You Still Have Time to Lower Your 2026 Tax Bill: 7 Moves to Make Now!
If tax strategy only enters your mind when your accountant asks for year-end documents, you aren't managing your tax exposure. You're waiting to see what you owe.
Ask any CPA when to start planning, and they will tell you January 1st. But if continuous tracking wasn't on your radar, September is still a strong window for New Jersey business owners. You have most of the year's results to project from, and enough calendar left to act before December 31.
Key dates
Oct 1: Generally the last day to establish a SIMPLE IRA for 2026, if you didn't previously maintain one
Dec 31: Equipment placed in service; most 401(k) deferral elections
Jan 15, 2027: Final 2026 estimated payments
1. Pressure-Test Your Full-Year Projection
Start with reconciled year-to-date books, because projecting from unreconciled numbers creates false confidence. Then run your baseline alongside a stronger-income scenario to see what a big fourth quarter does to your tax bill.
Why this matters: A record Q4 shouldn't trigger an April cash crunch. If an autumn surge adds $50,000 of net profit, a 30% combined rate creates an unbudgeted $15,000 liability. Seeing that number in September gives you time to set aside cash and evaluate legitimate planning options.
2. Review Owner Compensation and Distributions
Sole-proprietor draws, partner guaranteed payments, and S-corporation wages and distributions follow different rules. If you're an S-corp owner working in the business, September is a good time to confirm your W-2 salary is reasonable and that distributions aren't being used as a substitute for wages.
Why this matters:
Payroll tax and risk: A salary above what the facts support can mean unnecessary payroll tax. One below it creates compliance risk.
Penalties: Extra W-2 withholding in Q4 is treated as paid evenly through the year, which can wipe out earlier underpayment penalties.
Retirement: Larger plan contributions require a sufficient compensation base.
3. Evaluate Equipment Purchases (and State Differences)
Federal law allows 100% bonus depreciation on qualifying property acquired after January 19, 2025, plus Section 179 expensing up to $2,560,000 for 2026. The asset must be placed in service, meaning delivered and usable, by December 31.
Why this matters: Spending $100 to save $30 still leaves you $70 poorer. Buy for operations first, then choose the tax treatment.
The NJ trap: New Jersey generally limits the Gross Income Tax Section 179 deduction to $25,000 and does not conform to federal bonus depreciation. Buy $100,000 of machinery and your federal deduction may be immediate while your NJ deduction trails, so your state bill could be higher than expected.
4. Review Retirement Plan Opportunities
A SEP IRA, Solo 401(k), SIMPLE IRA, profit-sharing plan, or cash balance plan each carry different costs and deadlines. The IRS updated the 2026 limits:
401(k) Contribution Type | 2025 | 2026 |
Employee deferral | $23,500 | $24,500 |
Catch-up (age 50+) | $7,500 | $8,000 |
Higher catch-up (ages 60-63) | $11,250 | $11,250 |
Total additions (employee + employer) | $70,000 | $72,000 |
Source: IRS Notice 2025-67 (2026 limits) and Notice 2024-80 (2025 limits).
Two 2026 notes. The ages 60-63 limit applies if your plan offers it. And if your 2025 wages from the employer sponsoring the plan exceeded $150,000, 2026 catch-up contributions generally must be made as Roth.
Why this matters: Contributions turn tax payments into personal wealth, but deadlines differ. Employer contributions can often be funded by the tax-return due date, including extensions. Employee deferral deadlines are generally earlier, and new Solo 401(k) plans can have special timing rules. Cash balance plans need lead time for actuarial design.
5. Optimize the Timing of Income and Expenses
Cash-method businesses generally recognize income when received and deduct expenses when paid. Accrual-method businesses follow different rules.
Why this matters: Timing gives you short-term control over taxable income. A cash-basis business might pay necessary early-2027 expenses in December, or defer deductions if next year's bracket looks higher. Prepaids, inventory, and advance payments have special rules, so check with us first.
6. Recalculate Estimated Taxes and Evaluate BAIT
Underpayment penalties can apply even if you pay in full in April. Federally, the safe harbor generally means paying 90% of this year's tax or 100% of last year's (110% if last year's AGI exceeded $150,000). New Jersey uses different thresholds, generally 80% of current-year tax or 100% of prior-year tax.
Why this matters: A safe harbor avoids the penalty, not the bill. Reserve cash, because April can bring your remaining 2026 balance plus the first 2027 estimate.
The NJ BAIT question: With the federal SALT deduction capped at roughly $40,000, BAIT may let eligible S corporations and partnerships (including LLCs taxed as either) pay and deduct state income tax at the entity level. Owners receive a refundable NJ credit. It isn't right for everyone. It must be modeled alongside your federal deduction, income, credits, and cash flow, and sole proprietors don't qualify. The 2026 election is due March 15, 2027 and can't be extended, so model it now.
7. Plan for Major Structural Decisions
Think adding a partner, electing S-corp status, buying real estate, expanding to new states, or preparing for financing or a sale.
Why this matters: These often involve elections and registrations with effective-date deadlines. Starting in September gives you time to model scenarios with your legal and financial advisors first.
What to Bring to Your Planning Session
Reconciled P&L and balance sheet; payroll and owner-payment reports; federal, NJ, and BAIT payments made; planned equipment, real estate, or ownership deals; and expected Q4 changes.
Year-end planning only works while you still have options. Once December 31 passes, return preparation simply reports what happened. Ready to build your 2026 strategy? Contact Betancourt Business Advisors to schedule your Year-End Tax Planning Session.
This article is for general educational purposes only and is not tax, legal, investment, or financial advice. Results depend on each taxpayer's facts, entity type, accounting method, and jurisdiction.
