Tax Planning Moves to Make Before Year-End

There’s still time to take meaningful tax-planning steps that could reduce your 2026 federal income tax liability. With new and recently implemented provisions under the One Big Beautiful Bill Act (OBBBA), year-end planning is especially important for both businesses and individual taxpayers. Here are several strategies to consider before 2027 begins.

Business Tax Planning

1. Invest in capital assets

If you acquire and place in service eligible new or used assets in 2026, you can benefit from the 100% first-year bonus depreciation deduction. Eligible assets include new and used machinery, equipment, certain vehicles, off-the-shelf computer software and qualified improvement property (QIP).

Businesses may also be able to immediately deduct qualifying asset purchases through a Section 179 expensing election. For 2026, you can deduct up to $2.56 million of the cost of purchasing eligible new or used assets, such as equipment, furniture, off-the-shelf computer software and QIP. The deduction begins to phase out dollar-for-dollar when qualifying purchases exceed $4.09 million. 

Consider factors such as cash flow, revenue projections, financing terms and the impact on other tax breaks before buying a pricey capital asset. The related deduction may prove more valuable later.

2. Take advantage of the deduction for QPP

If you’re a manufacturer and you have new construction nearing completion, finishing it before the new year could provide a 2026 deduction. Your business may qualify for a temporary depreciation deduction for the construction of qualified production property (QPP) placed in service after July 4, 2025, and before Jan. 1, 2031. This break lets eligible businesses claim a deduction equal to 100% of the QPP’s adjusted basis in the tax year it’s placed in service. Unlike bonus depreciation, the QPP deduction requires an election. 

Among other requirements, QPP generally must be nonresidential real property located in the United States and used as an integral part of a “qualified production activity,” such as manufacturing, production or refining. Additional requirements apply, including restrictions on construction dates and property use.

3. Consider research expenses

The Sec. 174 deduction for research and experimental (R&E) expenses and the Sec. 41 research and development (R&D) credit may apply more broadly than many businesses realize. If your company develops or improves products, processes, software or techniques, it could pay off to investigate whether you’ve incurred qualified expenses. 

You can deduct such domestic expenses in the tax year they’re incurred or paid — regardless of whether the associated project has been completed — or amortize them over at least five years (15 for qualified foreign expenses).

4. Maximize your QBI deduction

The Sec. 199A qualified business income (QBI) deduction allows owners of sole proprietorships and pass-through entities (including partnerships, S corporations and most limited liability companies) to deduct up to 20% of their QBI. 

The amount of the allowable 199A deduction is subject to wage and investment limitations at higher income levels, so project your taxable income now to determine whether they might apply. The OBBBA expanded the phase-in ranges for those limits beginning in 2026, meaning some taxpayers will qualify for larger deductions. 

Another limit that’s phased in based on the income threshold is the 199A deduction being unavailable for income from a “specified service trade or business.” Examples include businesses involving investment-type services and most professional practices (other than engineering and architecture).

If your projections suggest you’re close to the lower end of the phase-in range, consider measures to reduce your taxable income. You can, for example, maximize retirement plan contributions. Cash-basis businesses can defer income into 2027 and accelerate expenses into 2026. 

5. Assess the impact of the “excess” business loss limitation

Noncorporate taxpayers generally can use business losses to offset income from other sources, such as salary, self-employment income, interest, dividends and capital gains, but only up to an inflation-adjusted limit. Losses exceeding this limit generally can’t be deducted in the current year. Instead, they’re treated as net operating loss (NOL) carryforwards to subsequent tax years, generally subject to the 80% taxable income limitation on NOL deductions.

The OBBBA made this “excess” business loss limitation permanent. For 2026, the limit drops to $256,000, or $512,000 for joint filers, down from $313,000 and $626,000, respectively, for 2025. 

If your projected 2026 business losses are approaching or exceeding the limit, consider whether accelerating business income or deferring certain deductions could help maximize your current-year tax benefits. 

