Year-End Tax Planning for 2026

Year-end tax planning starts with an estimate of your 2026 income and tax payments. A change in business profit, wages, investment income, or retirement withdrawals can change the result. Compare that estimate with what you expect in 2027 before deciding whether to move income or expenses between years.

Check withholding and estimated payments

To avoid an underpayment penalty, most individuals can use timely payments covering the smaller of 90% of this year's tax or 100% of last year's tax. The prior-year percentage rises to 110% if your 2025 adjusted gross income exceeded $150,000, or $75,000 if married filing separately. The prior-year return must cover 12 months. Special rules and exceptions apply.

Estimated payments are generally due throughout the year. Paying extra in January does not erase an earlier shortfall. Federal withholding is generally treated as paid evenly during the year, so increasing withholding from remaining paychecks may help. You can meet the payment target and owe a balance when you file. The IRS payment rules explain these calculations.

Review retirement contributions

The 2026 employee contribution limit for most 401(k) and 403(b) plans is $24,500. If the plan permits catch-up contributions, the additional limit is $8,000 at age 50 or older, or $11,250 for those turning 60 through 63 during 2026.

Beginning in 2026, catch-up contributions generally must be Roth if your 2025 wages subject to Social Security tax from the sponsoring employer exceeded $150,000. Those contributions do not reduce current taxable income. Pre-tax workplace contributions generally reduce income subject to federal income tax.

The combined traditional and Roth IRA contribution limit is $7,500 for 2026, plus $1,100 at age 50 or older. Eligibility depends on compensation and other rules. Income and workplace retirement coverage can affect a traditional IRA deduction; income also limits direct Roth IRA contributions. See the 2026 retirement limits.

Compare charitable gifts and deductions

For 2026, eligible taxpayers who take the standard deduction may deduct up to $1,000 in cash gifts to certain qualified charities, or $2,000 on a joint return. Gifts to individuals do not qualify.

If you itemize, a new floor generally allows a charitable deduction only for contributions above 0.5% of adjusted gross income, subject to other limits. Compare the deduction available in each year before combining several years of planned gifts into one. Medical expenses generally produce an itemized deduction only for eligible unreimbursed costs above 7.5% of adjusted gross income.

Review investment sales

Capital losses can offset capital gains. If losses exceed gains, the annual deduction against other income is generally limited to $3,000, or $1,500 if married filing separately, with unused losses carried forward.

Check the wash-sale rule before selling investments at a loss. Buying substantially identical stock or securities within 30 days before or after the sale can disallow the loss. Purchases by a spouse or in an IRA can also affect the result. Investment choices should fit your plans as well as your tax estimate.

Exercising incentive stock options can also affect the alternative minimum tax, a separate federal tax calculation. Include it in the estimate before exercising options.

Plan business purchases

A needed equipment purchase may qualify for an accelerated deduction, but ordering or paying for equipment is not enough. It must be ready and available for its business use by year-end to be placed in service in 2026.

For cash-method businesses, income generally counts when received or available without restriction. Holding a check until January does not automatically move the income into next year. Consider cash flow and the timing rules before changing collections or payments.

Put the dates on the calendar

Decision	Usual timing for 2026
Change employee payroll contributions or withholding	Before the final applicable payroll. Allow time for processing.
Complete charitable gifts	December 31, 2026. Allow time for transfers to be completed.
Take a required minimum distribution (RMD)	Generally December 31, 2026. An IRA owner turning 73 in 2026 can generally wait until April 1, 2027, for the first RMD, but the next one is due December 31, 2027.
Make the final regular estimated payment	January 15, 2027, for calendar-year individuals.
Make an eligible 2026 IRA contribution	Generally April 15, 2027. A filing extension does not extend this deadline.