4 Tax-Smart Investment Moves Before Year End
As the end of 2026 approaches, look beyond investment performance and consider how taxes may affect your overall returns. Although tax considerations generally shouldn’t drive investment decisions, a year-end portfolio review may identify opportunities to reduce your taxes. Here are four to consider.
1. Harvest losses (or gains)
Review the capital gains and losses you’ve realized so far this year. If you have a net capital gain, you may be able to offset some or all of it through tax-loss harvesting before year end. This means selling some investments that have declined in value compared to what you paid for them.
If you expect to end the year with a net capital loss, consider selling some appreciated investments. The resulting gains can be offset by your already-recognized capital losses, essentially making the sale tax-free. But don’t eliminate your entire net capital loss. Each year you generally can use up to $3,000 of net capital losses ($1,500 if married filing separately) to offset ordinary income (such as wages, business income and taxable retirement plan distributions). Any remaining losses can be carried forward indefinitely.
2. Avoid the wash sale rule
If you sell an investment at a loss for tax purposes, be mindful of the wash sale rule. Under this rule, if you sell a security at a loss and purchase the same or a substantially identical security within the 30-day period before or after the sale, the loss generally isn’t deductible in the current year. Instead, the disallowed loss is added to the basis of the replacement security, postponing the tax benefit until the replacement security is sold.
To avoid this result, consider waiting at least 31 days before repurchasing the investment or replacing it with a similar — but not substantially identical — security. Purchases by a spouse or certain related entities can also trigger the wash sale rule.
3. Time the sale of appreciated investments
Before selling investments that have increased in value, consider whether you should wait until next year. If you expect your taxable income to be lower in 2027 — perhaps you’re retiring or anticipating lower business income — delaying the sale could reduce the tax rate you pay on it.
However, if you expect to be in a higher tax bracket next year, selling in 2026 may be advantageous. Consider your expected income, cash needs and tax situation.
4. Donate appreciated securities
If you’re planning charitable gifts, consider donating long-term appreciated securities instead of cash. Donating them will allow you to avoid the capital gains tax you’d have to pay on the appreciation if you sold the securities. Plus, if you itemize, you generally can claim a charitable deduction for the fair market value of the securities.
Don’t donate stock that’s worth less than what you paid for it. Instead, sell the stock so you can deduct the loss and then donate the cash proceeds to charity.
Moving Forward
Before making significant investment moves, contact the office to discuss how to coordinate your investment decisions with your overall tax strategy.
Could Bad Debts Lower Your 2026 Taxes?
When customers or others don’t pay what they owe your business, you may be able to claim a bad debt deduction to help offset the financial loss. But it isn’t automatic. Businesses must satisfy specific federal tax rules and maintain adequate records to support the deduction.
Not Every Unpaid Debt Is Eligible
Whether an unpaid debt is deductible depends on several factors. First, the debt generally must be connected to your trade or business. Examples include unpaid customer invoices, certain loans to customers or suppliers and some business-related guarantees.
The debt also must be bona fide. This means there must have been a genuine expectation of repayment when the money was advanced or credit was extended. Documentation such as invoices, contracts, promissory notes and payment terms can show the transaction was a legitimate debt rather than a gift or capital contribution.
Additionally, not every business is eligible to deduct unpaid customer receivables. The purpose of the deduction is to offset a previous tax liability. So, you must have previously included the receivable in your income.
If your business uses the cash-basis method of accounting, you generally recognize income only when payment is received. Because unpaid invoices generally haven’t been included in taxable income, they’re typically not deductible as bad debts.
Accrual-basis businesses generally recognize income when it’s earned rather than when payment is received. As a result, they may be eligible for a bad debt deduction if an amount previously included in income later becomes partially or totally worthless. For partially worthless business debts, a charge-off for accounting purposes generally is required.
How Mixed-Purpose Debts Are Treated
Some debts may involve both business and personal motives. For example, suppose you guarantee a loan for one of your best customers, who also happens to be a close friend. If the borrower defaults, whether the loss is treated as a business or nonbusiness bad debt depends on whether your dominant motivation in making the guarantee was to help your business or your friend.
The distinction is important because nonbusiness bad debts are deductible only if they’re totally worthless. And they’re treated as short-term capital losses, which can generally offset capital gains and up to $3,000 of ordinary income annually, with any excess carried forward.
Document Your Collection Efforts
One of the most important requirements is showing that you’ve made reasonable efforts to collect the debt. Simply deciding that a customer probably won’t pay usually isn’t enough to conclude the debt is worthless.
It’s also critical to keep records of the actions you’ve taken. These may include invoices, reminder notices, collection letters, payment plans, correspondence with attorneys or collection agencies and information showing the debtor’s financial difficulties, bankruptcy or insolvency. Going to court isn’t necessary if you can demonstrate that obtaining a judgment would be futile.
