The last few weeks of the year go fast, between the holidays, closing out the books, and everything else on the calendar. But they're also some of the most valuable weeks for tax planning. Once December 31 passes, many of the decisions that shape your 2026 tax return are locked in. A little attention now can mean real savings in April, whether you're planning for your household, your business, or both.
For Individuals
Start with your filing status and tax bracket. There are seven federal tax brackets: 10%, 12%, 22%, 24%, 32%, 35% and 37%. The income range for each one depends on your filing status, so it's worth confirming you're using the status that's most advantageous for you:
- Single
- Married Filing Jointly
- Married Filing Separately
- Head of Household
- Qualifying Surviving Spouse
Once you know your status, look at your income for the year and figure out which bracket you're likely to land in. (The IRS publishes the income ranges for each bracket every year.) Almost every strategy below comes back to that number.
Make the most of your FSA and HSA. If you have a Flexible Spending Account, spend down the balance before the deadline so you don't forfeit those dollars. Check whether your plan offers a grace period or carryover. If you're eligible for a Health Savings Account and can benefit from it later, fund it. HSA dollars go in tax-advantaged and can grow for future medical costs.
Recognize income when your bracket is low. If you're in a lower bracket this year, it can make sense to pay tax now at that lower rate. Roth contributions, or Roth and backdoor Roth conversions up to the ceiling of your current bracket, let you pay tax today and lock in tax-free growth going forward.
If you're retired, you have more control over when income shows up. Adjusting your retirement distributions can help you avoid moving into a higher bracket.
Pay deductible expenses when your bracket is high. In a higher-income year, deductions are worth more. A few ways to make the most of them:
- Bunch charitable giving. Grouping several years of donations into one year can push you over the standard deduction and make itemizing worthwhile. Keep proper documentation for every gift.
- Prepay medical expenses. If you itemize, medical expenses above 7.5% of your adjusted gross income (AGI) are deductible, so timing larger expenses into one year can help you clear that threshold.
Review your capital gains and losses. How long you've held an investment matters. Short-term gains and losses (on securities held one year or less) are taxed at ordinary income rates. Long-term gains and losses are taxed at the lower 0%, 15% or 20% rates. Before year-end, look at what you've realized so far and whether any gains or losses could be timed more strategically.
Avoid penalties and interest. If you expect to owe $1,000 or more when you file, you're generally required to make quarterly estimated tax payments. To avoid an underpayment penalty, your payments should equal the lesser of:
- 90% of your current-year tax, or
- 100% of your prior-year tax (110% if your prior-year AGI was over $150,000)
There's still time to make a fourth-quarter payment or increase your withholding before the year ends.
Consider gifting. For 2026, you can give up to $19,000 per person ($38,000 for married couples giving together) without touching your lifetime gift and estate tax exemption (IRS gift tax FAQs). Gifts within that annual exclusion are tax-free for both the giver and the recipient. (For how gifting fits into a Washington estate plan, see our recent post on Washington State estate planning.)
What's New for 2026
A few important figures and changes to have on your radar. For full details, see the IRS's 2026 inflation adjustments and its overview of the new individual provisions.
- Standard deduction: $16,100 for Single and Married Filing Separately; $32,200 for Married Filing Jointly and Qualifying Surviving Spouse; $24,150 for Head of Household.
- Child Tax Credit: $2,200 per qualifying child.
- New charitable deduction for non-itemizers: Starting in 2026, you can deduct up to $1,000 in cash charitable contributions ($2,000 for married couples filing jointly) even if you take the standard deduction.
- Tips and overtime (continuing through 2028): Qualified tips are deductible up to $25,000. Qualified overtime pay is deductible up to $12,500 ($25,000 for joint filers). Both begin to phase out at $150,000 of modified AGI ($300,000 for joint filers).
- Car loan interest (continuing): Interest on loans taken out after December 31, 2024 for new, U.S.-assembled personal vehicles under 14,000 pounds is deductible up to $10,000. The deduction phases out between $100,000 and $150,000 of modified AGI ($200,000 to $250,000 for joint filers).
For Businesses
Project your 2026 income and tax. Estimate where your business will land this year so you can decide whether to accelerate or defer income and deductions. If your business is a pass-through entity, remember that its results flow to your personal return, so plan for both together.
Time your income and deductions.
- If you expect to be in a lower bracket next year, consider deferring income where possible (for example, by timing asset sales) and accelerating deductions, such as repairs, into the current year.
- If you expect to be in a higher bracket next year, do the reverse: accelerate income into this year and push deductions, like repairs, into future years.
Plan your year-end bonuses. Cash-basis businesses need to pay bonuses before December 31 to deduct them this year. Accrual-basis businesses can claim the deduction in the current year if bonuses are properly accrued by year-end and paid within two and a half months.
Review your fixed assets. Do you need more equipment? Current equipment purchases are eligible for 100% bonus depreciation, so the full cost can be deducted against revenue in the year you acquire it. Think about the best timing for both acquisitions and sales.
Take stock of carryforwards and credits. Check which net operating losses and tax credits are carrying into 2026, and whether your business qualifies for any general business credits.
Review your state filing requirements. Business that crosses state lines can create filing obligations in other states. Ask yourself:
- Do you have sales activity in other states beyond sales of tangible goods shipped through interstate commerce?
- How many states do you have physical locations or employees in?
Every Situation Is Different
Business tax planning in particular covers a lot of ground, because the tax code applies differently to different industries. The best results come from a plan built around your specific situation.
If you'd like help reviewing your year-end options, our team is happy to sit down with you before the year wraps up. Contact us to schedule a time.