With December 31 approaching, now is the time to act on your 2026 tax planning. This year-end issue covers nine strategies for business owners, families, and investors. Many of them must be completed before year-end to count for 2026.

In This Issue

• 2026 Year-End Section 199A Tax Reduction Strategies
• 2026 Year-End General Business Income Tax Deductions
• 2026 Year-End Vehicle Purchases to Save on Taxes
• 2026 Year-End Tax Deductions for Existing Vehicles
• 2026 Year-End Tax Strategies for Marriage, Kids, and Family
• 2026 Year-End Tax Strategies for Your Stock Portfolio
• 2026 Year-End Tax Strategies for Crypto Investors
• 2026 Year-End Medical Plan Strategies
• 2026 Year-End Retirement Deductions

2026 Year-End Section 199A Tax Reduction Strategies

If you own a tax code–defined pass-through business, such as a sole proprietorship or an S corporation, the Section 199A deduction could save you thousands in federal income taxes.

This valuable deduction, now permanent, lets eligible business owners deduct up to 20 percent of qualified business income (QBI).

For 2026, new rules provide greater flexibility, including wider income phase-in ranges and a $400 minimum deduction for qualifying taxpayers.

But your deduction could shrink or disappear as your taxable income rises. Before December 31, consider these eight Section 199A tax-saving strategies:

1. Harvest capital losses. Selling losing investments can reduce taxable income and potentially increase your Section 199A deduction.
2. Make charitable contributions. Deductible donations, including appreciated stock, can lower taxable income without reducing QBI.
3. Buy business equipment. Qualifying purchases placed in service before year-end may generate immediate deductions.
4. Maximize personal deductions. Health savings account contributions, deductible state and local taxes, mortgage interest, and certain 401(k) deferrals can help.
5. Fund retirement accounts. Retirement contributions may reduce taxable income enough to increase your deduction.
6. Review W-2 wages. Additional wages or bonuses may increase the deduction for certain businesses subject to wage limitations.
7. Evaluate Roth conversions. Converting a traditional IRA to a Roth could increase taxable income and reduce your Section 199A deduction.
8. Review rental properties. Profitable rental activities may qualify for additional Section 199A deductions.

2026 Year-End General Business Income Tax Deductions

The clock ticks on your 2026 tax deductions.

Fortunately, six straightforward year-end business strategies can help you reduce taxable income and keep more money in your pocket.

1. Prepay business expenses. If you use cash-basis accounting, IRS safe-harbor rules generally allow you to deduct qualifying expenses prepaid up to 12 months in advance. Consider prepaying rent, equipment leases, or business insurance before December 31.
2. Delay customer billing. Cash-basis businesses can postpone billing customers, clients, or patients until January. This shifts income into 2027, postponing the related taxes.
3. Buy business equipment. Do you need computers, machinery, furniture, or office equipment? Qualifying purchases placed in service before December 31 qualify for 100 percent bonus depreciation or Section 179 expensing.
4. Use credit cards strategically. Business expenses charged before December 31 to your credit card (if you’re a sole proprietor) or your corporation’s credit card are deductible in 2026. If you operate as a corporation and use your personal credit card, the corporation must reimburse you by December 31 to claim the deduction.
5. Claim every legitimate deduction. Don’t overlook expenses simply because they create a business loss. Qualifying net operating losses may provide valuable deductions in future years.
6. Deduct building improvements. Certain improvements to non-residential buildings qualify for immediate expensing through bonus depreciation or Section 179, rather than depreciation over 39 years.

Key point. Small changes in your December business activities can produce substantial tax savings.

2026 Year-End Vehicle Purchases to Save on Taxes

Do you need a new business vehicle?

Buying one before December 31, 2026, could deliver substantial tax savings, thanks to permanent 100 percent bonus depreciation and generous Section 179 deductions.

But not all vehicles qualify for the same tax benefits. Here’s what you need to know.

1. Heavy SUVs and crossovers. New or used SUVs with a gross vehicle weight rating (GVWR) exceeding 6,000 pounds may qualify for 100 percent bonus depreciation. Buy a $70,000 SUV used 90 percent for business, and you could deduct the entire $63,000 business cost in 2026.
2. Heavy pickup trucks. Qualifying pickups with a GVWR over 6,000 pounds and a cargo bed at least six feet long can qualify for 100 percent bonus depreciation or Section 179 expensing.
3. Cargo and passenger vans. Certain heavy vans also qualify for 100 percent bonus depreciation or generous Section 179 deductions, provided they meet specific requirements.
4. Cars and lighter vehicles. These vehicles face stricter depreciation limits. For 2026, the maximum first-year deduction is generally $20,300, including bonus depreciation, assuming 100 percent business use.
5. Electric vehicles. Federal electric vehicle purchase credits expired September 30, 2025. However, electric vehicles generally fall into the categories above and remain eligible for depreciation deductions or Section 179 expensing.