If you haven’t consistently documented your collection efforts, there’s still time. Review overdue accounts and make sure your files reflect the steps you’ve taken to pursue payment. This can make a significant difference if the IRS questions your deduction.
Review Your Receivables Now
Do you have aging receivables or other potentially uncollectible business debts? Contact the office before year end for help evaluating your options, ensuring your documentation is complete and identifying the deductions you may be eligible to claim.
Make the Most of Your HSA Tax Benefits
If you’re eligible to contribute to a Health Savings Account (HSA), consider taking a closer look at your contribution strategy. You may be able to reduce your 2026 taxes while strengthening your long-term financial security. Although many people use HSAs to pay current medical expenses, they can also help fund retirement.
Maximize Tax Savings
HSAs offer valuable tax advantages. Generally, contributions are pretax if made through payroll deductions or tax-deductible (without itemizing) if made directly to an HSA you establish yourself. Investment earnings grow tax-deferred, and withdrawals used for qualified medical expenses are tax-free.
If you haven’t reached the 2026 contribution limit, there’s still time before year end. For 2026, you can contribute up to $4,400 for self-only coverage or $8,750 for family coverage, plus an additional $1,000 catch-up contribution if you’re age 55 or older.
To be eligible to contribute, you generally must be covered by a qualifying high-deductible health plan (HDHP) and not be enrolled in Medicare or covered by certain other health plans. For 2026, an HDHP generally must have a minimum deductible of $1,700 for self-only coverage ($3,400 for family coverage) and maximum annual out-of-pocket expenses of $8,500 ($17,000 for family coverage). Beginning in 2026, HSA eligibility has expanded by generally treating bronze and catastrophic plans as HDHPs.
Think Beyond Medical Expenses
An HSA can do more than help pay today’s health care costs. If your financial situation allows, consider paying current qualified medical expenses out of pocket and leaving your HSA balance invested. Unused funds carry forward indefinitely and can continue growing on a tax-advantaged basis.
This strategy may also help build additional tax-deferred retirement savings. After age 65, you may withdraw HSA funds for nonmedical expenses without the 20% penalty that generally applies to earlier nonqualified withdrawals, though you’ll owe regular income tax on those distributions. Withdrawals used for qualified medical expenses remain tax-free, so tax-free HSA funds may be used to pay certain Medicare premiums and other eligible health care expenses during retirement.
Don’t Wait
Now is a good time to review whether you’re making the most of your HSA. Contact the office for assistance.
Ready Your Books for Tax Season
One of the most common bookkeeping mistakes business owners make is mixing business and personal finances. Addressing this issue before year end can simplify tax preparation, improve the accuracy of your financial records and help reduce the risk of IRS questions.
Business expenses generally must be “ordinary and necessary” to qualify for a tax deduction. If personal purchases are recorded as business expenses, you could overstate deductions. On the other hand, if legitimate business expenses are paid with personal funds but never recorded, you could miss valuable deductions.
Mixing business and personal transactions also can distort your financial statements, making it harder to measure profitability, manage cash flow and make informed business decisions. For corporations and limited liability companies, maintaining separate finances helps reinforce the legal distinction between the business and its owners. If you need guidance, contact the office.
Could Accessibility Upgrades Lower Your Tax Bill?
Improving accessibility at your business may come with a valuable tax break: Eligible small businesses can claim the Disabled Access Credit for certain costs related to improving accessibility for individuals with disabilities. A business may qualify if, in the prior tax year, it had gross receipts of $1 million or less or no more than 30 full-time employees.
The credit equals 50% of eligible expenses above $250 but not above $10,250. Examples of potentially eligible costs include providing interpreters for people with hearing impairments, providing readers for people with visual impairments, and acquiring or modifying equipment or devices. Contact the office if you need guidance on the credit.
When LTC Premiums Provide a Tax Break
Are long-term care (LTC) insurance premiums tax-deductible? It depends. Qualified LTC policies are considered health insurance under federal income tax rules. So if you buy a policy, your premiums are treated as medical expenses for itemized deduction purposes.
But your total eligible medical expenses for the year must meet the 7.5% of adjusted gross income threshold before you can start deducting LTC premiums. And there are age limits on how much you can deduct — for example, $500 for individuals age 40 and under and $6,200 for those 70 and over. Other age groups’ 2026 maximums fall between these two. Contact the office for more information.
Use QuickBooks Online to Monitor Business Performance
QuickBooks Online offers tools for managing many aspects of a business’s finances, including income and expenses, inventory, projects and payroll. It can also generate reports and provide other financial information that business owners can use to evaluate performance, spot trends and identify opportunities to improve profitability.
Here are some QuickBooks Online features that can provide useful insights into your business’s financial performance.
Strengthen Customer Relationships
Strong customer relationships can contribute to repeat business and long-term growth. QuickBooks Online can help you review customer activity and identify customers who haven’t done business with you recently. Consider reaching out with a personalized email about new products or services that may interest them or, when appropriate, a special offer. You can also look for opportunities to recognize loyal customers and show appreciation for their continued business.
