Year-end tax planning: 10 moves to consider before 2026 ends

It’s that time. Fourth quarter is upon us, and, just like an important football game, the last quarter is often the difference between victory and defeat. While filing your tax returns happens after the year is over, many of the decisions that affect your outcome must be made before December 31.

That makes the early days of Q4 a good time to review your tax situation, particularly if your income has changed, you own a business, you have significant investment activity, or you've experienced a major life event during the year.

Year-end tax planning isn't simply about finding deductions. It's about looking at your overall financial picture, estimating where you are likely to finish the year, and identifying opportunities or potential problems while there’s still time to address them.

Here are 10 factors individuals and business owners should consider reviewing before 2026 comes to a close.

1. Estimate your 2026 taxable income

A useful starting point for year-end planning is estimating your income for the full year.

Compare your expected 2026 income with 2025 and consider whether anything has changed significantly. That might include a salary increase or bonus, business profit or loss, investment gains, retirement distributions, rental income, or property sold.

The goal is to develop a reasonable projection of your adjusted gross income and taxable income. Once you have that estimate, you can better evaluate whether additional planning strategies may be appropriate.

For business owners, this exercise can be particularly important. If your business performed significantly better or worse than projected, tax estimates from earlier in the year may no longer reflect your actual situation.

2. Review your withholding and estimated tax payments

Finding out that you owe more than expected when you file your return makes for a bad day. A year-end tax projection can help identify a potential shortfall before filing season arrives.

If you’re a wage earner, review your pay statements for federal and state income taxes withheld, particularly if you received a raise or bonus, changed jobs, added a second job, or experienced a significant change in household income.

If you’re self-employed, a business owner, investor, landlord, or otherwise receive substantial income without withholding, now is the time to review your estimated tax payments and see where you’re likely to end up at year’s end. If you are behind, increasing wage withholding or making an additional estimated payment may reduce the amount due and potentially reduce underpayment penalties. Keep in mind that estimated-tax rules generally look at when payments were made throughout the year, so a late-year estimated payment may not fully eliminate a penalty attributable to an earlier-quarter shortfall. Withholding can be especially useful because, for federal estimated-tax purposes, it is generally treated as paid evenly throughout the year

In general, individuals can avoid the federal estimated-tax penalty if they owe less than $1,000 after withholding and refundable credits, or if at least 90% of the current year’s tax was paid on time.

3. Consider the timing of income and expenses

Astute tax planning sometimes comes down to good timing. Depending on your situation and accounting method, it may make sense to accelerate certain deductible expenses into 2026 or defer income until 2027. In other situations, the opposite strategy may be preferable.

For example, a business owner expecting substantially higher taxable income next year might have a different planning strategy than someone expecting income to decline. The key is not simply to defer taxes whenever possible. Instead, the timing of income and deductions should be considered in the context of your expected tax rates, cash flow, business needs, and overall financial plans.

It’s important to know that tax rules do place limits on when income and expenses can be recognized. Before changing the timing of a significant transaction solely for tax purposes, it’s best to discuss it with your tax advisor.

4. Review capital gains and losses

If you own investments outside of retirement accounts, the final months of the year are a good time to review realized and unrealized capital gains and losses. Selling an investment at a loss may allow that loss to offset capital gains elsewhere in your portfolio. If losses exceed gains, individuals may generally deduct up to $3,000 of net capital loss against other income for the year, or $1,500 if married filing separately. Unused net losses generally carry forward indefinitely. 

But don’t get tunnel vision.Tax considerations shouldn't be the sole driver of your investment strategies. Selling an investment can change the risk and diversification of your portfolio, and the wash-sale rules can disallow a current loss if you buy substantially identical stock or securities within 30 days before or after the loss sale—including, in some cases, through an IRA or Roth IRA.

In some cases, deliberately realizing a gain can also be part of a tax strategy. Your appropriate approach depends on your income, existing gains and losses, investment objectives, and expected future tax situation.

5. Maximize retirement savings where appropriate

Retirement contributions can serve two purposes: building long-term savings and, in some cases, reducing current taxable income.

For 2026, employees can generally contribute up to $24,500 to 401(k), 403(b), governmental 457, and federal Thrift Savings Plan accounts. Participants age 50 or older may generally make an additional $8,000 catch-up contribution, for a total of $32,500; participants ages 60 through 63 may qualify for a higher catch-up limit of $11,250, subject to plan terms.The IRA contribution limit for 2026 is $7,500, or $8,600 for people age 50 or older, subject to compensation and other eligibility rules.

If you participate in an employer retirement plan, review your year-to-date contributions and determine whether you're on track to reach your desired contribution level.

Business owners should also review their company's retirement plan and any employer contribution opportunities. Depending on the type of plan, certain decisions or actions may need to occur before year-end even when the contribution itself can be made later. Be aware that contribution deadlines and tax treatment vary by plan type. Increasing a contribution also needs to make sense from a cash-flow standpoint.