Don’t miss the deadline! You must purchase your vehicle and place it in business service by December 31, 2026. Driving at least one business mile helps document that requirement.

The bottom line. Vehicle selection, business use, and timing determine your deductions.

2026 Year-End Tax Deductions for Existing Vehicles

Your existing vehicles, both business and personal, may hold tax deductions you can claim for 2026. To use any of these strategies, you must act by December 31.

Sell an old business vehicle now used by family.

If your spouse or child drives a former business vehicle, it may carry a deductible loss. Selling it to a third party before year-end lets you capture that loss. The longer you wait, the more your business-use percentage and your deduction shrink.

Use the buy-and-sell strategy if you file Schedule C.

A trade-in is now treated as a sale. The IRS requires you to report any gain on the sale of your old vehicle on Form 4797, which avoids self-employment tax. You then depreciate the replacement vehicle, which reduces both income and self-employment taxes.

Check vehicles acquired through pre-2018 trade-ins.

Before 2018, trade-ins carried your old basis into each new vehicle. If you still drive a vehicle acquired that way, selling it could produce a large loss, even if you used IRS mileage rates.

Check your current business vehicle.

If the depreciation you have claimed is less than the vehicle’s actual drop in value, selling it may produce a deductible loss. This is common with vehicles deducted using IRS mileage rates, which include only a modest depreciation component.

Convert your personal vehicle to business use.

If you bought a personal vehicle after January 19, 2025, and now begin using it for business, 100 percent bonus depreciation may let you deduct the business share of its basis this year. If your corporation reimburses you for the vehicle, it must make that reimbursement by December 31 to achieve a 2026 deduction.

2026 Year-End Tax Strategies for Marriage, Kids, and Family

Your family could hold the key to substantial tax savings in 2026. Whether you have children, are considering marriage or divorce, or help support relatives, five strategies deserve attention before December 31.

1. Put your children on your payroll. If your children work in your business, paying them W-2 wages creates a business deduction. In qualifying sole proprietorships and spousal partnerships, wages paid to children under age 18 are exempt from federal payroll taxes. Your child can earn up to $16,100 in 2026 without owing federal income taxes.
2. Consider a Roth IRA for your child. A working child can contribute up to $7,500, limited by earned income. This creates an opportunity to build substantial tax-free retirement savings.
3. Time your marriage or divorce carefully. Your marital status on December 31 determines your filing status for the entire year. Getting married before year-end—or postponing a divorce until January—could save thousands. Run the numbers first.
4. Review your mortgage interest deductions. Unmarried co-owners may qualify for larger combined mortgage interest deductions than married couples. This difference can make the timing of marriage important.
5. Give appreciated stock instead of cash. If you support parents or other relatives in lower tax brackets, gifting appreciated stock may allow them to sell it at a 0 percent federal capital gains tax rate.

2026 Year-End Tax Strategies for Your Stock Portfolio

Your stock portfolio could be hiding valuable tax savings. Before year-end, consider six strategies to keep more of your investment profits and send less to the IRS.

1. Offset capital gains with capital losses. Review your portfolio for investments you can sell at a loss to offset taxable gains. Strategic matching can reduce taxes on gains otherwise taxed at rates as high as 40.8 percent.
2. Deduct excess capital losses. If your losses exceed your gains, you can deduct up to $3,000 against ordinary income and carry forward unused losses.
3. Avoid the wash-sale trap. Selling stock at a loss and repurchasing substantially identical securities within 30 days before or after the sale generally prevents an immediate loss deduction.
4. Give appreciated stock to family members. Transferring appreciated shares to parents or children in lower tax brackets may reduce your family’s overall tax burden. Special rules apply to children subject to the kiddie tax.
5. Donate appreciated stock to charity. If you itemize, donating stock directly to charity can generate a deduction based on fair market value while avoiding capital gains taxes.
6. Sell losing stocks before donating. Instead of donating depreciated shares, sell them first and donate the proceeds. You may qualify for both a capital loss deduction and a charitable deduction.

