Year-End Tax Planning Checklist for Houston Families and Business Owners (2026)

Every fall I have some version of the same conversation with clients: "Is there anything I should do before December 31?"

The answer is almost always yes. And the reason to ask in November, not late December, is simple. Most of the moves that lower your tax bill have a hard December 31 deadline, and several of them (payroll deferrals, Roth conversions, business purchases) take time to set up.

As a Houston CPA and hourly financial planner, I use a checklist like this one with families and business owners every year. The 2026 version has more new items than usual, because this is the first full year of many changes from the 2025 tax law (the One Big Beautiful Bill Act, or OBBBA).

This is general education, not advice for your specific situation. Use it to decide what to ask your planner or tax preparer about.

1. Income and deduction timing

Start with a rough projection of your 2026 taxable income. Once you know which bracket you're in this year, and which you expect next year, you can decide whether to pull income into 2026 or push it into 2027.

• Know your bracket. For 2026, the 24% bracket for married couples filing jointly runs up to $403,550, the 32% bracket up to $512,450, and the 37% bracket starts above $768,700 (IRS).
• Compare with the standard deduction. The 2026 standard deduction is $32,200 for married couples filing jointly and $16,100 for single filers (IRS). If your itemized deductions are close to that line, timing matters.
• Texas homeowners and the SALT cap. The state and local tax (SALT) deduction cap is $40,400 for 2026. It is reduced by 30 cents for every dollar of modified AGI above $505,000, but not below $10,000 (Schwab). Texas has no state income tax, so for most Houston families the SALT deduction is property tax plus, if you choose, state and local sales tax instead of income tax. With the higher cap, more homeowners may benefit from itemizing than in recent years.
• Time your property tax payment. Harris County and most Texas property tax bills aren't due until January 31. Paying in December puts the deduction in 2026, and paying in January puts it in 2027. Pick the year where it's worth more, keeping the SALT cap in mind.
• Watch the income-based phaseouts. Several new deductions phase out as income rises, including the SALT cap above $505,000 and the extra $6,000 deduction for people 65 and older, which is available for 2025 through 2028. That senior deduction phases out between $75,000 and $175,000 of modified AGI for single filers, or $150,000 and $250,000 for joint filers (Fidelity). A bonus, a large capital gain or a Roth conversion can push you over one of these thresholds.

2. Retirement account contributions and Roth conversions

Retirement accounts are still the most dependable way for most households to lower taxable income.

• Max out your 401(k), 403(b) or 457(b). The 2026 employee deferral limit is $24,500. Workers age 50 and over can add $8,000, and workers age 60 through 63 can add $11,250 instead (IRS). Deferrals must go through payroll, so check with HR now if you want to raise your contribution for the last few paychecks.
• New for 2026: Roth catch-up contributions for higher earners. If your prior-year wages from your employer were above $150,000, your catch-up contributions must now go in as Roth (after-tax) contributions (Schwab). Plans are applying this in 2026 under a good-faith interpretation of the law ahead of the final regulations (IRS). Look at a recent pay stub to see how your plan is handling it.
• IRAs and HSAs can wait until April. The 2026 IRA limit is $7,500, plus $1,100 if you're 50 or older (IRS). HSA limits are $4,400 for self-only coverage and $8,750 for family coverage (CRS). Both can generally be funded up to the April 2027 filing deadline, but put them on this list so they don't get forgotten.
• Consider a partial Roth conversion. Years with lower income are often a good time to convert part of a traditional IRA to a Roth. That includes early retirement, a sabbatical, or the year after selling a business. The tax is due on the amount converted, so the goal is to "fill up" a bracket without spilling into the next one or losing a deduction to a phaseout. Conversions must be done by December 31.

3. Required minimum distributions and QCDs

• Take your RMD. If you're 73 or older, your required minimum distribution for 2026 is generally due by December 31. The one exception is your first RMD, which can be delayed until April 1 of the following year. Delaying it means taking two RMDs in one tax year (Fidelity).
• Inherited IRAs. Many beneficiaries of IRAs inherited after 2019 must empty the account within 10 years and may also owe annual distributions. Rules vary by situation, so confirm yours.
• Use qualified charitable distributions. If you're 70½ or older and give to charity, a QCD sends money directly from your IRA to a charity, and it has to leave the IRA by December 31. You can give up to $111,000 per person in 2026 (CRS). The distribution isn't included in your income and counts toward your RMD. Because a QCD reduces AGI rather than being an itemized deduction, the new 0.5% floor described below doesn't apply to it. That makes QCDs even more attractive in 2026.

4. Charitable giving under the new 2026 rules

This is the area with the most change this year. Beginning in 2026 (The Tax Adviser):

• Itemizers face a 0.5% of AGI floor. Only charitable gifts above 0.5% of your AGI are deductible. For a household with $400,000 of AGI, the first $2,000 of giving produces no deduction.
• Top-bracket taxpayers face a 35% cap. If you're in the 37% bracket, a new limitation reduces the value of itemized deductions, including charitable gifts, to roughly 35 cents per dollar.
• Non-itemizers get a new deduction. If you take the standard deduction, you can now deduct up to $1,000 of cash gifts to public charities, or $2,000 on a joint return. Gifts to donor-advised funds don't qualify.

