Year-End Tax Prep 2026: What's New, What's Changed, What's Coming

Year-end used to mean one thing: go faster. The calendar is your deadline, and the only question is whether you get there before your clients burn out, your staff walks, or your software locks you out.

2026 is different. You're not just racing a deadline — you're navigating a rewritten code.

The One Big Beautiful Bill Act (OBBBA), signed in 2025, is phasing in through 2026. TCJA rates were made permanent. Bonus depreciation is stepping down. The QBI deduction got a haircut. And the IRS is still building the plumbing for half of it. If you're not planning before December, you're going to be filing extensions by February.

Here's what actually matters for small firms and solo practitioners right now.

The TCJA is permanent. Plan accordingly.

The biggest change isn't really a change — it's the removal of uncertainty. The 2017 tax cuts were set to sunset after 2025. They're now permanent under OBBBA. That means:

• The bracket structure stays. The 10%, 12%, 22%, 24%, 32%, 35%, and 37% brackets are locked in. No cliff to plan around.
• The standard deduction stays elevated. $32,200 for married filing jointly in 2026 — up from $30,000 in 2025.
• The estate tax exemption stays. About $14 million per individual, indexed for inflation.

For your clients, this means the planning conversation shifts from "do we accelerate or defer income based on what Congress might do" to "what actually saves this client money under known rates." That's a simpler conversation — and one you can have now instead of waiting for a lame-duck session.

What to tell clients: Donated bunny. If they were deferring income because they expected higher rates in 2027, that bet is off. The window for Roth conversions at today's rates is wider, not narrower.

Bonus depreciation: the clock is ticking

Bonus depreciation drops to 60% for property placed in service in 2026, down from 80% in 2025. It's scheduled to phase down another 20 points each year until it hits zero in 2027.

For a firm buying $100,000 in equipment:

• 2025: $80,000 bonus depreciation → $20,000 remaining basis
• 2026: $60,000 bonus depreciation → $40,000 remaining basis

That's a $20,000 difference in year-one deduction per $100,000 of equipment. For clients planning significant capital purchases, the math is simple: accelerate to 2025 if you can, or plan for the smaller deduction in 2026.

What to tell clients: If a client was on the fence about that new truck, server, or piece of heavy equipment, the 2025 deduction was the better play. If they missed it, 2026 is still better than 2027 (40% bonus).

QBI: still alive, but narrower

The Section 199A qualified business income deduction survived OBBBA, but with modifications. For 2026:

• The deduction is still 20% of QBI for most pass-through entities
• Phase-in thresholds are updated for inflation ($383,900 married filing jointly for 2025, adjusted for 2026)
• Specified service trades or businesses (SSTBs) still face the phase-out above those thresholds

The key change: specified service income thresholds are tighter under OBBBA than they were projected to be under pre-OBBBA sunset scenarios. More firms in the SSTB category will hit the phase-out range.

What to tell clients: If your client is a lawyer, doctor, accountant, or consultant pushing up against the phase-in threshold, structured retirement plan contributions or deferred compensation may pull QBI-eligible income below the limit. Run the numbers before year-end.

Standard deduction vs. itemizing: the gap keeps widening

The 2026 standard deduction ($32,200 MFJ / $16,100 single) is high enough that most clients won't itemize unless they have a large mortgage, significant state and local taxes, or outsized charitable contributions.

With the SALT cap still at $10,000 (permanently, under OBBBA), the standard deduction wins for most wage earners. The clients who benefit from itemizing are the ones with:

• Mortgage interest on $750,000+ of acquisition debt
• Large charitable contributions (especially if bundled into a donor-advised fund in alternating years)
• Medical expenses exceeding 7.5% of AGI

What to tell clients: Bundle two years of charitable giving into one year and take the standard deduction in the other. Run the two-year math — it usually works if they give more than $5,000-10,000 annually.

Estimated tax payments: the pain point that never goes away

Underpayment penalties hit harder when rates are higher, and the TCJA rates being locked in means the IRS penalty rate stays where it is. The IRS safe harbor — 100% of last year's tax (110% for high-income filers) — is still the easiest way to avoid penalties.

For 2026, the key change is that the IRS is understaffed and behind on processing, so amended returns and penalty abatement requests are taking 8-12 months. Getting it right the first time matters more than ever.

What to tell clients: If your client's income spiked this year, bump up Q4 estimated payments to hit the safe harbor. Don't rely on getting a penalty waived — the IRS doesn't have the staff to handle the volume quickly.

What your year-end checklist should look like

1. Run QBI projections now. Don't wait until December to find out your client is over the threshold. Six months of planning beats six weeks of scrambling.
2. Review depreciation schedules. Identify assets placed in service in 2026 vs. assets that could have been accelerated. If you have a client with a significant purchase coming, mid-December is the cutoff.
3. Check withholding. The 2026 withholding tables are out. Run a quick check on whether your W-2 clients are on track before Q4.
4. Bundle charitable giving. For clients who give regularly, a donor-advised fund strategy lets them bunch deductions without changing their giving pattern.
5. Prepare for the SALT cap. With SALT permanently capped at $10,000, pass-through entity tax (PTET) elections are the only workaround for business owners. Make sure your clients in PTET states have filed the election.

The bottom line

2026 isn't a normal year-end. The OBBBA changes aren't a surprise — they're law — but the first year of a new regime always has surprises in implementation. Plan early, plan conservatively, and don't assume the IRS has the tools to fix your mistakes quickly.

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Three takeaways for this week:

1. The TCJA is permanent. Plan like it.
2. Bonus depreciation drops to 60%. Accelerate if you can.
3. QBI phase-ins are tighter. Run projections before December.