As the end of 2026 approaches, individuals and businesses face a more complex year-end planning environment. New rules, guidance, and court decisions may create opportunities or require action before important deadlines. This article highlights 10 considerations to discuss with your tax advisor:
- Potential tax benefits when selling qualified small business stock
- Expanded deductions for qualifying U.S. production facilities
- New Opportunity Zone rules after December 31, 2026 and considerations before then
- New limitations affecting individual and corporate charitable deductions
- Employer reporting requirements for tips and overtime, along with Trump Account considerations
- Remaining clean energy incentives and opportunities to buy or sell tax credits
- Uncertainty surrounding self-employment tax for limited partners
- State conformity, sales tax, and emerging wealth and property tax developments
- International tax changes affecting cross-border businesses
- Potential tariff refunds, pricing adjustments, and import-data corrections
Reviewing the issues most relevant to you now can help uncover planning opportunities and avoid costly surprises that may need to be considered before the end of the year.
Could Selling Your C Corporation Stock Be Federally Tax-Free?
If you own stock in a qualifying C corp, the qualified small business stock (QSBS) exclusion remains one of the most powerful exit-planning tools available. For stock issued after July 4, 2025, the QSBS exclusion delivers the following:
- 50% gain exclusion upon the disposition of stock after a three-year holding period
- 75% after four years
- 100% after five years
The per-shareholder gain exclusion cap rose from $10 million to $15 million (or 10 times basis, if greater), and the company gross asset limit increased from $50 million to $75 million. Because stock positions issued before July 5, 2025 stay under prior rules, the stock’s issuance date now drives the entire analysis, and two positions in the same company can be governed by different rules depending solely on when the stock was issued.
A few qualifications should be considered:
- The issuer must be a domestic C corp, so an LLC or S corp does not produce QSBS.
- The gross asset test is measured at issuance, not at sale, so early investors can still qualify even after a company grows large.
- Certain businesses are excluded, including professional services, consulting, financial services, banking, insurance, farming, and hospitality.
- For holders of stock options, the holding-period clock starts only when an option is exercised into stock, not when it is granted.
Our planning tip: A good starting point is confirming C corp status and issuance dates for each position, verifying the gross asset test as of the date your stock was issued, and gathering qualification documentation now rather than at exit. If your business is not currently a C corp, consider whether converting could open the door to future QSBS benefits, weighing the trade-offs of C corp taxation against the new holding period that would begin at conversion. Stock owners may also evaluate exercising options early to begin the holding period or consider gifting QSBS to nongrantor trusts, although aggressive “stacking” strategies are under IRS scrutiny and could be affected by future agency guidance. If a stock sale is likely before the five-year mark, reinvesting the proceeds into new QSBS within 60 days can protect the exclusion you would otherwise lose.
Can Manufacturers, Producers, & Refiners Deduct 100% of a New Facility?
Businesses building, expanding, or acquiring U.S. manufacturing, production, or refining facilities may now expense qualifying property that would otherwise be recovered over a 39-year depreciation period. A temporary 100% first-year depreciation deduction is now available for qualified production property subject to the following rules:
- The property must be nonresidential real property used in an activity that results in a “substantial transformation” of a product. Packaging, labeling, or minor assembly of products does not qualify.
- Construction on the building generally must begin after January 19, 2025 and before January 1, 2029.
- The property must be placed in service after July 4, 2025 and before January 1, 2031.
Our planning tip: With the clock ticking to get a qualifying asset placed in service, it is worth connecting with a trusted advisor soon. Together you can review current and planned projects against the timing windows, commission a cost segregation study to separate nonqualifying areas such as offices, and confirm that your project’s start or acquisition dates are properly documented.
How Will Opportunity Zone Rules Change After December 31, 2026?
If you have recently sold, or expect to sell, an investment or asset at a significant gain, Opportunity Zones may offer a way to reinvest that gain postpone the tax on it, and potentially exclude certain gains if applicable holding requirements are met. The single most important planning point right now is that December 31, 2026 splits investments into two different benefit regimes, and the rules differ meaningfully on each side of that date.
On or before December 31, 2026, the original rules continue to apply. Any gain you previously deferred through an Opportunity Fund becomes taxable on December 31, 2026 (or sooner if you sell your fund interest before then), an event that will require estimated tax and liquidity planning. Even though tax on the deferred gain may be coming due, a separate benefit remains. If you hold the investment for at least 10 years, any growth in its value is tax-free when you sell.
After December 31, 2026, the new rules take over.
- Investments must be made in newly designated zones to access the new benefits, since the existing ones do not carry over.
- The deferred gain is taxed on a rolling five-year timeline measured from your investment date, and holding the investment for five years excludes 10% of the deferred gain from tax through a basis step-up.
- Investments in the new qualified rural opportunity funds are even more favorable, excluding 30%. As under the prior program, holding the investment for at least 10 years means any growth in its value is tax-free when you sell.
