Year-End Tax Planning 2026: Checklist of Strategies by Dec 31

Year-end tax planning comes down to finding the strategies that lower each client’s 2026 tax bill and getting them done in time. Most of those strategies have to be in place by December 31. Equipment has to be placed in service and losing investments sold before the year closes.

So the real question in November is which of your clients need which strategy, and whether you can reach all of them in time. This guide covers the 2026 strategies tied to the December 31 deadline, across every major entity type plus Rental Real Estate (Schedule E) and Farms (Schedule F), and how to run year-end planning for every client in Instead. Many of the 2026 changes come from the One Big Beautiful Bill Act (OBBBA).

Short answer: Year-end tax planning for 2026 means timing each client’s income, deductions, and payments into the right tax year, and most strategies close December 31.

2026 year-end tax planning deadlines

For most 2026 planning strategies, the deadline is December 31. A few payment and election dates fall close to it.

Year-end tax strategies by entity type

Which strategies apply depends on the return each client files. Each section below covers one entity type and what has to happen by December 31 or one of the dates around it.

Individuals (1040)

Individual clients have December 31 strategies across investments, gifts, retirement accounts, and state taxes.

• Harvesting losses: A sale counts in the year of its trade date, so a sale on December 31 is a 2026 loss even if it settles in January (IRS Publication 550). Watch the wash sale rule. Buying substantially identical stock within 30 days before or after the sale means you can’t deduct the loss.
• Opportunity zone deferred gain: Deferred gain from an original qualified opportunity fund investment is recognized December 31, 2026; plan the cash and include it in the January 15 estimate.
• Charitable giving: From 2026, clients who don’t itemize can deduct up to $1,000 of cash gifts to eligible charities ($2,000 married filing jointly). Gifts to donor-advised funds don’t count. Itemizers can now deduct only the part above 0.5% of their contribution base, and qualified charitable distributions (QCDs) from an IRA skip that floor, so they’re worth more. A gift counts when it’s made: a mailed check on its mailing date, a card gift on its charge date (IRS Publication 526). Our post on the new charitable deduction for non-itemizers has more.
• QCDs: A QCD counts for 2026 only if it’s complete by December 31.
• Required minimum distributions: Clients 73 and older have to take each year’s RMD by December 31. The one exception is the first RMD, which can wait until April 1 of the following year (IRS Publication 590-B).
• Inherited IRA RMDs: 10-year-rule beneficiaries take the annual RMD by December 31 when the original owner died on or after their required beginning date (penalty waivers ended after 2024).
• Retirement deferrals: 401(k) employee deferrals come out of pay, so 2026 deferrals have to come from 2026 paychecks. The 2026 limit is $24,500 before catch-up contributions (Notice 2025-67). Catch-ups add $8,000 at age 50 or older, or $11,250 at ages 60 through 63. IRA contributions can wait. The FAQ below covers them.
• Roth catch-up for high earners: Catch-ups must be Roth for employees with 2025 FICA wages over $150,000; set before the last 2026 payroll, and note they can’t be made if the plan has no Roth option.
• Roth conversions: A conversion counts in the year it’s made, so convert by December 31 to fill the client’s lower 2026 brackets.
• ACA premium tax credit: For 2026, there is no cap on repaying excess advance premium tax credits, so a December Roth conversion or capital gain can trigger full repayment for marketplace enrollees. Check projected income before year-end.
• ISO exercises and AMT: A disqualifying sale of incentive stock option (ISO) shares in the same year undoes the alternative minimum tax (AMT) effect; the AMT phase-out threshold returns to $1,000,000 for married filing jointly, not indexed before 2027.
• SALT planning: The 2026 cap on the state and local tax (SALT) deduction is $40,400, and it phases down for modified adjusted gross income above $505,000. For married filing separately, the cap is $20,200 and the phase-down starts at $252,500. The phase-down can’t take the cap below $10,000 ($5,000 for married filing separately). Taxes paid by December 31 count toward the 2026 cap. Prepaid 2027 property tax counts only if it’s assessed in 2026, and a prepaid state income tax payment has to be a reasonable estimate.
• Year-end withholding true-up: W-2 withholding counts as paid evenly through the year, so a December bump fixes earlier underpayments in a way a January 15 estimate can’t.
• Annual-exclusion gifts: Each client can give up to $19,000 per recipient without making a taxable gift, if the gift is complete by December 31.
• Gift-by-check timing: A gift check to a person is complete only when the recipient cashes or deposits it (the mailed-date rule applies only to charitable gifts), so the recipient has to cash or deposit it by December 31.
• State 529 deduction: Many states require the contribution by year-end for the state deduction.
• Trump Accounts: Children born 2025 through 2028 who are U.S. citizens can claim a $1,000 federal seed deposit, and any child with a Social Security number who is under 18 at the end of the year can have an account. Contributions began July 4, 2026, with a $5,000 annual limit for 2026 (including up to $2,500 from an employer, excluded from the employee’s income), so fund the 2026 amount by December 31. Our guide to opening a Trump Account has the steps.
• Dependent-care FSA for 2027: Elect up to the $7,500 limit during open enrollment, if the employer’s plan allows it.

