The 2026 tax year represents the most significant shift in the U.S. tax code in nearly a decade. As the provisions of the Tax Cuts and Jobs Act (TCJA) are scheduled to “sunset” on December 31, 2025, taxpayers face a return to higher individual rates, lower standard deductions, and a reduced estate tax exemption.
This Tax Planning Checklist in 2026 is designed to help high-net-worth individuals and business owners navigate the “Tax Cliff” and protect their wealth through proactive strategy.
Income Timing: The “Reverse Deferral” Strategy
Historically, tax planning involves deferring income to future years. However, with tax brackets set to increase in 2026 (the top rate returning to $39.6\%$ from $37\%$), 2025 and early 2026 are the time to reconsider.
- Accelerate Bonuses: If you have control over timing, consider taking performance bonuses or deferred compensation while lower rates are still in effect.
- Exercise Stock Options: Evaluate the tax impact of exercising Non-Qualified Stock Options (NQSOs) before the rate hike.
- Roth Conversions: 2026 is a pivotal year for Roth conversions. Paying taxes now at a known rate may be significantly more cost-effective than paying them later when rates are higher.
Pro Tip: Don’t just look at the federal level. Ensure your income acceleration doesn’t inadvertently push you into a higher state tax bracket or trigger the Net Investment Income Tax (NIIT).
Investment & Capital Gains Optimization
The 2026 landscape requires a shift from passive holding to active tax-gain harvesting.
- Tax-Gain Harvesting: If you are in a lower bracket now, it may make sense to sell appreciated assets and immediately repurchase them. This “steps up” your basis, reducing the tax hit when you sell for good in future, higher-tax years.
- Tax-Loss Harvesting: Use realized losses to offset up to $3,000 of ordinary income.
- Asset Location: Move “tax-heavy” assets (like high-turnover mutual funds or REITs) into tax-deferred accounts (401k/IRA) and keep “tax-light” assets (index funds) in brokerage accounts.
The 2026 “Sunset” Deduction Review
The standard deduction is expected to be cut nearly in half in 2026. This makes itemizing a viable strategy once again for many homeowners and philanthropists.
- Charitable Bunching: Consider “bunching” several years of charitable donations into a single year using a Donor-Advised Fund (DAF) to surpass the new, lower standard deduction threshold.
- SALT Limitation Prep: The $\$10,000$ cap on State and Local Tax (SALT) deductions is scheduled to expire. This could provide a massive deduction windfall for residents in high-tax states.
- Mortgage Interest: Review your debt. The limit for deductible mortgage interest may revert from $\$750,000$ back to $\$1,000,000$ of principal.
Business Owner Strategy: Section 199A & Beyond
For business owners, the expiration of the Qualified Business Income (QBI) deduction is the single largest threat to profitability in 2026.
- Maxing the 20% Deduction: Ensure your business is structured to maximize the $20\%$ QBI deduction before it potentially disappears.
- Entity Selection: With personal rates rising, the gap between C-Corp tax rates and S-Corp pass-through rates is widening. Now is the time for an entity stress test.
- Qualified Small Business Stock (QSBS): If you hold Section 1202 stock, confirm you meet the holding period requirements to potentially exclude 100% of your capital gains.
Estate and Gift Tax: The “Use It or Lose It” Window
The lifetime gift and estate tax exemption is currently at record highs (over $\$13$ million per individual). In 2026, this is expected to drop to approximately $7 million.
- Lifetime Gifting: If your estate is valued above the projected $\$7$ million threshold, failing to gift assets now could result in a $40\%$ tax hit on the overage later.
- SLATs and GRATs: Utilize Spousal Lifetime Access Trusts (SLATs) or Grantor Retained Annuity Trusts (GRATs) to move appreciation out of your taxable estate while maintaining some level of indirect access
FAQs
1. Is the tip deduction available if I don’t itemize?
Yes. The 2026 tip income deduction is an “above-the-line” adjustment, meaning you can claim it even if you take the Standard Deduction. It is limited to $25,000 for those under the income threshold.
2. How does the 2026 SALT cap work?
For the 2026 tax year, the State and Local Tax (SALT) deduction cap is increased from $10,000 to $40,400. This amount will be adjusted for inflation by 1% annually through 2029.
3. What is a Trump Account for children?
A Trump Account is a new retirement savings vehicle for children under 18. Parents can contribute up to $5,000 annually (with potential employer matching up to $2,500), and the growth is tax-free, similar to a Roth IRA.
4. Can I deduct interest on a used car in 2026?
No. The new $10,000 auto loan interest deduction specifically applies to new vehicles assembled in the United States.
5. Is the QBI deduction still expiring?
No. The One Big Beautiful Bill of 2025 made the Section 199A Qualified Business Income (QBI) deduction permanent at its 20% rate.
Secure Your Financial Future with Squire’s Tax Planning
Tax planning is not a once-a-year event; it is a year-round strategy. The 2026 “Sunset” is a rare opportunity for those who are prepared and a massive liability for those who are not.
At Squire’s Tax Planning, we combine advanced forensic accounting with forward-looking strategies to ensure you keep more of what you earn.
