November and December are important tax planning months.

Before December 31 arrives, individuals, self-employed professionals, investors and business owners still have an opportunity to review their projected 2026 tax position and determine whether year-end actions could improve the outcome.

At TaxPlus, our formal 2026 year-end tax planning window runs through December 18, 2026.

Why plan before year-end? Because many tax strategies depend on actions taken during the tax year. By the time you begin preparing your 2026 return in 2027, some opportunities may no longer be available.

What Should You Review Before the End of 2026?

Depending on your individual circumstances, a year-end tax planning review may include:

• Projected 2026 taxable income
• Federal and state tax withholding
• State and Local Tax deductions
• Retirement plan contributions
• Roth IRA conversions
• Capital gains and losses
• Charitable contributions
• Business expenses and equipment purchases
• Bonus depreciation
• Cost segregation for qualifying real estate
• Business entity planning
• New deductions created under recent federal tax legislation

There is no single strategy that applies to everyone. Effective tax planning begins with understanding your projected income, deductions, investments and business activity.

2026 SALT Deduction: What Changed?

The State and Local Tax, or SALT, deduction can include qualifying state and local income or sales taxes and property taxes for taxpayers who itemize deductions.

For 2026, the federal SALT deduction limit is $40,400, or $20,200 for married taxpayers filing separately.

The deduction begins to decrease when modified adjusted gross income exceeds $505,000, or $252,500 for married taxpayers filing separately. The deduction cannot be reduced below $10,000, or $5,000 for married taxpayers filing separately.

For taxpayers in states such as California with relatively high state income and property taxes, this expanded limitation can make reviewing itemized deductions especially important.

Taxpayers who expect to itemize should also maintain documentation for other potentially deductible expenses, including qualifying charitable contributions.

New Federal Deductions to Review for 2026

Recent federal tax legislation created several temporary deductions that remain relevant for 2026.

Qualified Overtime Deduction

For 2025 through 2028, qualifying taxpayers may deduct up to $12,500 of qualified overtime compensation, or up to $25,000 for married taxpayers filing jointly.

Importantly, this does not necessarily mean all overtime wages are deductible. The deduction generally applies to the portion of qualifying overtime compensation that exceeds the employee’s regular rate of pay.

The deduction begins to phase out when modified adjusted gross income exceeds $150,000 for individual taxpayers or $300,000 for joint filers.

Qualified Tips Deduction

Eligible workers in qualifying occupations may deduct up to $25,000 of qualified tips.

Eligibility requirements apply, including rules governing what constitutes a qualified tip and which occupations qualify. Income limitations can also reduce the available deduction.

Car Loan Interest Deduction

Qualifying taxpayers may deduct up to $10,000 per year of eligible passenger-vehicle loan interest for tax years 2025 through 2028.

Among other requirements, the vehicle generally must:

• Be purchased new for personal use
• Have its original use begin with the taxpayer
• Have final assembly in the United States
• Have a gross vehicle weight rating below 14,000 pounds
• Be financed with a qualifying loan secured by the vehicle

The deduction begins phasing out at modified adjusted gross income above $100,000, or $200,000 for joint filers.

These deductions are generally available whether a qualifying taxpayer itemizes or takes the standard deduction.

Enhanced Deduction for Taxpayers Age 65 and Older

Qualifying taxpayers age 65 and older may be eligible for an additional deduction of up to $6,000 per person through 2028.

For married taxpayers filing jointly, that can mean up to $12,000 if both spouses qualify.

The deduction is subject to income limitations and begins phasing out at higher modified adjusted gross income levels.

This benefit is separate from the existing additional standard deduction available to qualifying taxpayers who are age 65 or older or blind.

2026 Standard Deduction Amounts

For tax year 2026, the standard deduction is:

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

The additional standard deduction for age or blindness is $1,650 per qualifying individual, increasing to $2,050 for an unmarried taxpayer who is not a surviving spouse.

Whether you should itemize or take the standard deduction depends on your individual mix of qualifying expenses.

Retirement Contributions and Year-End Planning

Retirement planning can serve two purposes: building long-term savings and potentially reducing current taxable income.

Before year-end, consider reviewing:

• Employer-sponsored retirement plan contributions
• Retirement plans available through a business or self-employment
• Traditional IRA contribution eligibility
• SEP and other small-business retirement plan opportunities
• Whether a Roth IRA conversion is appropriate

Contribution and plan-establishment deadlines vary considerably by plan type, so don’t assume every retirement decision has a December 31 deadline.

Should You Consider a Roth IRA Conversion?

A lower-income year can sometimes create an opportunity to convert some or all of a traditional IRA to a Roth IRA at a comparatively lower tax rate.

The conversion itself generally creates taxable income, so the question isn’t simply whether to convert—it is how much to convert and at what tax cost.

TaxPlus can model a partial or full conversion to determine how it could affect your current tax liability and longer-term retirement strategy.

Review Capital Gains and Losses Before Year-End

If you hold investments in taxable, non-retirement accounts, review your realized and unrealized gains and losses before December 31.

Investors with significant capital gains may be able to use tax-loss harvesting to offset qualifying gains by selling investments at a loss.

This strategy is subject to important rules, including wash-sale restrictions. Investment and tax considerations should therefore be reviewed together before making transactions solely for tax purposes.

2026 Tax Planning for Business Owners

Year-end planning can be particularly valuable for self-employed taxpayers and business owners.

Depending on your circumstances, areas to review can include:

Equipment and Qualified Property

Federal law now generally provides 100% additional first-year depreciation for certain qualified property acquired and placed in service after January 19, 2025.