In Instead, run Build an Individual Tax Estimate (TY2026) to work out each client’s 2026 estimated tax and quarterly payments.

Sole Proprietors (Schedule C)

Sole Proprietor clients have December 31 strategies on Schedule C, plus one entity decision with a March 15 deadline.

• Equipment placed in service: Section 179 and bonus depreciation both deduct equipment in the year it’s placed in service, meaning ready and available for use, even before its first job. The 2026 Section 179 limit is $2,560,000, dropping dollar for dollar above $4,090,000 of property placed in service, with heavy SUVs capped at $32,000 (Rev. Proc. 2025-32). Bonus depreciation is 100% for property acquired and placed in service after January 19, 2025; equipment not ready until January is deductible in 2027. Our guide to the 2026 Section 179 expensing limits has the numbers, and how MACRS depreciation works covers anything not expensed.
• Cash-method timing: A cash-method business can hold December billing so the payments arrive in 2027. It can also prepay some 2027 expenses by December 31 and deduct them in 2026 under the 12-month rule.
• Excess business loss check: Heavy expensing can push a loss over $256,000 ($512,000 married filing jointly); the excess becomes a net operating loss. Check before year-end purchases.
• Obsolete inventory and bad debts: Dispose of or mark down inventory within the year. An accrual-method business can also charge off specific bad debts by December 31.
• Solo 401(k) or SEP: A sole proprietor with no employees who sets up a new solo 401(k) can make first-year employee deferrals up to the return’s due date without extensions (SECURE 2.0). A SEP can be set up and funded until the due date including extensions.
• Hiring your children and the home office: Both deductions need current-year records. Before the year closes, collect each child’s hours and pay and the home office’s space and costs.
• Pay children’s wages: A cash-method business deducts wages only when paid, so pay by December 31.
• QBI modeling: The 2026 thresholds for the qualified business income (QBI) deduction are $201,750 of taxable income for single filers and $403,500 for married couples filing jointly. Above them, the wage and service-business limits phase in, so model where the client lands before December 31.
• 1099 reporting: The Form 1099-NEC and 1099-MISC threshold is now $2,000 for payments made in 2026, so collect W-9s from contractors before year-end. The Form 1099-K threshold is back to $20,000 and 200 transactions.
• Schedule C to S Corporation analysis: For an S election that takes effect January 1, 2027, Form 2553 is due by March 15, 2027.

In Instead, Schedule C to S Corp Conversion Analysis works through that decision for each Sole Proprietor client; filing Form 2553 stays with your firm.

S Corporations (1120-S)

For S Corporation owners, the year-end strategies depend on how money leaves the business and when new equipment is ready to use.