Don’t wait until December 31. Because of settlement rules, aim to complete your stock transactions by December 18, 2026.

2026 Year-End Tax Strategies for Crypto Investors

If you own cryptocurrency, consider these five moves before December 31 to reduce your 2026 taxes.

1. Harvest your losses. With Bitcoin well below its October 2025 peak, you may have losses. Selling losing coins lets you offset capital gains plus up to $3,000 of other income, and any excess carries forward. Current law does not apply the wash-sale rule to crypto, but a pending House bill would apply it to sales after September 14, 2026. For certainty, wait 31 days to buy back the same coin, or buy a different one.
2. Step up your basis. If you expect higher income next year, consider selling appreciated coins you have held for more than a year and paying tax at long-term capital gains rates now. Then repurchase at today’s price, reducing your taxable gain later. (The wash-sale rule does not apply to gains.)
3. Donate appreciated crypto. If you itemize, giving coins held for more than a year to charity or a donor-advised fund lets you (a) deduct their full value and (b) avoid capital gains tax. Donations over $5,000 require a qualified appraisal. New 2026 rules slightly reduce itemized charitable deductions.
4. Gift crypto to family. You can give up to $19,000 ($38,000 for married couples who give) without filing a gift tax return. The recipient takes over your basis and holding period.
5. Buy crypto through retirement accounts. A self-directed IRA or solo 401(k) can hold crypto. For solo 401(k) employee contributions, both the plan and the contribution must be in place by December 31.

2026 Year-End Medical Plan Strategies

Before December 31, review your business’s medical benefits. Here are five year-end strategies that could help you capture valuable tax deductions and credits while providing tax-free benefits to employees.

1. Reimburse Section 105 medical expenses. If your business has a Section 105 health reimbursement arrangement (HRA), reimburse eligible medical expenses before December 31 to secure your 2026 business deductions. This strategy can be particularly valuable when your spouse is your employee.
2. Fund your QSEHRA. If you have fewer than 50 employees, a qualified small employer HRA may allow tax-free reimbursements of up to $6,450 for an individual or $13,100 for a family in 2026.
3. Consider an ICHRA. An individual coverage HRA allows businesses of any size to reimburse employees tax-free for individually purchased health insurance and eligible medical expenses.
4. Protect your S corporation deduction. If you own an S corporation, make sure the corporation pays or reimburses your health insurance premiums and includes them on your W-2. Otherwise, you could lose your valuable above-the-line deduction.
5. Claim the health insurance tax credit. Eligible small employers that provide group health insurance may qualify for a federal tax credit of up to 50 percent of qualifying premiums, subject to specific requirements and limitations.

2026 Year-End Retirement Deductions

December 31 is approaching, but you still have time to strengthen your retirement savings and reduce your 2026 taxes. Five strategies deserve your attention.

1. Establish a retirement plan. Even if you’re the business’s only employee, a solo 401(k) can generate substantial deductions. For 2026, combined employee and employer contributions can reach $72,000, or $80,000 if you’re age 50 or older ($83,250 for ages 60-63), subject to compensation limits.
2. Claim retirement plan start-up credits. Eligible small businesses establishing retirement plans for employees can qualify for tax credits of up to $5,000 annually for three years—a potential $15,000 benefit.
3. Earn tax credits for contributing to employees’ retirement accounts. Eligible employers can claim a tax credit of up to $1,000 per employee annually for contributions they make to the employees’ retirement accounts. The credit is available for up to five years, with the amount decreasing after the second year.
4. Add automatic enrollment. Eligible small employers can claim an additional $500 annual tax credit for three years simply by adding automatic enrollment to a qualifying retirement plan.
5. Consider a Roth IRA conversion. Converting traditional retirement funds to a Roth IRA may create long-term tax savings. You’ll pay taxes on the conversion now, but qualified future withdrawals are tax-free. Roth IRAs also eliminate lifetime required minimum distributions for their owners.

Don’t miss the December 31 deadline! Establishing your 401(k) before year-end can preserve valuable employee contribution opportunities for 2026.

Key point. Retirement planning can build your net worth while cutting your taxes.

Let’s plan before December 31. Call us at 206-508-2410 or email info@teddycpa.com to schedule your year-end tax planning review.

This newsletter is for general information only and is not tax advice for your specific situation. Please consult us before acting on any of these strategies.