Year-End Tax Planning 2026: Smart Moves to Make Before December 31

Tax planning is not something you do in April. By April you are just reporting what already happened. The moves that actually change your bill — retirement contributions, charitable gifts, capital gains decisions, business purchases — almost all have to happen before December 31, 2026.

This year there are some new wrinkles. The One Big Beautiful Bill Act, signed in mid-2025, created several deductions that apply for the first time on your 2026 return. If you qualify, they are worth real money — but you need the right records. And the usual year-end basics still apply: max out your retirement accounts, harvest investment losses, take your required distributions, and get your books in order.

At JKJ Enterprises we prepare taxes, do bookkeeping, and help people plan. Here is what we are telling our clients right now.

Max Out Your Retirement Accounts

This is the single biggest lever most people have. Every dollar you put into a traditional 401(k) or IRA reduces your taxable income dollar-for-dollar.

• 401(k), 403(b), and 457 plans: The 2026 employee contribution limit is $24,500. If you are 50 or older, the standard catch-up is $8,000, bringing your total to $32,500. A new rule for ages 60 through 63 allows a larger catch-up of $11,250 instead of $8,000 — a total of $35,750. One important change: if you earned more than $150,000 in FICA wages in the prior year, your catch-up contributions must go into a Roth account starting in 2026. They will not reduce your taxable income this year, but they grow tax-free.

• Traditional and Roth IRAs: The limit is $7,500, plus a $1,100 catch-up if you are 50 or older. Good news: you have until April 15, 2027 to make your 2026 IRA contribution. But if the money is available now, there is no reason to wait.

If you are a business owner with a SEP-IRA or Solo 401(k), the contribution limits are much higher and the deadlines vary. Talk to us if you have not maxed those out.

Fund Your HSA

If you have a high-deductible health plan, a Health Savings Account is one of the best tax tools available — contributions are deductible, growth is tax-free, and withdrawals for medical expenses are tax-free.

• Self-only coverage: $4,400
• Family coverage: $8,750
• Age 55+ catch-up: additional $1,000

Like IRAs, HSA contributions can be made until April 15, 2027 for the 2026 tax year. But if your employer contributes through payroll, those need to happen before year-end.

Harvest Your Investment Losses

If you have investments that are sitting at a loss, selling them before December 31 lets you use those losses to offset capital gains — and up to $3,000 of ordinary income beyond that. Unused losses carry forward to future years.

A few things to watch:

• The wash-sale rule: If you sell a stock at a loss and buy the same or a "substantially identical" security within 30 days before or after the sale, the IRS disallows the loss. You can reinvest in something similar but not identical.

• The 0% bracket: If your taxable income is modest — generally below about $48,000 for a single filer or $96,000 for a married couple filing jointly — you may owe zero federal tax on long-term capital gains. If you are in that zone, it can make sense to sell winners, not losers, to "reset" your cost basis while paying no tax. This works especially well in a year when income is unusually low, like the year you retire.

Charitable Giving Under the New Rules

The 2025 tax law changed how charitable deductions work starting in 2026:

• Non-itemizers can now deduct up to $1,000 in cash donations to qualifying charities ($2,000 for married couples filing jointly). This is an above-the-line deduction, meaning you get it even if you take the standard deduction.

• Itemizers can still deduct charitable contributions, but there is now a floor of 0.5% of your adjusted gross income. Donations below that floor are not deductible. For someone with $100,000 of AGI, that means the first $500 of donations does not count.

That floor makes bunching more valuable than ever. Instead of giving $2,000 a year for five years, you give $10,000 in one year and take the standard deduction in the other four. A donor-advised fund makes this easy: you contribute a lump sum this year, get the full deduction, and distribute the money to your chosen charities over time.

• Qualified Charitable Distributions (QCDs): If you are 70½ or older with a traditional IRA, you can send up to $111,000 per person directly from your IRA to a qualifying charity. The distribution does not show up as taxable income, and it can satisfy your required minimum distribution. This is one of the best moves for retirees who give to charity — it keeps income lower, which can also keep Medicare premiums lower.

Take Your Required Minimum Distributions

If you are 73 or older and have a traditional IRA, 401(k), or similar retirement account, your RMD must come out by December 31. The only exception is if this is your very first RMD year — then you can delay until April 1 of the following year, but you will owe two distributions in that year.

The penalty for missing an RMD is 25% of the amount you should have taken (reduced to 10% if you fix it quickly). Do not forget this one.

Consider a Roth Conversion

If your income is unusually low this year — maybe you retired mid-year, cut back on work, or had a business downturn — it could be a good time to convert some of your traditional IRA to a Roth. You pay tax on the converted amount at your current rate, and then it grows tax-free for the rest of your life.

Two cautions:

• The converted amount is added to your income for the year, which can push you into a higher bracket. Run the numbers before you convert.
• Medicare uses a two-year lookback to set your premiums. A large Roth conversion in 2026 could raise your Part B and Part D premiums in 2028 through IRMAA surcharges. If you are on Medicare or approaching it, factor that into the decision.

