Why 2026 Tax Planning Still Matters
The rate-sunset drama is behind us: the One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, made the core individual provisions of the 2017 Tax Cuts and Jobs Act permanent, so there’s no “lock in this year’s rate before it’s gone” urgency driving 2026 decisions. That doesn’t mean there’s nothing to do. Several OBBBA provisions are temporary in their own right (the enhanced SALT cap phases out after 2029, the senior deduction runs only through 2028), and the ordinary mechanics of retirement contributions, tax-loss harvesting, and charitable timing are worth acting on in any year.
Here are the most impactful strategies to consider before year-end 2026.
Maximize Retirement Contributions
401(k) and 403(b)
The 2026 employee contribution limit is $24,500 ($32,500 if age 50+), up from $23,500 / $31,000 in 2025. If you haven’t maximized your contributions, increasing your paycheck deferrals now can meaningfully reduce your taxable income.
Super Catch-Up Contributions: Under SECURE 2.0, individuals ages 60–63 can make a “super catch-up” contribution of $11,250 (total $35,750 in 2026) to employer plans — this figure is unchanged from 2025.
SEP-IRA (Self-Employed)
For self-employed individuals, the SEP-IRA limit is 25% of compensation, up to $72,000 for 2026 (up from $70,000 in 2025). For a sole proprietor or single-member LLC, “compensation” is net profit minus the deductible half of your self-employment tax and minus the contribution itself, which works out to an effective 20% of net profit after the half-SE-tax deduction (see the self-employed rate table in IRS Publication 560). On $100,000 of net profit, that’s about $18,600, not $25,000, and it takes roughly $376,000 of net profit to reach the $72,000 cap. Contributions can be made up to your tax filing deadline (including extensions).
Solo 401(k)
If you’re self-employed with no employees, a Solo 401(k) allows both employee deferrals ($24,500) and employer contributions (up to 25% of compensation, which for a sole proprietor is effectively 20% of net profit after the half-SE-tax deduction), for a potential combined contribution of up to $72,000 ($80,000 if you’re 50 or older, $83,250 at ages 60–63).
Roth Conversion Strategy
If 2026 is a lower-income year for you — perhaps due to a job transition, business startup losses, or retirement — consider converting traditional IRA funds to a Roth IRA.
Why it matters: With OBBBA locking in current rates permanently, the urgency isn’t “convert before rates jump” — it’s simpler than that: converting during a genuinely low-income year still lets you pay tax on the conversion at your current, temporarily-lower marginal rate rather than waiting until your income (and bracket) recovers.
Key considerations:
- The converted amount is added to your taxable income — model the impact carefully
- Avoid pushing income into a higher bracket or triggering Medicare IRMAA surcharges
- There’s no income limit for Roth conversions (unlike direct Roth IRA contributions)
Harvest Tax Losses
If you have investment accounts with unrealized losses, December is the time to harvest them. Tax-loss harvesting lets you:
- Offset capital gains dollar-for-dollar
- Deduct up to $3,000 of net losses against ordinary income per year
- Carry forward excess losses to future years
Watch for the wash-sale rule: You cannot repurchase substantially identical securities within 30 days before or after selling at a loss. You can immediately reinvest in similar (but not identical) funds to maintain your market exposure.
Qualified Business Income (QBI) Deduction — Now Permanent
The Section 199A QBI deduction allows eligible self-employed individuals and pass-through business owners to deduct up to 20% of qualified business income.
OBBBA made this deduction permanent starting in 2026, removing the sunset that had previously been scheduled for the end of 2025. It’s no longer a “use it or lose it” planning item, but the income-based phase-out still applies every year:
- 2026 phase-out begins at $201,750 (single) / $403,500 (married filing jointly), up from $197,300 / $394,600 in 2025, and OBBBA widened the phase-in range to $75,000 / $150,000 (from $50,000 / $100,000) (Rev. Proc. 2025-32)
- Strategic timing of income and deductions can still keep S-corp owners inside the full deduction window at the margin
SALT Deduction Strategy
OBBBA raised the SALT deduction cap from the old TCJA figure of $10,000 to $40,400 for 2026 (up from $40,000 in 2025) — a temporary increase that phases down for taxpayers with MAGI over $505,000 ($500,000 in 2025) and is scheduled to revert to $10,000 after 2029. For most households in high-tax states like Virginia, Maryland, and DC, this alone restores a meaningful federal deduction that TCJA had eliminated.
Pass-Through Entity (PTE) Tax Elections
For business owners still bumping into the cap — especially those with MAGI above the $505,000 phase-out threshold — many states have enacted workarounds allowing pass-through businesses (S-Corps, partnerships) to pay state tax at the entity level, bypassing the individual SALT cap entirely. Virginia, Maryland, and DC all have PTE elections.