• Owner pay through payroll: The IRS requires an S Corporation to pay a shareholder who works in the business reasonable compensation before it makes non-wage distributions. If an owner has taken distributions all year and little salary, December’s payroll is the last one paid in 2026.
• Shareholder health and HSA: Health insurance premiums and HSA contributions the S Corporation pays for a shareholder who owns more than 2% go into that shareholder’s W-2 wages. Add them before the final 2026 payroll.
• Pay accrued amounts to shareholders: Under Section 267(e), every S Corporation shareholder is a related party at any ownership level, so accrued bonuses, rent, and interest are deductible only when paid.
• Pass-through entity tax (PTET): Check each state’s PTET election and payment deadlines. Payment is often due by December 31 to qualify for the 2026 federal deduction. The entity deducts it, so it stays outside the owners’ SALT cap.
• Re-model PTET value: PTET adds the most value when the owner’s personal SALT already fills the cap or modified adjusted gross income (MAGI) is in the $505,000 phase-down range. It lowers adjusted gross income (AGI), which can keep MAGI below $505,000, and it also lowers QBI. Model both effects before paying.
• Basis check (Form 7203): Check each shareholder’s stock and debt basis before the S Corporation passes through 2026 losses or makes distributions.
• Restore basis: Basis is measured at year-end, so a direct shareholder loan or capital contribution in December can allow 2026 losses.
• Reduced-basis loan repayments: If losses reduced debt basis and 2026 income will not restore it, repaying in 2026 triggers gain. Time repayment for a year with enough income to restore basis first. Open-account loans produce ordinary income.
• Accountable plan: When an owner on payroll pays business costs personally, an accountable plan lets the business reimburse them so it isn’t treated as wages. Reimbursements that miss the plan’s rules go into box 1 of the owner’s W-2. Sort out which ones qualify before year-end payroll and W-2s. Our guide to accountable plan reimbursements before year-end covers the details. IRS Publication 463 sets three rules:
  • Each expense needs a business connection.
  • The owner accounts for it within a reasonable time.
  • Any excess gets paid back.
• Retirement deferrals: An owner’s 2026 401(k) deferrals have to be withheld from 2026 payroll, so set them before the final run.
• Safe-harbor 401(k) by nonelective amendment: Adopt the 3% nonelective safe harbor before December 1 (by November 30 for a calendar-year plan). Later amendments require 4%. This applies to any employer, not just an S Corporation.
• Equipment timing: The same Section 179 and bonus depreciation rules apply. Equipment has to be placed in service by December 31.
• Pro-rata distributions: Distributions have to match ownership percentages. Uneven ones can put the S election at risk.
• Augusta rule: If a client rents out a home they also live in for fewer than 15 days in the tax year, the rent isn’t taxable income (IRS Publication 527). The day count runs by tax year, so any 2026 rental days have to happen by December 31. When the renter is the owner’s own business, keep a record of each meeting and how the rent was set. It’s a separate rule from the home office deduction and its two methods. Our guide to the Augusta rule for business owners covers the setup.

In Instead, Accountable Plan Implementation and Augusta Rule Implementation set up both strategies for each S Corporation owner.

Partnerships and LLCs (1065)

For Partnerships and LLCs taxed as partnerships, the year-end strategies turn on partner basis and entity elections.

• Partner basis, at-risk, and passive limits: Check all three for each partner before allocating 2026 losses. A loss above a partner’s basis at year-end isn’t deductible that year.
• Debt allocations: A partner’s share of partnership debt counts toward basis. If a partner needs more, restructure guarantees before December 31.
• Capital contributions for basis: A contribution adds basis immediately, so it can cover a 2026 loss.
• PTET election and payment: Check the same PTET deadlines for each partnership. As with an S Corporation, payment is often due by December 31.
• Guaranteed payments: Payments for services carry self-employment tax, and an LLC member’s share of income may too, so review each member’s exposure before year-end.
• Partner 401(k) deferral elections: A partner’s compensation counts as received on the last day of the partnership year, so the written deferral election must be in place by December 31.
• Section 754 election: If an interest changed hands or the partnership made distributions in 2026, a Section 754 election on the 2026 return lets it adjust the basis of partnership property.
• Depreciation timing: Choose between bonus depreciation and Section 179 for equipment placed in service by December 31. The Section 179 limit applies at the partnership level and again for each partner.
• Section 163(j) interest limit: The business interest limit is again based on earnings before interest, taxes, depreciation, and amortization (EBITDA). From 2026, it also applies before any interest is capitalized.

