Year-End Tax Planning for 2026: 7 Things to Review Before December 31

December 31 is a hard cutoff for many tax decisions. After that, most of the work is reporting what already happened. A review in November or early December still gives you room to act.

This checklist covers seven areas worth reviewing whether you earn a paycheck, run a business, own rental property, or invest. Because a move that lowers your federal bill can play out differently on your Missouri return, each section notes where Missouri rules differ.

1. Know where you stand before you change anything

Before you buy, contribute, or sell for tax reasons, estimate what you’ll owe.

Gather recent pay stubs, a year-to-date profit and loss for any business, investment gains and losses, and records of estimated payments. Note big changes, such as a new job, a property sale, retirement, or a jump in business profit.

Then answer two separate questions:

Have I paid enough to avoid a penalty? Federally, you’re generally protected if withholding and on-time estimated payments cover at least 90% of this year’s tax or 100% of last year’s (110% if last year’s AGI was over $150,000).
Will I owe a large balance in April? Meeting the penalty safe harbor doesn’t mean you’ll owe nothing.

Tip: If you’re behind, extra withholding from a remaining paycheck is generally treated as if it were paid evenly through the year. That can reduce an underpayment penalty more effectively than a late estimated payment.

Missouri: Check state payments separately. Adequate federal withholding doesn’t mean you’ve paid enough to Missouri.

2. Use your retirement contributions on purpose

The 2026 limits:

401(k), 403(b), and most 457 plans: $24,500 in employee contributions
Catch-up, age 50+: an additional $8,000
Catch-up, ages 60–63: an additional $11,250, if your plan offers it
IRA: $7,500

If you want to increase 401(k) contributions, act now. Only a few paychecks remain, and payroll needs time to process a change.

Traditional pretax contributions reduce this year’s taxable income. Roth contributions don’t, but qualified withdrawals later are tax-free. The right mix depends on your bracket now versus what you expect in retirement.

New for 2026: If you earned more than $150,000 in FICA wages from your employer in 2025, your catch-up contributions generally must be made as Roth contributions. Check with your plan administrator on how your plan handles this.

Business owners: Compare SEP, SIMPLE, and solo 401(k) options based on your profit, employees, and cash flow. Some plans must be set up, or elections made, by December 31 to accept 2026 employee deferrals. Others can be established later.

Not every deadline is December 31. IRA contributions for 2026 can generally be made until the April 2027 filing deadline.

3. Review investments with Missouri’s capital gains subtraction in mind

Starting with the 2025 tax year, Missouri lets individuals subtract 100% of the capital gains reported on their federal return when calculating Missouri adjusted gross income. That covers both short- and long-term gains.

What this means at year end:

Selling appreciated investments: The capital gain is generally free of Missouri income tax. Federal tax still applies, including the 3.8% net investment income tax for higher earners.
Harvesting losses: Losses can still reduce your federal tax. But Missouri’s subtraction is based on gains after losses are netted, so losses used to offset gains generally won’t save Missouri tax.
Wash sales: If you sell securities at a loss, don’t buy the same or substantially identical securities within 30 days before or after the sale.
Real estate and business sales: Depreciation recapture and other ordinary-income portions of a sale need separate analysis.

The Missouri subtraction isn’t a deadline and isn’t a reason to sell something you’d otherwise keep. It changes the math, not your investment goals.

4. Business owners: update your books before you buy anything

Tax planning is only as good as the numbers behind it.

Reconcile your accounts and look for missing items. For contractors, Realtors, and other self-employed professionals, that often includes mileage logs, business expenses paid personally, and unpaid customer invoices.

Then decide whether any planned spending makes sense before year end. Remember that a deduction doesn’t make a purchase free. If a fully deductible $5,000 purchase reduces tax at an assumed 25% combined marginal rate, you save $1,250 and still spend $3,750.

Federal rules currently allow many equipment purchases to be deducted in full in their first year. But the deduction begins when the asset is placed in service, meaning ready and available for business use. Ordering or paying by December 31 isn’t enough.

S corporation owners: Before the final payroll runs, review:

Whether your salary is reasonable for the work you do
Whether health insurance paid for you is included in your W-2
Whether business expenses you paid personally have been reimbursed under a written accountable plan

5. Revisit charitable giving under the new 2026 rules

Three changes take effect this year:

If you don’t itemize: You can deduct up to $1,000 of cash gifts to qualifying charities ($2,000 if married filing jointly). Gifts to donor-advised funds don’t count toward this deduction.
If you itemize: Only giving above 0.5% of your AGI is deductible. With a $200,000 AGI, the first $1,000 of donations produces no deduction.
If you’re in the 37% bracket: The tax benefit of itemized deductions, including charitable gifts, is capped at 35%.

Ways to adjust:

Bunch gifts. Combining two or more years of giving into one year can help you clear the 0.5% floor and make itemizing worthwhile.
Give appreciated investments. You generally avoid the federal tax on the gain and may deduct the full value if you itemize.
Use qualified charitable distributions (QCDs). If you’re 70½ or older, giving directly from your IRA reduces taxable income without needing to itemize.

Get a written acknowledgment for any single gift of $250 or more, and allow time for stock transfers to complete. Gifts to individuals aren’t deductible.

6. Missouri families: consider a 529 contribution

Missouri allows a state income subtraction for 529 contributions of up to $8,000 per taxpayer, or $16,000 for married couples filing jointly. These are annual limits across all your contributions, not per child, and contributions to other states’ 529 plans can qualify.

This reduces income subject to Missouri tax. It isn’t a dollar-for-dollar credit, and there’s no federal deduction.

To count for 2026, the contribution must be completed in 2026, so check your plan’s processing cutoff. Nonqualified withdrawals can trigger tax and require you to repay prior Missouri tax benefits.

7. Tell your advisor about big changes now

Some of the best planning starts with a conversation about what changed this year. Flag it if you:

Sold, or plan to sell, a rental property or business
Retired, or are considering a Roth conversion
Started a business or changed how it operates
Had a major change in income, marriage, or dependents
Bought health coverage through the Marketplace
Expect a large bonus, investment gain, or unusual payment
Received tips or overtime pay, or are 65 or older (new federal deductions may apply)

These events can affect more than your bracket. They can change deductions, credits, health insurance subsidies, and future taxes. A projection shows the combined effect before you commit.

Start with a clear picture

You don’t need every tax strategy. You need the few that fit your situation, done while there’s still time.

Want a clear picture of your 2026 taxes? Contact us to schedule a year-end planning review. Bring recent pay stubs, current business financials if you have them, and a list of this year’s major changes. We’ll estimate your tax bill and walk through practical next steps before December 31.

This article provides general education, not advice for your specific situation. Tax treatment depends on your circumstances, eligibility, and applicable federal and Missouri rules.