Our planning tip: If you already have money invested in an Opportunity Fund, remember that your deferred gain becomes taxable at the end of 2026, even though you may not have sold the investment or received any cash to pay the tax liability. If you have a recent or upcoming gain, you generally have 180 days from the sale to reinvest, which gives you flexibility to invest before or after December 31 and land in whichever program produces the better result. Because the rules and available zones change at year-end, it is worth comparing both options with your advisor before you decide.
What Changed for Charitable Contribution Deductions in 2026?
If you give to charity, the math changed this year, and it changed differently depending on whether you are giving personally or through your business.
Individuals who itemize are now limited to deducting the portion of their giving that exceeds 0.5% of income. In practical terms, the first portion of your giving may no longer produce a tax benefit. Someone with $1 million of income receives no deduction for the first $5,000 donated. Those in the top 37% tax bracket face a second new limit as well, which can reduce the value of itemized deductions, including charitable contributions, to as low as 35%.
For C corps, a similar threshold applies but is set higher, at 1% of taxable income. A C corp with $1 million of taxable income must give more than $10,000 before any deduction begins. The existing 10% cap on corporate charitable contribution deductions continues to apply, although contributions exceeding that cap generally may be carried forward for up to five years. Accordingly, corporations should consider both the new starting threshold and the ceiling when planning their charitable giving.
If your business is a pass-through such as an S corp or partnership, these entity-level rules generally do not apply. Charitable contributions instead pass through to the owners, who apply the individual thresholds on their personal returns. For most pass-through owners, the planning conversation looks more like the individual analysis above than the C corp one. Trusts and estates are subject to separate charitable deduction rules and should evaluate the new limitations independently.
Our planning tip: Because smaller annual gifts may no longer clear the threshold, or be limited by it, individuals and C corps should consider whether to concentrate several years of giving into a single year, a strategy often called bunching. A donor-advised fund (DAF) can help, allowing you to claim the deduction now while distributing the money to charities over time. Businesses may want to review payments made to charities, since amounts such as event sponsorships are sometimes better characterized as advertising or promotional expenses that fall outside these new limits.
What Employer Reporting Changes Apply to Tips & Overtime?
If you have employees or pay contractors, 2026 brings changes that go well beyond a routine year-end update. Here are a couple of items to consider:
- Qualified tips and overtime must now be reported separately, on Form W-2 for employees and on Form 1099 for others. This matters beyond compliance, because the recipient generally cannot claim the deduction unless the amounts are separately reported, and the penalty relief that applied for 2025 is no longer available.
- Employers may contribute up to $2,500 each year to an employee’s or dependent’s Trump Account through a written program established for the benefit of employees, and employees may direct pre-tax salary reductions to a dependent’s account through a qualifying pre-tax benefits plan. These employer contributions are not treated as taxable income to the employee, which has made the benefit an increasingly discussed tool for attracting and retaining talent.
Our planning tip: Coordinating with your tax advisor, payroll provider, human resources team, and legal counsel can help avoid surprises in the first year that these rules carry penalties. Employers considering a Trump Account program may want to evaluate whether it supports recruiting and retention goals before finalizing benefit decisions for the coming year. Keep in mind that tips and overtime wages remain subject to withholding and payroll taxes even where a recipient may claim a deduction.
Are Any Clean Energy Credits Still Available?
Reading the headlines, you might conclude the 2025 tax law eliminated clean energy incentives entirely. Credits for electric vehicles and residential energy improvements were largely terminated, but incentives for business projects remain available, including:
- Solar
- Wind
- Geothermal
- Battery storage
- Clean fuel
- Carbon capture
- Domestic manufacturing
It is also a misconception that you must be an energy developer to benefit. Credits can be sold, allowing businesses to purchase them at a discount and apply them against their tax liability. Individuals also may purchase credits, but their use generally is limited to tax attributable to passive income. For a project owner who cannot use the credits currently, selling them converts an otherwise idle benefit into cash.
Our planning tip: If you expect a significant tax liability this year, it is worth exploring whether purchasing credits produces a better result than other strategies available to you, since the discount is effectively a return on the purchase. Those developing or investing in projects should confirm their construction timeline against the current deadlines and build the sourcing and the prevailing wage and apprenticeship requirements into the plan from the outset, as these conditions may be difficult to correct once a project is underway.
Could Your Share of Partnership Income Be Subject to Self-Employment Tax?
If you or your business operates as a partnership, a series of ongoing court cases is reshaping how self-employment tax may apply to a limited partner’s share of partnership income. For a long time, many partnerships assumed that simply holding “limited partner” status under state law was enough to keep a partner’s share of income out of self-employment tax. That assumption is no longer safe, and the issue remains fluid, with different federal appeals courts weighing in and reaching different answers on what actually qualifies a partner for the exception. Courts are considering what the partner actually does and how involved the partner is in managing or operating the business.
