Year-End Tax Planning: 10 Strategies to Consider

The following article was provided by Whittlesey. It is posted here with permission. 

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Even though tax filing season is still several months away, the decisions you make before Jan. 1, 2027, could have a significant impact on your 2026 federal income tax liability. 

Changes introduced by the One Big Beautiful Bill Act give businesses and individuals new opportunities to reduce tax liabilities, maximize deductions, and prepare for the year ahead. 

Here are 10 tax planning strategies to consider before Dec. 31, 2026. 

1. Review Your Income and Deductions 

Year-end is an ideal time to evaluate your projected taxable income.

Depending on your situation, accelerating deductible expenses or deferring income into 2027 may help manage your tax liability. 

Individuals should also compare their potential itemized deductions with the 2026 standard deduction to determine which approach provides the greatest tax benefit. 

Year-end planning strategies should account for anticipated future tax rates, not just current-year savings. 

Taxpayers age 65 and older may qualify for the new senior deduction of up to $6,000 ($12,000 for eligible married couples filing jointly).

This deduction is available whether taxpayers itemize or take the standard deduction, but income-based phaseouts apply. 

Keep in mind that year-end planning strategies should account for anticipated future tax rates, not just current-year savings. 

2. Take Advantage of Business Depreciation Deductions 

The OBBBA restored 100% bonus depreciation for eligible property acquired after Jan. 19, 2025.

Businesses planning to purchase equipment, technology, or other qualifying assets should consider whether placing those assets in service before year-end makes financial sense. 

Deadline: Qualifying assets generally must be placed in service by Dec. 31, 2026, to generate a deduction for the 2026 calendar tax year. 

3. Revisit Business Tax Credits and Deductions 

Businesses should review eligibility for research and development tax incentives, the qualified business income deduction, and other available federal and state credits. 

Recent tax law changes may provide additional opportunities, particularly for businesses investing in innovation or growth. 

4. Maximize Retirement Contributions 

Making contributions to tax-advantaged retirement accounts can help reduce current taxable income while supporting long-term financial goals. 

For 2026, the employee contribution limit for most 401(k) plans is $24,500, with additional catch-up contributions available to eligible individuals. 

Deadline: Employee 401(k) contributions generally must be made by Dec. 31, while eligible IRA contributions can typically be made until April 15, 2027. 

5. Evaluate the Expanded SALT Deduction 

The federal state and local tax deduction limit increased to $40,400 for 2026 ($20,200 for married taxpayers filing separately), potentially providing additional opportunities for taxpayers who itemize, particularly those in higher-tax states such as Connecticut and Massachusetts. 

However, the deduction limit begins to phase down for taxpayers with modified adjusted gross income exceeding $505,000 ($252,500 for married taxpayers filing separately). 

Taxpayers should also consider whether accelerating eligible state or local tax payments before year-end could maximize their 2026 deduction, subject to applicable limitations. 

6. Review Investment Gains and Losses 

Tax-loss harvesting may help offset realized capital gains by selling investments that have declined in value. 

If capital losses exceed capital gains, taxpayers may generally deduct up to $3,000 of the excess against ordinary income ($1,500 for married taxpayers filing separately), with unused losses carried forward to future years. 

Before making investment decisions, consider wash-sale rules, your investment objectives, and the possible impact on future taxes. 

Deadline: Investment sales generally must occur by Dec. 31 to affect your 2026 capital gains and losses. 

7. Make Charitable Contributions Strategically 

New charitable giving rules take effect in 2026.

Eligible taxpayers who do not itemize may deduct up to $1,000 in qualifying cash donations or $2,000 for married couples filing jointly. 

Taxpayers who itemize face a new limitation, with charitable deductions generally allowed only for contributions exceeding 0.5% of adjusted gross income. 

These and other changes make strategic charitable giving worth considering.

These and other changes make strategic charitable giving, including combining contributions into a single tax year, worth considering.

Taxpayers should evaluate how the new rules affect their deductions and ensure contributions are properly documented. 

Deadline: Contributions generally must be completed by Dec. 31, 2026, to qualify for the 2026 tax year. 

8. Consider Estate and Gift Tax Planning 

The federal estate and lifetime gift tax exclusion amount is $15 million per individual for 2026.

Additionally, the annual federal gift tax exclusion is $19,000 per recipient, allowing individuals to make gifts up to this amount without using any portion of their lifetime gift tax exemption.

Gifts intended to use the 2026 annual gift tax exclusion generally must be completed by Dec. 31, 2026. 

Married couples can generally combine their annual exclusions to gift up to $38,000 per recipient. 

Individuals and families should review their estate plans and consider whether annual gifting strategies align with their wealth-transfer goals. 

Deadline: Gifts intended to use the 2026 annual gift tax exclusion generally must be completed by Dec. 31, 2026. 

9. Don’t Overlook State Tax Planning 

Federal tax changes do not always apply at the state level.

Businesses and individuals in Connecticut, Massachusetts, and other states should review how recent legislation affects deductions, filing requirements, and tax exposure. 

For businesses, this is also an opportunity to evaluate multistate tax obligations and available pass-through entity tax elections. 

10. Schedule a Year-End Tax Planning Review 

Tax planning is most effective when decisions are made before year-end, not during tax filing season. 

A forward-looking review can help identify overlooked deductions, evaluate new tax law provisions, and ensure your strategy supports immediate and long-term financial goals. 

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About the author: Brenden Healy is partner-in-charge of tax services in Whittlesey’s Hartford office. He has more than 25 years of experience in public accounting. Healy’s practice specializes in providing tax consulting services to businesses and individuals, with a focus on manufacturing and distribution, wholesale and retail, real estate, healthcare, and nonprofit organizations.