Personal Tax Planning

1. Evaluate whether to itemize deductions

Taxpayers can choose to itemize certain deductions on Schedule A or take the standard deduction based on their filing status instead.

For 2026, the standard deduction is: 

• $16,100 for single filers (and married couples filing separately).
• $24,150 for heads of household. 
• $32,200 for married couples filing jointly. 

Taxpayers age 65 and older or blind can claim an additional standard deduction of $2,050 ($1,650 per spouse if married). 

High earners should note the OBBBA’s new limit on itemized deductions kicks in for the 2026 tax year. The limit effectively caps itemized deductions for taxpayers in the highest tax bracket (37%) at 35 cents per dollar (down from 37 cents per dollar).

2. Take advantage of the senior deduction

Through the 2028 tax year, taxpayers age 65 or older by the end of the tax year may qualify for an additional $6,000 “senior” deduction ($12,000 for joint filers if both spouses qualify). 

The new deduction begins to phase out when modified adjusted gross income (MAGI) exceeds $75,000 for single filers or $150,000 for joint filers. The deduction is reduced by 6% of MAGI exceeding these thresholds. 

If your MAGI might exceed the applicable phaseout threshold, you may be able to take steps before year end to reduce it and maximize your senior deduction. If you’re still working, increasing your retirement plan contributions for 2026 can reduce your MAGI. 

3. Review your charitable giving strategy

Before the OBBBA, taxpayers who didn’t itemize generally couldn’t deduct their charitable contributions. Beginning in 2026, however, nonitemizers can deduct up to $1,000 in qualifying cash donations ($2,000 for joint filers). Donations to donor-advised funds and most private foundations, as well as noncash contributions, aren’t eligible. 

If you might be eligible for this new deduction, be sure to properly substantiate your cash donations.

The OBBBA also introduced a new limitation on charitable deductions for taxpayers who itemize. Beginning in 2026, only contributions exceeding 0.5% of adjusted gross income (AGI) are deductible. For example, if your 2026 AGI is $100,000, you can’t deduct the first $500 of your charitable contributions. 

These changes make the strategy of “bunching” charitable contributions into a single tax year worth considering. Traditionally, taxpayers have used this approach to accumulate enough itemized deductions to exceed the standard deduction in alternating years. Now, concentrating donations in one year may also help reduce the impact of the new 0.5%-of-AGI floor. 

4. Maximize SALT deductions 

The OBBBA temporarily increased the limit on state and local tax (SALT) deductions through the 2029 tax year. For 2026, taxpayers who itemize can deduct up to $40,400 ($20,200 for married couples filing separately). Deductible expenses include:

• State and local real estate taxes. 
• Qualifying personal property taxes. 
• Either state and local income taxes or general sales taxes, but not both. 

For 2026, the deduction cap is reduced by 30% of MAGI exceeding $505,000 ($252,500 for separate filers), but it can’t fall below $10,000 ($5,000 for separate filers). 

If your 2026 SALT expenses are below the applicable cap, consider whether accelerating certain tax payments into 2026 could increase your deduction. For example, you may benefit from paying property taxes before year end, provided they’ve already been assessed, or making eligible state estimated income tax payments. 

5. Harvest investment losses

If you have underperforming investments in your taxable portfolio, consider selling them before year end to harvest capital losses that can offset taxable capital gains you’ve already recognized.

If your capital losses exceed your gains, you generally can deduct up to $3,000 of the excess against ordinary income ($1,500 for separate filers), with unused losses carried forward to future tax years. 

Be mindful of the wash-sale rule, which generally disallows a loss deduction if you purchase substantially identical securities within 30 days before or after the sale. The rule can also apply to purchases made by your spouse or through an IRA.

Now’s the Time to Plan

Changes under the OBBBA, combined with longstanding tax-saving tactics, create both opportunities and challenges to navigate before year-end. Turn to our tax pros to evaluate your options and make the most of tax-saving opportunities before year-end.