C Corporations (1120)

A C Corporation pays its own tax, so its year-end strategies time the corporation’s deductions and its December 15 payment.

• Charitable gifts: From 2026, a C Corporation can deduct gifts only to the extent they exceed 1% of taxable income, up to the 10% cap. A cash-method corporation gives by December 31; an accrual-method one can give by April 15, 2027 for a 2026 deduction if its board authorizes the gift by year-end (Section 170(a)(2)).
• Accrued bonuses: An accrual-method corporation can deduct 2026 bonuses accrued by December 31 if it pays them within 2.5 months, by March 15, 2027. Bonuses to a related party, such as an owner of more than 50%, are deductible only when paid (Section 267).
• Obsolete inventory and bad debts: Same disposal and charge-off rules as sole proprietors, by December 31.
• Q4 estimated payment: The fourth 2026 installment is due December 15, 2026. Check it against the safe harbors before it’s paid. A large corporation can use the prior-year safe harbor only for its first installment; for the fourth, look at the annualized-income method.
• Equipment timing: Section 179 and bonus depreciation apply to equipment placed in service by December 31.
• Domestic R&E and Section 280C: Domestic research and experimental (R&E) costs are deductible in the year they’re paid or incurred again. Section 280C reduces that deduction by the R&D credit unless the corporation elects a reduced credit, so plan the two together.
• S Corporation or C Corporation comparison: Compare the corporation’s 2026 tax with what it would owe as an S Corporation. An S election for 2027 is due by March 15, 2027.

In Instead, a C Corporation tax estimate workflow covers the 2026 estimate ahead of the December 15 payment.

Trusts and Estates (1041)

Trusts and Estates reach the top tax bracket quickly, so most year-end strategies focus on how much income goes out to beneficiaries.

• Distributions: A trust reaches the top 37% bracket at $16,000 of 2026 taxable income. Distributing income to beneficiaries in lower brackets shifts the tax to them.
• 65-day election (Section 663(b)): The 65th day after year-end is Saturday, March 6, 2027, so make distributions by Friday, March 5, 2027, to be safe. The election to treat them as 2026 distributions is made on the 2026 return.
• Section 643(g) election: By the 65th day after year-end, a trust can elect to assign its 2026 estimated payments to beneficiaries. Because March 6, 2027, is a Saturday, the deadline moves to the next business day, Monday, March 8, 2027. It often pairs with the 65-day distribution election.
• NIIT: A trust owes the 3.8% net investment income tax (NIIT) on undistributed investment income once its income passes the top-bracket threshold. Distributions of distributable net income (DNI) shift that income to beneficiaries.
• Harvesting losses inside the trust: The trade-date rule applies to trust accounts too, so sales have to happen by December 31.
• Section 642(c): Most trusts deduct only amounts actually paid to charity. Deductions for amounts set aside are limited to estates and certain trusts created on or before October 9, 1969.
• Estates: An estate can choose a fiscal year-end, so time its first distributions around that choice.
• Trust or estate termination: Excess deductions and loss carryovers pass to beneficiaries only in the final year, so if it’s winding up, decide whether to close in 2026 or 2027.
• IRA RMDs payable to trusts: Conduit and accumulation trusts that are IRA beneficiaries must take the year’s RMD by December 31.

Tax-Exempt (990)

Tax-Exempt clients have their own year-end list: unrelated business income, the December 15 estimated tax payment, two excise taxes, payouts, and donor paperwork.

