Daniel Flink | Oct 23 2026 00:00
Year-End Tax Planning: Getting Ready for Next Season's Tax Preparation

The best time to lower your 2026 tax bill is before December 31, not in April. Once the calendar turns, most of the moves that shape your return are locked in. What's left in spring is reporting what already happened.

 

That's why we encourage Twin Cities individuals and business owners to treat November and December as planning season. A short review now can mean a smaller bill, fewer surprises, and a much smoother appointment when tax season opens.

 

This year matters more than most. The One Big Beautiful Bill Act, signed in July 2025, changed several rules that take effect for the first time on 2026 returns, especially for charitable giving and itemized deductions. Here's what to know, what to do before year-end, and how to get organized for filing season.

 

What's New for the 2026 Tax Year

Tax rates didn't change for 2026, but nearly every threshold moved, and a few new rules kick in for the first time. These are the federal and Minnesota numbers worth knowing before you make year-end decisions.

 

For 2026, the federal standard deduction is $16,100 for single filers, $32,200 for married couples filing jointly and $24,150 for heads of household. Minnesota sets its own amounts: $15,300 single, $30,600 joint and $23,000 head of household.

 

Retirement and health account limits rose too. You can defer up to $24,500 into a 401(k), 403(b) or 457 plan, plus an $8,000 catch-up at age 50 or older ($11,250 at ages 60 to 63). The IRA limit is $7,500, plus $1,100 at 50 or older. HSA limits are $4,400 for self-only coverage and $8,750 for family coverage, with an extra $1,000 at 55 or older. The dependent care FSA limit jumps from $5,000 to $7,500.

 

For estate planning, the annual gift exclusion stays at $19,000 per recipient, and the federal estate exclusion is now $15 million per person.

 

The charitable deduction rules changed. Starting in 2026, people who take the standard deduction can deduct up to $1,000 ($2,000 married filing jointly) of cash gifts to qualifying charities. That's new, and it rewards everyday giving. If you itemize, only the portion of your gifts above 0.5% of your adjusted gross income counts. On a $200,000 AGI, the first $1,000 of giving no longer reduces your taxes.

 

The SALT cap is higher. The federal deduction for state and local taxes rose to $40,000 in 2025 and grows 1% a year through 2029, so it's roughly $40,400 for 2026. It phases down for incomes above about $500,000. For Minnesotans, who pay both a state income tax and meaningful property taxes, this alone can tip the scale toward itemizing.

 

Other new deductions continue in 2026. These include up to $6,000 for taxpayers 65 and older, deductions for qualified tips and overtime pay, and interest on loans for qualifying new vehicles. Each has income limits and its own documentation rules, so keep pay stubs and loan statements handy.

 

High earners face a new itemizing limit. If you're in the 37% bracket (over $640,600 single or $768,700 joint in 2026), the tax benefit of itemized deductions is now capped. Timing of deductions matters more for this group than it used to.

 

Year-End Moves for Individuals and Families

Most of these need to happen by December 31. A few, like IRA and HSA contributions, can wait until April 15, 2027, but it's easier to plan them now.

 

1. Max out workplace retirement contributions. Every pre-tax dollar you put into a 401(k), 403(b) or 457 lowers your federal and Minnesota taxable income. If you're behind on the $24,500 limit, ask HR to bump your contribution for your last few paychecks. If you're 60 to 63, don't miss the larger $11,250 catch-up.

 

2. Decide between itemizing and the standard deduction, separately for federal and Minnesota. Add up mortgage interest, property taxes, Minnesota income tax and charitable gifts. With the higher SALT cap, more Twin Cities homeowners may itemize federally in 2026. Minnesota lets you itemize on your state return even if you take the federal standard deduction, so run the numbers both ways.

 

3. Be strategic with charitable giving. Federally, standard-deduction filers now get up to $1,000 ($2,000 joint) for cash gifts. Itemizers lose the first 0.5% of AGI. Minnesota also changed its rules for 2026: the state charitable deduction and subtraction now apply only to gifts above 1% of AGI. Because of these floors, "bunching" two years of gifts into one year, often through a donor-advised fund, can make more sense than giving the same amount every year. Giving appreciated stock instead of cash avoids capital gains tax on the growth.

 

4. Use qualified charitable distributions if you're 70½ or older. A QCD sends money straight from your IRA to a charity. It isn't taxable income, it counts toward any required minimum distribution, and it sidesteps the new deduction floors entirely.

 

5. Take required minimum distributions on time. If you're 73 or older, or you inherited an IRA, make sure your 2026 RMD is out by December 31. Missing it triggers a penalty of up to 25% of the amount you should have withdrawn.

 

6. Harvest investment losses. Selling investments that are down can offset gains you've already realized this year, plus up to $3,000 of ordinary income. Unused losses carry forward. Watch the 30-day wash-sale rule if you plan to buy back in.

 

7. Consider a Roth conversion in a lower-income year. If 2026 income came in lower than usual (a job change, retirement, a business slowdown), converting part of a traditional IRA to a Roth could lock in today's rates. Conversions add to your Minnesota income too, so model both returns.