New Deductions from the One Big Beautiful Bill Act

The 2025 tax law created several new deductions that apply for tax years 2025 through 2028. They are claimed on a new Schedule 1-A and are available whether or not you itemize. Here are the ones most relevant to our clients:

• Senior deduction: Up to $6,000 per person age 65 or older ($12,000 for a married couple both 65+). Starts phasing out at $75,000 modified AGI for single filers and $150,000 for joint filers.

• No tax on tips: Employees who receive cash tips can deduct up to $25,000 of tip income.

• Overtime premium deduction: The overtime premium portion of your pay — the extra half — is deductible up to $12,500 ($25,000 for joint filers). Phase-outs start at $150,000 single / $300,000 joint.

• Car loan interest: Interest on a loan for a new, U.S.-assembled vehicle is deductible up to $10,000. Phase-out starts at $100,000 single / $200,000 joint.

All of these require good records. If you earn tips, keep a daily log. If you work overtime, save your pay stubs showing the overtime premium. If you bought a qualifying vehicle, keep the loan statement and the window sticker or documentation showing where it was assembled.

SALT Cap and the Itemizing Decision

The state and local tax (SALT) deduction cap for 2026 is $40,400 ($20,200 if married filing separately). It phases out for incomes above $505,000. For California homeowners paying significant property tax and state income tax, the cap still limits what you can deduct — but it is higher than the old $10,000 cap.

The 2026 standard deduction is:

• Single: $16,100
• Married filing jointly: $32,200
• Head of household: $24,150

If your itemized deductions — SALT (capped), mortgage interest, charitable giving (with the new floor), and medical expenses — do not clear the standard deduction, take the standard deduction and use the new $1,000/$2,000 above-the-line charitable deduction instead. If they do clear it, itemize and get the full benefit.

Check Your Withholding and Estimated Taxes

If you owe a lot every April or get a very large refund, your withholding is off. The IRS withholding estimator at irs.gov can help you adjust your W-4 before year-end.

If you pay estimated taxes, the Q4 payment is due January 15, 2027. If you underpaid during the year, increasing your Q4 payment or bumping up your December payroll withholding can help avoid the underpayment penalty. Payroll withholding is treated as if it was paid evenly throughout the year, so a large December withholding can "make up" for earlier shortfalls — estimated payments cannot do that.

Small Business Year-End Moves

If you run a business, the last two months of the year are critical:

• Buy needed equipment. Section 179 and 100% bonus depreciation (restored by the 2025 tax law) let you deduct the full cost of qualifying equipment, vehicles, and software purchased and placed in service before December 31. The key word is "needed" — do not buy things just for the deduction.

• Defer income, accelerate expenses. If you are a cash-basis business, sending invoices in January instead of December pushes that income into 2027. Paying bills, subscriptions, and supplies before year-end pulls expenses into 2026. This only helps if you expect to be in the same or lower bracket next year.

• Catch up your bookkeeping. If your books are behind, fix them now — not in March when you are trying to file. Clean books make it easier to spot deductions and avoid errors.

• Collect W-9s. If you paid any contractor $600 or more in 2026, you need their W-9 to file a 1099-NEC. Those are due to the IRS by January 31, 2027. Chase them down now while people are still responsive.

A Few More Before Year-End

• FSA deadlines: If you have a Flexible Spending Account, most plans have a "use it or lose it" rule. Some employers give a grace period into March or allow a small carryover, but many do not. Check your plan and spend down the balance on eligible expenses — glasses, prescriptions, dental work — before it expires.

• Annual gift exclusion: You can give up to $19,000 per recipient in 2026 ($38,000 if you and your spouse both give to the same person) without filing a gift tax return or using any of your lifetime exemption. This is a common estate-planning tool, and it resets on January 1.

• Get organized early. Gather your W-2s, 1099s, mortgage statements, property tax bills, charitable receipts, and medical expense records now. The earlier you start, the less stressful filing season will be — and the less likely you are to miss a deduction.

Your Year-End Tax Checklist

1. Max out 401(k) and IRA contributions (or at least increase them for November and December).

2. Fund your HSA if you have not hit the limit.

3. Review investments for tax-loss harvesting opportunities.

4. Make charitable donations — consider bunching or a QCD if you are 70½+.

5. Take your RMD if you are 73 or older.

6. Evaluate whether a Roth conversion makes sense at this year's income.

7. Gather records for new deductions (tips, overtime, senior deduction, car loan interest).

8. Compare your itemized deductions to the standard deduction.

9. Check withholding and make your Q4 estimated payment by January 15.

10. Business owners: buy needed equipment, catch up bookkeeping, collect W-9s.

11. Spend down your FSA balance.

12. Make annual gifts if you are doing estate planning.

Let Us Help You Finish 2026 Strong

Year-end tax planning is not about tricks — it is about making sure you are not leaving money on the table. Whether you need help with retirement contributions, charitable strategies, business deductions, or just getting your books in order before filing season, we are here. Call JKJ Enterprises at (323) 750-5441, email [email protected], or book a time at book.jkjenterprises.com/team/jkjent.

Disclaimer: This article is for general educational purposes only and is not tax, legal, or financial advice. Tax laws are complex and individual circumstances vary. Consult a qualified tax professional about your specific situation before making any tax decisions. Figures and rules cited reflect publicly available information as of October 27, 2026, and are subject to change. JKJ Enterprises provides tax preparation, bookkeeping, and insurance services (CA License #0F12966).