As we enter the final quarter of 2026, taxpayers have an increasingly important opportunity to review their financial picture before year-end.
Strong equity markets, higher interest rates, continued investment in artificial intelligence, and changing economic conditions can all create tax consequences. For individuals, investors, and business owners, the final months of the year are an important time to estimate taxable income, review investment gains and losses, evaluate retirement contributions, and determine whether additional tax planning should be completed before December 31.
Key Tax Planning Topics for the Fourth Quarter
- Strong investment returns may create larger capital gains and estimated tax obligations.
- Higher interest rates can increase taxable interest income from savings accounts, CDs, money market funds, and bonds.
- Investors should review opportunities for tax-loss harvesting and portfolio rebalancing before year-end.
- Business owners should evaluate equipment, technology, and AI-related investments for potential tax deductions.
- Retirement contributions and certain business deductions may provide opportunities to reduce taxable income.
- Taxpayers should review withholding and estimated payments now rather than waiting until tax filing season.
Strong Markets Can Mean Higher Tax Bills
Stocks continued to perform well during the third quarter, which can be good news for investors but may also create additional tax exposure.
Taxpayers who sold appreciated stocks, mutual funds, cryptocurrency, real estate, or other investments during the year should review their realized capital gains before year-end.
Capital gains are generally categorized as either short-term or long-term depending on how long an investment was held. Short-term gains are generally taxed at ordinary income tax rates, while qualifying long-term gains may receive preferential federal tax rates.
Investors should also remember that taxable brokerage accounts may generate taxable income even when cash is not withdrawn from the account. Mutual funds, for example, may distribute capital gains toward the end of the year.
This makes the fourth quarter a useful time to estimate:
- Realized capital gains and losses
- Dividend income
- Interest income
- Cryptocurrency transactions
- Mutual fund distributions
- Potential estimated tax obligations
For taxpayers with significant gains, reviewing the tax impact before making additional investment sales can help prevent surprises when returns are prepared.
Consider Tax-Loss Harvesting Before Year-End
Market volatility can also create tax-planning opportunities.
If certain investments are currently worth less than their purchase price, taxpayers may be able to sell those investments and use the resulting capital losses to offset taxable capital gains elsewhere in their portfolio.
If losses exceed gains, individuals may generally deduct up to $3,000 of net capital losses against ordinary income, with additional losses carried forward to future years.
However, taxpayers should be aware of the wash-sale rules. Selling an investment at a loss and purchasing the same or a substantially identical security within the applicable period may prevent the loss from being immediately deductible.
Tax-loss harvesting should therefore be coordinated with the taxpayer’s overall investment strategy rather than performed strictly for tax purposes.
Higher Interest Rates Can Create More Taxable Income
Higher interest rates have made savings accounts, money market funds, Treasury securities, CDs, and other fixed-income investments more attractive.
But higher yields can also mean higher taxable income.
Taxpayers who historically earned very little interest may now receive substantially larger Forms 1099-INT at the end of the year.
Interest from most bank accounts, CDs, and corporate bonds is generally taxable for federal income tax purposes. Treasury interest is generally subject to federal income tax but may receive favorable treatment for state and local income tax purposes.
For individuals holding substantial cash balances, interest income should therefore be included when estimating 2026 taxable income and quarterly tax payments.
AI Spending Is Becoming a Tax Issue for Businesses
Artificial intelligence continues to drive significant business investment.
Companies of all sizes are purchasing new software, computers, servers, automation systems, cybersecurity tools, and other technology intended to improve productivity.
While the economic discussion around AI often focuses on productivity and employment, there is also an important tax question:
How should businesses treat these technology investments for tax purposes?
Depending on the expenditure, businesses may be able to deduct certain costs immediately, capitalize and depreciate them over time, or treat recurring software costs as ordinary business expenses.