Not every business purchase automatically qualifies, and special rules apply to vehicles and other types of property. Before making a large purchase solely for a tax deduction, evaluate whether the asset makes economic sense for the business and whether it satisfies the tax requirements.

Timing Business Income and Expenses

Cash-basis businesses may have legitimate opportunities to review the timing of certain income and deductible expenses around year-end.

The applicable rules depend on factors including constructive receipt, the nature of prepaid expenses and the taxpayer’s accounting method. Timing strategies should therefore be reviewed before invoices, payments or transactions are changed.

Qualified Improvement Property

Certain improvements to the interior of qualifying nonresidential real property may be eligible for accelerated depreciation treatment.

If your business completed or is considering significant improvements, year-end is an appropriate time to review when the property will be placed in service and which depreciation rules apply.

Can Cost Segregation Accelerate Real Estate Depreciation?

Under appropriate circumstances, a cost segregation study can identify components of a building that may qualify for shorter depreciation periods rather than the standard recovery period applicable to the overall structure.

This can accelerate depreciation deductions for certain owners of income-producing property.

Cost segregation can be particularly relevant when depreciation deductions can currently be used, but the strategy has tradeoffs. Accelerating deductions today generally means fewer depreciation deductions later, and depreciation recapture may affect taxes when the property is sold.

Whether this strategy makes sense depends on the property, ownership structure, income, participation rules and anticipated holding period.

Should You Form an S Corporation Before Year-End?

An S Corporation may provide benefits for some profitable businesses, but it is not automatically the best entity choice for every freelancer or small business owner.

TaxPlus recommends that clients who want to evaluate an S-Corp for 2026 begin the process by November 30 to allow sufficient time for setup and year-end planning.

This November 30 date is a TaxPlus planning target, not a general federal S-Corporation filing deadline.

An S-Corp analysis should consider:

• Projected business profit
• Reasonable compensation requirements
• Payroll and administrative costs
• State taxes and filing requirements
• Retirement planning
• Liability and legal considerations
• Overall tax savings after additional compliance costs

Entity selection should be based on the full financial picture rather than one tax deduction.

Employing Children or Other Family Members

Hiring family members can create legitimate tax and retirement-planning opportunities when they perform real work for reasonable compensation.

However, payroll-tax treatment depends heavily on the legal structure of the business.

For example, when a child works for a parent’s sole proprietorship—or certain partnerships owned by the child’s parents—different Social Security, Medicare and unemployment-tax rules may apply based on the child’s age.

Those exceptions generally do not apply in the same way when the business is operated as a corporation.

If you are considering employing a child, spouse or parent, TaxPlus can help review the payroll and tax requirements for your particular entity structure.

Don’t Plan Around Tax Credits That Have Already Expired

Several incentives discussed during earlier tax-planning seasons are no longer available for new purchases or expenditures in 2026.

The federal New Clean Vehicle Credit and Previously-Owned Clean Vehicle Credit generally are not available for vehicles acquired after September 30, 2025.

Federal Energy Efficient Home Improvement and Residential Clean Energy credits also generally ended for qualifying property or expenditures after December 31, 2025.

That makes it especially important to use current-year information rather than relying on a prior year’s tax-planning checklist.

Start Preparing for the 2026 Tax Filing Season

Year-end tax planning is also a good opportunity to prepare for next year’s filing process.

TaxPlus recommends that clients begin organizing:

• Income statements and tax forms
• Business income and expense records
• Investment activity
• Real estate records
• Charitable contribution documentation
• Estimated tax payments
• Retirement contributions
• Major purchases and asset records

Returning TaxPlus clients may request a customized 2026 Tax Organizer containing prior-year information for reference.

Schedule Your 2026 Year-End Tax Planning Conference

Tax planning works best before the year is over.

TaxPlus will be available for formal 2026 year-end planning through December 18, 2026.

Our team can help you project your 2026 tax position, evaluate applicable strategies and prepare for the upcoming filing season.

Los Angeles
May@taxplus.com
310-398-3231

San Diego
Ashley@taxplus.com
858-279-1640

TaxPlus works with clients both in person and remotely by phone or video conference.

Schedule your year-end tax planning conference today.

This article is intended for general educational purposes and does not constitute individualized tax, legal, investment or financial advice. Tax rules and eligibility requirements vary based on individual circumstances and may change. Consult a qualified professional regarding your specific situation.

Frequently Asked Questions

When should I start 2026 year-end tax planning?

Ideally, before December 31 and early enough to implement any strategy that requires action during 2026. TaxPlus’s formal planning window runs through December 18.

What is the SALT deduction limit for 2026?

The 2026 federal SALT deduction limit is $40,400, or $20,200 for married taxpayers filing separately. Income-based reductions begin above specified MAGI thresholds.

Is November 30 a federal deadline for forming an S Corporation?

No. November 30 is TaxPlus’s recommended planning target for clients who want adequate time to evaluate and begin setting up an S-Corp before year-end. Federal and state formation and tax-election deadlines depend on the taxpayer’s circumstances.

Can I deduct all of my overtime income?

Not necessarily. The federal overtime deduction generally applies only to qualified overtime compensation above the regular rate of pay and is subject to annual limits, income phaseouts and other eligibility requirements.

Can I deduct car loan interest in 2026?

Qualifying taxpayers may deduct up to $10,000 of eligible interest on certain loans used to purchase qualifying new vehicles for personal use. Vehicle, loan, U.S. final-assembly and income requirements apply.