Our planning tip: Because this area is being actively litigated in multiple courts and could continue to change, this is not a set-it-and-forget-it matter. Working with your tax advisor to document what each partner actually does, including their role in management, decision making, and day-to-day operations, can help support your position regardless of the standard that ultimately prevails.
How Could State & Local Tax Changes Affect Businesses?
Federal tax changes do not automatically produce the same result at the state level. Each state decides whether, when, and to what extent it will follow federal tax law. As a result, a deduction available when calculating your federal taxable income may be delayed, limited, or unavailable when calculating your state taxable income. Businesses should consider whether services they previously treated as nontaxable became subject to sales tax during 2026. For example, Washington recently expanded its sales tax to cover several service categories, including advertising and digital marketing, IT consulting and support, custom software and websites, data processing, temporary staffing, security services, and live presentations. Businesses providing or purchasing these services may now face new sales tax collection or use tax obligations.
Furthermore, states and localities are increasingly considering new ways to tax wealth, high income, and high-value property. These approaches take different forms. For example, California is considering a one-time graduated tax on net worth above $1 billion, while New York City began imposing an annual surcharge on certain high-value, nonprimary residences effective July 1, 2026. These developments may affect not only where taxpayers live, but also how real estate and other assets are owned, making residency, ownership structure, valuation, and documentation increasingly important planning considerations.
Our planning tip: Before completing year-end planning, it is worth reviewing with your tax advisor how the states where you live or operate treat the federal tax provisions you expect to use. Businesses should also consider whether recent sales tax expansions require changes to collection practices, contracts, or billing systems. Individuals with significant wealth or high-value property may want to review residency, ownership structures, and supporting documentation as states and localities consider new approaches to taxation.
What International Tax Changes Should Multinational Businesses Review?
If your business operates across borders, several year-end tax developments could affect you, and which ones matter most will depend on where you operate, how you conduct business across borders, and whether you own foreign entities.
- If you sell goods, services, or technology through a U.S. corporation, the deduction for certain foreign-derived deduction-eligible income (FDDEI) changed in 2026. The deduction decreased from 37.5% to 33.34%, increasing the effective federal tax rate on qualifying income from 13.125% to approximately 14%. Income from certain sales of intangible or depreciable property also may no longer qualify, including sales after June 16, 2025.
- If you own a controlled foreign corporation, (CFC), you also may be affected by changing rules for allocating foreign income when ownership changes during the year. Under the prior rules, selling the CFC’s stock before the end of its tax year could shift the income inclusion to the shareholder that owned the stock on the last day of that year. The new approach allocates the income more closely based on how long each shareholder owned the stock. As a result, a seller may still be taxed on a portion of the CFC’s income earned before the sale, even if the seller no longer owns the stock at year-end.
- If you lead a large multinational group, you also should continue evaluating the global minimum tax rules. New safe harbors may reduce the number of countries requiring detailed calculations or additional tax, but they may not eliminate all local taxes, registrations, or filing obligations.
Our planning tip: Your international tax results can change significantly based on transactions you completed during the year and where related income and expenses are reported. Before finalizing year-end tax planning, review your cross-border activity with a tax advisor to identify unexpected income inclusions, reduced deductions, or limitations on foreign tax credits. Large multinational groups also should confirm where global minimum tax obligations remain, since available safe harbors may reduce, but not eliminate, their tax and filing responsibilities.
Can Businesses Recover Overpaid Tariffs?
If tariffs have touched your business this year, whether you are the one paying them or seen them show up in a vendor’s price increase, it is a good time to take a closer look at where things actually stand in this ever-changing tariff environment.
- Importers of record can be eligible for refunds on certain tariffs paid in 2025 and 2026, and many have already received them.
- If you are on the receiving end of a tariff-driven price increase, consider a conversation with your vendor, since a refund or price reduction may be negotiated. And if you are the vendor, know that your customers may be asking exactly that question.
- Separately, take a closer look at how your import data is being reported. The data that determines how your goods are classified, valued, and taxed at import is not always reviewed as closely as it should be. Errors in that data, such as misclassified goods, missed exemptions, or reporting mistakes, can add up over time.
Our planning tip: If you paid a vendor more because of tariffs, ask whether they have received a refund and whether that changes the price you should be paying now. If you are the vendor, be ready to have that conversation, and know the numbers before your customer brings it up. Some vendors are choosing to get ahead of it entirely, proactively sharing a refund with affected customers as a goodwill gesture that can strengthen the relationship. For your own imports, do not rely solely on someone else’s summary of your data. A tax and customs advisor can pull the underlying records, check for classification errors or missed exemptions, and advise you whether money is potentially being left on the table.
How Forvis Mazars Can Help
Year-end tax planning often requires coordinating decisions across federal, state, and international tax rules and acting before important deadlines. Reviewing these developments now can help you identify available opportunities, anticipate potential pitfalls, and determine which steps should be completed before year-end. Contact a professional at Forvis Mazars to discuss how these considerations may apply to you or your business and develop a year-end tax plan.