Businesses making major technology purchases before year-end should keep detailed records identifying:
- What was purchased
- When it was placed in service
- The business purpose
- The purchase price
- Whether the expenditure represents equipment, software, research, or another category
Proper classification can make a meaningful difference in the timing of the deduction.
Business Owners Should Review Year-End Purchases
The fourth quarter is also a good time for business owners to evaluate planned equipment purchases.
Computers, office furniture, vehicles, machinery, and certain other business assets may qualify for accelerated deductions depending on the taxpayer’s circumstances and applicable tax rules.
However, purchasing something simply to receive a deduction usually does not make economic sense.
A $10,000 business purchase does not generally save $10,000 in taxes. Instead, the deduction reduces taxable income.
The better question is whether the business already needs the equipment and whether completing the purchase before year-end creates a worthwhile tax benefit.
Retirement Planning Can Reduce Current-Year Taxes
Retirement contributions remain one of the most valuable year-end tax-planning tools.
Depending on eligibility and the type of retirement plan, taxpayers may be able to make contributions to:
- Traditional 401(k) plans
- SIMPLE IRAs
- SEP IRAs
- Traditional IRAs
- Solo 401(k) plans
- Other employer-sponsored retirement plans
Certain contributions may reduce current taxable income while allowing investments to grow tax deferred.
Business owners should review retirement plan options before year-end because some plans have establishment deadlines that occur before the tax return itself is due.
Retirement planning should therefore be considered as part of the overall tax-planning process rather than waiting until tax preparation begins.
Don’t Forget Estimated Taxes and Withholding
One of the most common year-end tax problems is simply not paying enough throughout the year.
This can happen when taxpayers experience:
- Higher investment income
- Large capital gains
- Bonuses
- Stock compensation
- Self-employment income
- Rental income
- Business profits
- Retirement distributions
- Increased interest or dividend income
Taxpayers should compare their expected 2026 tax liability with the federal and state taxes already paid through withholding and estimated payments.
If there is a significant shortfall, additional estimated payments or increased withholding may help reduce the balance due and potentially limit underpayment penalties.
Business Owners Should Review Their Books Before Tax Season
Year-end planning is particularly effective when bookkeeping is current.
Business owners should make sure that bank accounts and credit cards are reconciled and that major transactions have been properly categorized.
Items worth reviewing include:
- Business versus personal expenses
- Fixed-asset purchases
- Owner contributions and distributions
- Loans
- Payroll
- Contractor payments
- Retirement contributions
- Health insurance
- Charitable contributions
- Business travel
- Automobile expenses
Waiting until tax season to clean up an entire year of bookkeeping can make tax planning considerably more difficult.
Tax Planning Should Happen Before the Year Ends
Tax preparation looks backward. Tax planning looks forward.
Once December 31 passes, many planning opportunities disappear.
For taxpayers with businesses, investments, real estate, stock compensation, retirement accounts, or significant changes in income, the final quarter of the year is an ideal time to prepare a tax projection.
A projection can help answer questions such as:
- How much will I likely owe?
- Should I increase withholding?
- Do I need another estimated tax payment?
- Should I realize investment gains or losses?
- Would an additional retirement contribution help?
- Should my business complete a planned purchase this year or next year?
- How will a large bonus, stock sale, or business distribution affect my taxes?
The goal is not simply to reduce taxes at any cost. Good tax planning considers the taxpayer’s complete financial situation and helps determine the timing and structure of transactions in a tax-efficient manner.
Looking Ahead to Year-End
The economy, markets, technology, and tax laws are constantly changing. But one principle remains consistent: taxpayers generally have more planning options before the year ends than after it.
October through December provides an important window for individuals and business owners to review income, deductions, investments, retirement contributions, estimated taxes, and major transactions.
At Miller CPA, we work with clients to evaluate their current-year tax position and identify planning opportunities before filing season begins.
If your income or financial situation has changed significantly during 2026, now is a good time to review whether your tax plan should change with it.