What this means for year-end planning:

• Bunching still works. Combining several years of giving into one year, often through a donor-advised fund, helps you get over both the standard deduction and the 0.5% floor.
• Give appreciated stock, not cash. Donating shares you've held more than a year avoids the capital gains tax and usually gives you a deduction for the full market value.
• Check whether you'll itemize. If you'll take the standard deduction, make sure at least $1,000 or $2,000 of your giving is cash to a qualifying public charity.

5. Capital gains, losses and tax-loss harvesting

• Harvest losses. Selling investments at a loss can offset realized gains, plus up to $3,000 of ordinary income, with the rest carried forward. Watch the wash-sale rule: buying the same or a substantially identical investment within 30 days before or after the sale disallows the loss.
• Harvest gains in a low-income year. For 2026, married couples filing jointly pay 0% on long-term capital gains up to about $98,900 of taxable income, and 15% up to about $613,700 (Fidelity). If you're under the 0% threshold, you may be able to realize gains tax-free and reset your cost basis higher.
• Check mutual fund distributions. Many funds pay capital gains distributions in December. Buying a fund in a taxable account just before a distribution can create a tax bill on gains you didn't earn.
• Plan concentrated positions early. If you're selling a business, a rental property or a large stock position, the structure and timing of the sale usually matter more than anything else on this list. Start that conversation well before December.

6. Business owner moves before December 31

For owners of S corporations, partnerships and sole proprietorships, the next few weeks are the last chance to change 2026 results.

• Equipment and vehicles. The OBBBA permanently restored 100% bonus depreciation for qualifying property acquired after January 19, 2025. The Section 179 expensing limit is $2,560,000 for 2026, phasing out above $4,090,000 of qualifying purchases (U.S. Bank). Property has to be placed in service, not just ordered, by December 31. Buy equipment because the business needs it, not only for the deduction.
• Retirement plans for owners. SEP IRAs, and in many cases solo 401(k)s, can be set up and funded after year-end, up to the filing deadline. But if you're an S corporation owner making 401(k) salary deferrals, they have to run through payroll by December 31. A cash balance plan can add large deductions for high-income owners, but takes more lead time to design.
• S corporation salary. Review whether your W-2 salary is still reasonable for the work you do, and run the numbers before the last payroll of the year.
• The QBI deduction is now permanent. The 20% qualified business income deduction didn't expire, and planning around its wage and income limits still matters.
• Texas note: because Texas has no state income tax, the pass-through entity tax (PTET) workaround that owners in other states use to get around the SALT cap generally doesn't apply here.
• Clean up the books. Reconcile accounts, pay December bills, and collect W-9s from contractors. For payments made in 2026, the Form 1099-NEC reporting threshold rises from $600 to $2,000 per contractor (Paylocity).

7. Estimated taxes and safe harbors

• Avoid the underpayment penalty. You're generally protected if your withholding and estimated payments cover at least 90% of your 2026 tax, or 100% of your 2025 tax. That second figure rises to 110% if your 2025 AGI was over $150,000 (IRS).
• Use withholding to catch up. Unlike estimated payments, withholding is treated as if it were paid evenly through the year. Increasing withholding on a December paycheck or IRA distribution can make up for earlier underpayments.
• Mark the date. The fourth-quarter 2026 estimated payment is due January 15, 2027.

8. Estate planning and annual gifts

• Use your annual exclusion. In 2026, you can give $19,000 to each person, or $38,000 as a married couple, without using any of your lifetime exemption. If a couple's gift comes from only one spouse's account, a gift tax return may be needed to split it (IRS). Annual exclusion gifts don't carry over. If you don't use 2026's, it's gone.
• The exemption is now $15 million. The lifetime estate and gift tax exemption is $15 million per person for 2026, indexed for inflation going forward (IRS). The rush to make large gifts before a "sunset" is over. Estate planning now focuses more on control, income tax basis and family goals.
• Fund 529 plans and Trump Accounts for children. 529 contributions count toward your annual exclusion. Trump Accounts for children began accepting contributions on July 4, 2026, with a $5,000 annual limit per child (CRS).
• Review beneficiaries and documents. Check the beneficiary designations on retirement accounts and life insurance. Make sure your will, powers of attorney and any trusts still reflect your family situation.

Your year-end checklist

• Project 2026 taxable income and compare it with 2027
• Decide whether to itemize or take the standard deduction, and choose whether to pay your property tax bill in December or January
• Increase 401(k) deferrals if you're below the limit
• Check how your plan is handling Roth catch-up contributions
• Evaluate a partial Roth conversion
• Take RMDs from IRAs and inherited IRAs
• Make QCDs if you're 70½ or older
• Bunch charitable gifts or fund a donor-advised fund with appreciated stock
• Harvest tax losses, or gains if you're in the 0% bracket
• Use remaining FSA money if your plan has a December 31 deadline
• Business owners: finalize equipment purchases, owner salary, retirement plan setup and contractor W-9s
• Confirm that estimated payments and withholding meet a safe harbor
• Make annual exclusion gifts and 529 or Trump Account contributions
• Review beneficiary designations and estate documents

How we help

Year-end planning works best when it's based on your actual numbers, not general rules. At Mercer Street, we work on an hourly, fee-only basis. That means you can get a focused year-end tax review without signing up for ongoing asset management.

Our ad hoc planning is billed at $600 per hour with a two-hour minimum, which is usually enough time to work through the moves that matter most for your situation.

If you'd like to go through this checklist together before December 31, schedule a call.