning and help your business get one step ahead.