QuickBooks Online provides detailed customer records that can give you quick insight into past activity, current account status and potential opportunities. Beyond basic contact information, customer records offer comprehensive transaction lists and activity feeds that document your interaction with them. You can take notes and assign tasks, browse projects you’ve done for them and see their current open balance and any missing payments. Connect Gmail or Outlook to QuickBooks Online, and you’ll be able to store conversations with them right in their records. You can find customer records by clicking the Home button in the toolbar, then Customer Hub, then Customers & Leads.
Manage Inventory More Effectively
Inventory management often requires balancing product availability with the cost of carrying excess stock. Maintaining too much inventory can tie up cash and increase carrying costs, while maintaining too little can make it difficult to fulfill customer orders in a timely manner.
QuickBooks Online can help you monitor inventory and address potential stock issues. The inventory home page provides an overview of low-stock items, top-selling products and open sales and purchase orders. Individual inventory records provide additional details, including the quantity on hand, quantities on purchase and sales orders and the reorder point you’ve established. Helpful reports include Inventory Valuation Summary/Detail and Sales by Product/Service Summary and Detail.
To see inventory pages in QuickBooks Online, click All apps in the toolbar, then Inventory.
Encourage Timely Customer Payments
Managing accounts receivable and encouraging timely payments are key to maintaining healthy cash flow. Businesses can take several steps to help reduce payment delays, such as:
- Charging late fees,
- Shortening payment terms, and
- Offering a small discount for early payment.
Providing convenient payment options can also encourage customers to pay more promptly. For example, allowing customers to pay invoices electronically can simplify the payment process and potentially reduce the time between invoicing and payment. To do this, you can set up a merchant account through QuickBooks Payments. Customers can pay electronically using available payment methods, such as ACH transfers, credit or debit cards, Apple Pay, PayPal or Venmo. Transaction fees apply.
Monitor Cash Flow
Understanding how much money is coming into and going out of your business is essential for effective cash flow management. Although positive cash flow isn’t the same as profitability, both are important measures of financial performance. QuickBooks Online provides tools to help you track and manage cash flow.
Click the Home button in the toolbar and scroll down until you see the Cash Flow graph. This provides a quick look at current and historical cash flow. If you need a more detailed view of your cash flow, the QuickBooks Online Statement of Cash Flows report can provide additional information for analysis.
Track Outstanding Receivables
To monitor unpaid invoices, consider regularly reviewing the Accounts Receivable Aging Summary report. It provides an overview of outstanding customer balances and shows how long invoices have remained unpaid, making it easier to identify overdue accounts. Although you can customize the report, the default view lists customers and related jobs by aging period: Current, 1-30, 31-60, 61-90, 91 and over, and Total.
You can also view outstanding customer payments. Click Home, then Sales & Get Paid, then Sales transactions. Colored bars at the top of this page show you the amounts associated with Estimates, Unbilled income, Overdue invoices, Open invoices and credits, and Recently paid. Click on any bar to see a list of related transactions below.
Make Financial Review a Routine
Using QuickBooks Online regularly can provide valuable insights into your business’s financial performance. Consider incorporating these practices into your accounting workflow to help monitor results, identify potential issues and make informed business decisions. For assistance using QuickBooks Online or interpreting your financial information, contact the office.
Upcoming Tax Due Dates
September 15
Individuals – Pay the third installment of 2026 estimated taxes (Form 1040-ES), if not paying income tax through withholding or not paying sufficient income tax through withholding.
Calendar-year corporations – Pay the third installment of 2026 estimated income taxes, completing Form 1120-W for the corporation’s records.
Calendar-year S corporations – File a 2025 income tax return (Form 1120-S) and provide each shareholder with a copy of Schedule K-1 (Form 1120S) or a substitute Schedule K-1 if an automatic six-month extension was filed. Pay any tax, interest and penalties due.
Calendar-year S corporations – Make contributions for 2025 to certain employer-sponsored retirement plans if an automatic six-month extension was filed.
Calendar-year partnerships – File a 2025 income tax return (Form 1065 or Form 1065-B) and provide each partner with a copy of Schedule K1 (Form 1065) or a substitute Schedule K1 if an automatic six-month extension was filed.
Employers – Deposit Social Security, Medicare and withheld income taxes for August if the monthly deposit rule applies.
Employers – Deposit nonpayroll withheld income tax for August if the monthly deposit rule applies.
September 30
Calendar-year trusts and estates – File a 2025 income tax return (Form 1041) if an
automatic five-and-a-half-month extension was filed. Pay any tax, interest and penalties due.
October 13
Individuals – Report September tip income of $20 or more to employers (Form 4070).
Any accounting, business or tax advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties. If desired, we would be pleased to perform the requisite research and provide you with a detailed written analysis. Such an engagement may be the subject of a separate engagement letter that would define the scope and limits of the desired consultation services.
