10 Tips For 2026 Tax Planning

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It’s that time of year: The time when businesses and individuals wind up the current year and begin to plan for the new year.

Part of the yearly business planning process should include tax planning, since the reality is that paying taxes will always be a part of your business. Or as the saying goes, “Nothing is certain but death and taxes.” (We will just stick with taxes here!)

Below are 10 ideas for tax planning that might be beneficial, depending on your circumstances. We update or add items based on recent legislation.  (Of course, always check with your tax accountant, as they are the expert when it comes to tax advice.)

10 Tips for 2026 Tax Planning

  1. Accelerate/defer income or deductions. At times, you can control the timing of income or expense payment. Shifting income or expenses can be beneficial to help lower your tax burden.
  2. Harvest capital losses for individuals.  Capital losses can be offset against capital gains.  Do this where it makes sense.
  3. State income tax. Consider the Pass-Through Entity Tax Deduction if you are a pass-through entity like an S-Corp or Partnership. An entity level state income tax can be federally deducted at the entity level and bypass the $40,000 SALT deduction limitation.
  4. Take advantage of tax credits to lower state income tax.  These credits can be used for job creation, research and development, and training.
  5. Charitable donations timing.  Determine what timing makes the most sense depending on the income/profits you expect to generate for the year. There are limitations on these deductions and your tax advisor can best figure out what works for you. Non-itemizers can claim deductions up to $1,000 for singles and $2,000 for married couples. Here at the Numbers Coach, giving back to our community is one of our cornerstone business goals.
  6. Make your estimated tax payments.  Make sure you are paying your estimated taxes if you earn income outside of your salary or if you are a business owner with pass-through income from your company.  An S-Corp or LLC will have pass-through income to its shareholders.  Failure to pay estimated quarterly taxes can result in penalties and interest.
  7. Carefully select your accounting methods.  This is often overlooked at the start of a company or even as it is in operation.  Determine whether cash or accrual basis accounting is best for your business model.  It’s not always obvious and your tax advisor can make sure it’s the most beneficial for your circumstances.
  8. Section 179 Expensing Deduction & Bonus Depreciation. A business can write off 100% of the cost of equipment (land and buildings are excluded).
  9. Qualified Business Income Deduction (QBI). For flow-through entities (partnerships, limited liability companies, S-Corps) there is a 20% of income deduction with certain limitations.
  10. Contribution to Retirement Plans. You can take a tax deduction of the lesser of $70,000 or 25% of an employee’s compensation for contributions to a 401(k), SEP IRA, or KEOGH.

Just a few tips to think about as you close out this year and plan for 2026.  Let us know if we can help with your financial planning, or check out our Financial Planning Tool Kit.

Here’s to a healthy 2025 year-end and a profitable 2026!
Mike

Get Personal with Your Business Financial Planning

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As a business owner, aligning business financial planning with personal financial goals is essential for your long-term financial health. But how to go about it successfully?

Here are 8 key strategies we recommend:

  1. Separate Finances: Maintain distinct accounts for personal and business finances. This ensures clear tracking of cash flow, expenses, and tax obligations, reducing financial complexity.
  2. Set Clear Goals: Define both personal and business financial objectives. For example, retirement savings, family expenses, and business expansion should align to support overall wealth-building strategies.
  3. Pay Yourself Strategically: Establish a salary or draw of consistent income that the business can support. Avoid withdrawing erratically because it disrupts cash flow and personal budgeting.
  4. Leverage Tax Strategies: Optimize tax planning for both personal and business finances. Utilize deductions, credits, and retirement contributions to reduce taxable income and maximize savings. However, don’t use strategies that may reduce your tax bill, but ultimately cause harm to your cash flow needs.
  5. Build Emergency Funds: Maintain separate emergency reserves for personal and business needs to address unexpected challenges without compromising either. How much to maintain? This is a personal question that relates to 1.) how much risk you are comfortable to take and 2.) how reliable and consistent your cash flow is from the business. You often hear 3-6 months of expenses as reasonable. In some situations, the Numbers Coach recommends over 12 months, due to the unreliability of business cash flow. (See this recent post for more guidance.)
  6. Plan for Retirement: Use tax-advantaged retirement accounts like SEP IRAs or solo 401(k)s. These account allow higher contributions for self-employed individuals, linking personal retirement savings with business success.
  7. Manage Debt Wisely: Balance personal and business debt to avoid over-leveraging. The Numbers Coach philosophy is to minimize the use of debt. When it is used, then prioritize debt repayment while ensuring sufficient liquidity.
  8. Consult Professionals: Work with financial advisors and accountants experienced in both business and personal finance to create a cohesive plan tailored to your goals. But remember, you are the only one who truly cares about your money. As much as your advisors try to have your best interest at heart, it is up to you to learn and know your numbers.

By integrating these aspects into your business and personal financial planning, you can build financial stability, meet personal aspirations, and position your business for long-term success.

Building Your Financial Plan

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Any competent financial executive will say “a business needs a sound financial plan” to tie the numbers to a business owner’s strategy. But what does that really mean? It’s time to demystify this statement.

  • Define your objective.  Why do you run your business?  Your reason could be any of the following or something else, but it’s important to start with the end in mind:
    •    “I want a good, stable life style maintaining business.”
    •     “I want to increase my net worth so I can retire early and enjoy the good life.”
    •     “I’ll start a ground breaking business, grow it quickly and sell it so I can move on to the next adventure. I don’t want to get bored!”
    •     “I want to create a legacy for my family.”
  • Create a business plan.
    • Now that you have your objective in mind, the plan is simply the day-to-day activities that will help you achieve it.  This can be as simple as determining how many new clients you will need at X dollars per month, or more detailed with specific key performance indicators for all areas of the business (finance, operations, sales and marketing, HR, etc.)
    • It is easy to think of the plan as the tool. And it is – a well developed plan helps you manage to your expectations. It provides business measures to keep things on track. (And as we all know, if you don’t measure it you can’t manage it.)  But often overlooked is the value gained in going through the planning process – whether it’s a simple two-page plan or a full-blown book with multiple chapters. The business idea will be refined and honed, and valuable insights achieved during planning.
  • Execute.
    • Now it’s time to put the plan into action.  Without this step, a plan is just a piece of paper.  Start acting on your plan, find someone to keep you accountable to sticking with it, and celebrate your progress along the way.

Let me know how I can help you build your blueprint.  

Here’s to planning a successful year!   

Mike