• UBTI: Unrelated business taxable income (UBTI) is figured separately for each unrelated trade or business under Section 512(a)(6), so a loss in one can’t offset income from another.
• Q4 estimated tax: On Form 990-T (unrelated business income tax) and Form 990-PF (investment income excise tax), due December 15, 2026.
• Executive compensation excise tax: From 2026, the tax on pay over $1 million applies to every employee, not just the five highest-paid.
• Endowment excise tax: From 2026, it applies to schools with 3,000 or more tuition-paying students that also meet the endowment-size test.
• Private foundations: The minimum distribution is 5% of the net value of noncharitable-use assets. Any 2025 amount still undistributed has to be paid out by December 31, 2026, so plan grants before year-end.
• Donor acknowledgments and quid pro quo disclosures: Donors need a written acknowledgment for any gift of $250 or more. When a donor gets something back for a payment over $75, the organization has to disclose it.
• Year-end donor communications: Before December 31, tell donors the new non-itemizer deduction excludes gifts to donor-advised funds and that itemizers now face the 0.5% floor.
• 1099 thresholds: The Form 1099-NEC and 1099-MISC threshold is now higher, at $2,000 for payments made in 2026.

Rental Real Estate (Schedule E)

Rental Real Estate owners have December 31 strategies tied to participation hours, depreciation timing, and passive losses.

• Material participation: The hours have to be performed by December 31. A real estate professional needs more than 750 hours, more than half of their personal service time, and material participation in the rentals. The most common test for other taxpayers is 500 hours in the activity. Keep logs as the work happens.
• Placed in service: The placed-in-service date controls bonus depreciation and cost segregation on rental property.
• Passive-loss release: Fully disposing of a passive activity by December 31 in a fully taxable sale to an unrelated party frees its suspended losses.
• 1031 exchange window: An exchange started late in 2026 ends at the earlier of 180 days or the return due date, so extend the 2026 return to keep the full window.

Farms (Schedule F)

Farm clients have a few year-end items plus a March 1 filing date.

• Prepaid farm supplies: Pay by December 31; the deduction is generally limited to 50% of other farm expenses.
• Crop insurance and livestock: Crop-insurance deferral and weather-related livestock-sale elections apply for 2026.
• Estimated tax: A farmer who skips estimates must file and pay by March 1, 2027.
• Farmland installment election: A new installment election applies to sales of farmland to qualified farmers.

Estimated tax payments and the S election: the dates around year-end

Three more dates sit close to December 31.

1. December 15, 2026: Fourth-quarter estimated tax is due for calendar-year corporations (IRS Publication 509).
2. January 15, 2027: The fourth installment of 2026 individual estimated tax is due. The required annual payment is the smaller of 90% of 2026 tax or 100% of 2025 tax. That figure rises to 110% of 2025 tax if 2025 adjusted gross income (AGI) was over $150,000, or $75,000 for married filing separately (IRS Publication 505).
3. March 15, 2027: Form 2553 is due for an S election that takes effect January 1, 2027. The election can be made no more than 2 months and 15 days after the tax year starts (Instructions for Form 2553).

Building an S Corporation owner’s year-end tax plan in Instead

A client’s year-end plan in Instead starts from planning workflows, and your team decides which strategies the client uses.

Take an S Corporation owner who is buying equipment for the business this fall and holds board meetings at home.

A year-end plan for one client, step by step:

1. Pull the year-to-date numbers: books through the latest close, payroll so far, and anything bought or ordered for the business.
2. Run the planning workflows that fit: for this owner, that’s two planning workflows in Instead. Accountable Plan Implementation produces an accountable plan package with a policy, a guide, and a tracker. Augusta Rule Implementation produces a rental agreement, a client email, a meeting log, and rent comparables.
3. Check the January 15 payment: Use Build an Individual Tax Estimate (TY2026) to check estimated payments through the fourth installment against the prior-year safe harbor, which is 100% or 110% of 2025 tax.
4. Agree on the strategies with the client: your team reads what the workflows produced and settles the plan in the planning meeting.
5. Put a date on each strategy: the day the equipment is ready, the last payroll, the gift, or the trade. December is then about doing them.

Running year-end planning across your client list

One planning workflow in Instead can run for every client you select at once.

Running one workflow across many clients:

1. Find the clients a strategy applies to: filter the clients list by entity type, such as S Corporation (1120-S) or Sole Prop (1040 Schedule C).
2. Select the ones you want: they load into a firm-level conversation with their entities in one step.
3. Attach the workflow: it runs from one launch, each in its own workspace.