 

8. Use it or lose it on FSA dollars. Check your health FSA balance and your plan's carryover rules. Open enrollment is also the time to raise your dependent care FSA election to the new $7,500 limit if you pay for childcare.

 

9. Don't forget Minnesota-specific breaks. Contributions to a 529 college savings plan can earn a Minnesota subtraction or credit. Families with K-12 students may qualify for the K-12 Education Credit or subtraction for tutoring, school supplies and similar costs. Keep those receipts.

 

10. Check your withholding and estimated payments. A bonus, stock vest, home sale or side business can leave you underpaid. The final 2026 federal estimated payment is due January 15, 2027. Minnesota expects estimated payments if you'll owe $500 or more after withholding. Fixing a shortfall in December is far cheaper than paying an underpayment penalty in April.

 

Year-End Moves for Small Business Owners

For business owners, year-end planning starts with clean books. You can't make good decisions about the last six weeks of the year without knowing where the first 46 weeks landed.

 

1. Get your books current by early December. Reconcile bank and credit card accounts, categorize uncategorized transactions, and run a year-to-date profit and loss statement. That one report drives almost every decision below.

 

2. Time equipment purchases deliberately. 100% bonus depreciation is now permanent, and the Section 179 expensing limit is $2.56 million for 2026. Equipment, vehicles, computers and qualifying software placed in service by December 31 can often be written off this year. One Minnesota caution: the state does not follow federal bonus depreciation. Most of that write-off is added back on your Minnesota return and recovered over the following years. Section 179 has its own Minnesota limits too. Buy because the business needs it, not just for the deduction.

 

3. Manage income and expenses at the margin. Cash-basis businesses can often defer some December invoicing into January or prepay certain expenses before year-end. This works best when you expect a similar or higher tax rate next year. It backfires if 2027 looks stronger.

 

4. Protect your QBI deduction. The 20% qualified business income deduction is now permanent. For 2026, limits start phasing in at taxable income of $201,750 ($403,500 joint). If you're near that range, retirement contributions and owner wages can affect how much you keep.

 

5. Fund a retirement plan for yourself. A Solo 401(k), SEP-IRA or SIMPLE plan can shelter a large share of self-employment income. Some plans must be set up by December 31 even if you fund them later, so don't wait until spring to decide.

 

6. S-Corp owners: review your reasonable salary. Make sure owner wages for 2026 are run through payroll before the last payroll of the year. That includes any year-end bonus and health insurance premiums that need to appear on your W-2.

 

7. Prepare for 1099 season under the new threshold. For payments made in 2026, the federal Form 1099-NEC and 1099-MISC threshold rises from $600 to $2,000. Fewer forms may be required, but collect W-9s from every contractor now anyway. It's the easiest way to avoid a January scramble, and state rules may still differ.

 

8. Review your entity structure. If profits have grown, the LLC-versus-S-Corp question is worth revisiting before January 1, when a new election would take effect. Pass-through owners should also ask whether Minnesota's elective pass-through entity (PTE) tax makes sense for 2026.

 

Getting Organized for Tax Season

The fastest, least stressful tax appointments start with a complete folder. Start gathering now, and add forms as they arrive in January and February.

 

Start with last year's federal and Minnesota returns, then collect income forms as they arrive: W-2s, the full range of 1099s (including brokerage, retirement, state refund and payment-app forms) and any Schedule K-1s from partnerships, S-Corps, trusts or estates, which often arrive late.

 

For deductions and credits, gather your Form 1098 mortgage interest statement, 2026 property tax statements and charitable receipts, including written acknowledgments for any single gift of $250 or more. Keep records of federal and Minnesota estimated payments, HSA, IRA and 529 contributions, childcare provider details, your Certificate of Rent Paid if you rent, and K-12 education receipts. If you plan to claim the overtime or tips deductions, keep the pay stubs or employer statements that show them.

 

Business owners should also bring a year-end profit and loss statement and balance sheet, bank and loan statements, records of equipment purchases, payroll reports and contractor W-9s.

 

A few dates are worth marking now. December 31, 2026 is the deadline for most of the moves above. Fourth-quarter federal and Minnesota estimated payments are due January 15, 2027.

 

W-2s and 1099-NECs go out by February 1, and partnership and S-Corp returns are due March 15. Individual federal and Minnesota returns, any balance due, and 2026 IRA and HSA contributions are all due April 15, 2027. An extension moves the filing deadline to October 15, 2027, but it doesn't extend the time to pay.

 

Let's Plan Before the Year Runs Out

Year-end tax planning doesn't have to be complicated, but it does have to be on time. A 30-minute conversation in November or early December can uncover savings that simply aren't available in April.

 

At It All Adds Up Accounting and Tax, we've helped Twin Cities individuals and business owners plan ahead since 1982. We know how federal changes interact with Minnesota's own rules, and we'll help you focus on the moves that actually fit your situation.

 

Ready to get ahead of next season? Schedule a year-end planning meeting or call us at (952) 928-8870. Learn more about our tax planning, individual tax preparation and business tax preparation services.

 

This article provides general information based on federal and Minnesota rules published as of October 2026. It isn't tax or legal advice for your specific situation. Tax laws change, and the right move depends on your full financial picture, so please consult a tax professional before acting.

 

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