6. Evaluate charitable giving plans

If charitable giving is part of your financial plan, consider reviewing your contributions before year-end rather than waiting until the final days of December. For taxpayers who itemize deductions, qualifying charitable contributions may provide a tax benefit. Beginning in 2026, taxpayers who do not itemize may also generally deduct up to $1,000 of qualifying cash contributions—or up to $2,000 for married couples filing jointly—to certain qualified organizations. This special deduction does not apply to all organizations or all forms of giving, so donors should confirm eligibility and retain proper records.

For donors who itemize and hold long-term appreciated publicly traded securities, a direct contribution to an eligible public charity can often avoid capital gains while supporting a charitable deduction, subject to applicable rules and limitations.

If you are age 70½ or older, ask whether a qualified charitable distribution, or QCD, from an IRA is appropriate. A QCD must generally be paid directly by the IRA trustee to an eligible charity; it can exclude the distribution from income, but the same gift cannot also be claimed as an itemized charitable deduction.

Documentation matters, too. Make sure you retain the acknowledgments and records required to substantiate charitable contributions. Most importantly, make charitable decisions because they align with your giving goals. The potential tax benefit should be viewed as one part of the decision rather than the sole reason for giving.

7. Review business equipment and other major purchases

Business owners frequently go on buying sprees for equipment, technology, vehicles, furniture, and other items as year’s end approaches. Depending on the property and circumstances, tax provisions such as Section 179 expensing and bonus depreciation may allow some or all of an eligible asset's cost to be deducted more quickly, rather than depreciated over many years. For tax years beginning in 2026, the maximum Section 179 deduction is $2.56 million, generally reduced once qualifying property placed in service exceeds $4.09 million. Special limits apply to certain vehicles, and eligibility varies by asset and business circumstances.

Keep in mind, however, that buying something simply to obtain a tax deduction rarely makes economic sense. A deduction reduces taxable income; it does not make the purchase free. Before accelerating a purchase, ask whether the business actually needs the asset, whether the purchase fits your cash-flow plans, and when the property must be placed in service to qualify for the intended tax treatment. In general, property must be purchased and placed in service—ready and available for its intended business use—by year-end to support a 2026 depreciation deduction. Ordering or paying for equipment alone may not be enough.

8. Get ahead of year-end payroll and contractor reporting

For employers, year-end tax planning also means preparing for January reporting requirements:

• Review employee and independent contractor records now. Confirm that names, addresses, Social Security numbers or taxpayer identification numbers, and other required information are accurate.
• Businesses that work with independent contractors should make sure they request a completed Form W-9 before the first reportable payment whenever practical.
• Employers generally must furnish Forms W-2 to employees by January 31 and file them with the Social Security Administration by that date. Businesses generally must also furnish and file Forms 1099-NEC by January 31 when reporting nonemployee compensation, subject to the applicable reporting rules and thresholds.
• Business owners should also review year-end payroll issues such as taxable fringe benefits and, where applicable, owner compensation.

Taking care of these details before December 31 can make January significantly less stressful and reduce the likelihood of reporting errors.

9. Clean up your books before the year closes

Good tax planning depends on good financial information. Business owners should review their accounting records before year-end and resolve issues while transactions are still relatively fresh. That may include reconciling bank and credit card accounts, reviewing accounts receivable and accounts payable, identifying uncategorized transactions, updating fixed-asset records, and reviewing loans and owner contributions or distributions.

This is also an opportunity to look for unusual balances or transactions that may have been recorded incorrectly.

Waiting until tax preparation begins to clean up an entire year's books can delay the return and make meaningful tax planning much more difficult. Clean up your records in October or November to give your advisor a much clearer picture of where the business is likely to finish the year.

10. Identify decisions that must be made before December 31

One of the most important distinctions in year-end planning is the difference between a tax decision that must be made before year-end and one that can wait until tax-filing season.

• Some retirement contributions, for example, may be made after December 31 and still count for the prior tax year. Other actions generally must occur during the tax year to have the intended effect.
• The same issue can arise with charitable gifts, investment transactions, business purchases, payroll decisions, and the recognition of income or expenses.
• By the time you're gathering tax documents in February or March, some planning opportunities may already be gone.

That's why tax preparation and tax planning are different activities. Tax preparation reports what already happened. Tax planning gives you an opportunity to consider what should happen while you still have choices.

It’s not one size fits all

There is no single year-end tax strategy that works for everyone. A taxpayer who had a large increase in income may need a very different approach from someone whose income declined. A business owner considering a major equipment purchase has different planning needs from a retiree managing investment income and retirement distributions. Changes in your family, employment, investments, or business can also affect which strategies are appropriate.

The common factor is timing.

Reviewing your situation before the end of the year gives you an opportunity to identify potential tax liabilities, evaluate planning strategies, and take action when appropriate. Waiting until your return is being prepared may mean discovering opportunities only after the deadline to use them has passed.

If your income or financial situation has changed during 2026, or if you simply haven't reviewed your tax position recently, the start of Q4 is a good time to meet with your tax advisor. A year-end projection can help you understand where you stand and determine whether there are steps worth taking before December 31.

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