That changes what December looks like. Your team works from results for the whole list, not just the clients someone had time to meet. For more on how this works, see how one workflow runs across many clients.

Adapting year-end planning to how your firm already works

Your firm’s own year-end checklist can become the workflow, so every preparer runs the same steps in the same order.

Two ways to turn your checklist into a workflow:

• Already in a document: bring it in with Upload workflow.
• Only in someone’s head: write it with Build workflow.

Either way, have a firm owner share it as a Firm workflow so the whole practice uses the same version.

Rolling it out, step by step:

1. Test it on one real client: run it there first.
2. Review the results: have a tax manager read what comes back.
3. Fix what doesn’t fit: change any step that doesn’t match your firm’s plan.
4. Add the rest over time: start with the strategies that apply to the most clients.

Questions to ask before you commit

If you’re comparing software for year-end tax planning, these five questions show whether a platform can cover your whole client list.

1. Can we run the same planning steps for every client at once, or only one client at a time?
2. Which planning strategies are built in today, and which would we have to write ourselves?
3. Can we bring in our own year-end checklist rather than adopt yours?
4. Who decides which strategies a client uses, and where does our review happen?
5. Does the planning work stay with each client’s records, so it’s there when we prepare the return?

Want to run year-end tax planning for 2026 in Instead?

The tax planning and tax estimate workflows in the Instead AI tax platform launch for every client you select, so you can run a December strategy across your whole client list at once rather than one meeting at a time. Filter by entity type, attach the workflow, and your team reviews the results and sets each client’s plan. The planning stays with each client’s records, ready when you prepare the return.

To see it on client types like yours, book a platform walkthrough.

Frequently asked questions

Q: When does the 2026 tax year end?

A: For calendar-year taxpayers, it ends December 31, 2026, the date most year-end strategies tie to. An S Corporation generally uses a calendar year too. If a business uses a fiscal year, its tax year ends on the last day of that fiscal year.

Q: What has to be done before December 31 for 2026 taxes?

A: Most 2026 planning strategies have to be in place by December 31. For business owners, that means equipment placed in service and owner wages run through payroll. For Individuals, it means investment losses, charitable gifts, and required minimum distributions.

Q: Does equipment have to be in use by December 31 to deduct it?

A: No. It has to be placed in service by December 31, which IRS Publication 946 defines as ready and available for a specific use. Equipment that’s installed and ready counts even if it hasn’t been used yet. For a calendar-year business, equipment that isn’t ready until January is deductible in 2027.

Q: Can the Augusta rule still be used in December?

A: Yes, if it’s a home the client also lives in and their total rental days for 2026 stay under 15. The count runs by tax year, so December days count toward 2026 and January days start the 2027 count. When the renter is the client’s own business, the rent should be at a fair market rate.

Q: When is the last day for 2026 charitable deductions?

A: For individual gifts, December 31, 2026. A mailed check counts on the date it’s mailed, and a credit card gift counts on the date it’s charged. From 2026 on, clients who don’t itemize can deduct up to $1,000 of cash gifts to eligible charities ($2,000 for married couples filing jointly). Gifts to donor-advised funds don’t count.

Q: What year-end planning can wait until the return is filed?

A: IRA contributions for 2026 can wait until the return’s due date without extensions. For most people, that’s April 15, 2027. SEP IRA contributions can wait until the due date including extensions. HSA contributions for 2026 can wait until April 15, 2027. A new profit-sharing or defined-benefit plan for 2026 can be adopted and funded by the return’s due date including extensions. 401(k) deferrals can’t wait, because they come out of 2026 pay. The exception is a sole proprietor with no employees who sets up a new solo 401(k): first-year employee deferrals can wait until the return’s due date without extensions.

Q: How does Instead help with year-end tax planning?

A: Instead’s planning workflows include Accountable Plan Implementation and Augusta Rule Implementation. Instead also offers tax estimate workflows for Individuals and C Corporations. A firm can select clients and launch a workflow across all of them at once, each in its own workspace. The firm’s team reviews the results and decides which strategies to use.