If your pass-through income pushes past what the raised SALT cap covers, this election can restore thousands of dollars in federal deductions that the cap would otherwise block.
Accelerate Deductions, Defer Income
A classic year-end strategy is to accelerate deductible expenses into the current year while deferring income to the next:
Deductions to accelerate:
- Charitable contributions (including QCDs from IRAs if 70½+)
- Property tax prepayments (if local assessor allows)
- Business expenses and equipment purchases
- Professional fees and subscriptions
Income to defer (if possible):
- Year-end bonuses (negotiate to receive in January)
- Self-employment invoice timing
- Installment sale structuring
Year-End Charitable Giving Strategies
Qualified Charitable Distributions (QCDs)
If you’re 70½ or older and have a traditional IRA, you can donate directly to charity from your IRA — up to $111,000 in 2026 (up from $108,000 in 2025) — through a QCD. This:
- Satisfies your Required Minimum Distribution (if applicable)
- Excludes the amount from your adjusted gross income entirely
- Provides a tax benefit even if you take the standard deduction
Donor-Advised Funds
If you’re planning a large charitable gift, consider bunching multiple years’ worth of contributions into a donor-advised fund in a single year. This can push you over the standard deduction threshold, allowing you to itemize — while spreading your actual donations to charities over multiple years.
Review Your Withholding and Estimated Taxes
Before year-end, check whether you’ll owe a penalty for underpayment of estimated taxes. The IRS safe harbor requires you to pay either:
- 100% of last year’s tax liability (110% if AGI exceeded $150,000), OR
- 90% of your current year’s tax liability
If you’re short, making an additional estimated payment by January 15, 2027 (for Q4 2026) can reduce or eliminate the penalty.
2026 vs. 2025, at a Glance
Every figure below moved by ordinary inflation indexing or a scheduled OBBBA adjustment — nothing reverted, and no rate sunset occurred:
| Item | 2026 | 2025 |
|---|---|---|
| Top marginal rate | 37% (unchanged, permanent) | 37% |
| Standard deduction (single) | $16,100 | $15,750 |
| Standard deduction (married filing jointly) | $32,200 | $31,500 |
| Child Tax Credit | $2,200/child (unchanged) | $2,200/child |
| 401(k) employee deferral | $24,500 | $23,500 |
| SALT deduction cap | $40,400 | $40,000 |
| Social Security wage base | $184,500 | $176,100 |
Compare your own numbers year-over-year with our tax impact calculator.
Frequently Asked Questions
Do I need to do all 8 of these strategies?
No — these are options to evaluate against your own situation, not a checklist everyone should complete. A W-2 employee with no side business has little use for the QBI or PTE-election sections, while a business owner in a no-income-tax state may not need the SALT strategy at all. Work through the ones that match your income sources and state.
What’s the single highest-impact move for most people?
For anyone not already maxing out retirement contributions, that’s usually the highest-leverage move — it reduces taxable income dollar-for-dollar, unlike strategies that depend on timing or state-specific elections. After that, whether SALT, QBI, or charitable strategies matter most depends heavily on your state and income type.
Can I still make moves for a prior tax year after December 31?
Some, but not most. IRA and HSA contributions can be made up until the tax filing deadline (typically mid-April) for the prior year, and so can SEP contributions and a Solo 401(k)‘s employer contribution (up to the filing deadline, including extensions). But 401(k) employee deferrals have to be elected by December 31, and Roth conversions and tax-loss harvesting must happen within the calendar year itself. Mark your calendar for December, not April, for everything else.
Does the QBI deduction being “permanent” mean it can never change?
“Permanent” in tax law means no scheduled sunset date, not that Congress can never amend it. A future law could still modify or repeal it, but the key practical difference from before OBBBA is that there’s no longer a specific expiration date requiring proactive planning around a countdown.
How is this different from working with a tax preparer at filing time?
Filing-time preparation reports what already happened; the strategies here are things you have to act on before the tax year ends to change the outcome. A tax advisory relationship focused on planning, not just annual filing, is what catches these opportunities while there’s still time to use them.
Get Personalized Guidance
Tax planning is highly individual. The strategies above may or may not apply to your situation, and some can interact in complex ways. A customized analysis of your 2026 numbers can identify which moves are worth pursuing — and which to avoid.
Schedule a year-end tax planning consultation with Worth Shield Financial Services before December to ensure you have time to act.
This post is for educational purposes and does not constitute tax advice for your specific situation. Tax laws are subject to change.