By Vesela Harris, CPA, EA | JE Tax Advisors LLC
Updated October 19, 2026 | For the 2026 tax year
Before December 31, it is worth checking whether your tax decisions still fit your income, cash flow, and plans for next year.
An employee may have time to increase retirement contributions through remaining paychecks. A business owner may be able to fund an employer contribution based on compensation or adjusted earnings. A retiree may need to take a required distribution or arrange a charitable transfer before the year closes.
These decisions have different limits and deadlines. Here is what to review for 2026, with separate guidance for employees, business owners, S corporation shareholders, and retirees.
1. Employees: review retirement contributions before your final paychecks
For most 401(k) and 403(b) plans, the basic 2026 employee deferral limit is $24,500. If the plan permits age based catch up contributions, the usual limits are:
| Your age at the end of 2026 | Basic employee limit | Age based catch up | Potential total employee deferral |
|---|---|---|---|
| Under 50 | $24,500 | $0 | $24,500 |
| 50 through 59, or 64 and older | $24,500 | $8,000 | $32,500 |
| 60 through 63 | $24,500 | $11,250 | $35,750 |
The higher amount for ages 60 through 63 replaces the regular catch up. It is not added on top of it. Plan terms, compensation, and special rules can affect eligibility.
Employer matching generally does not use up your $24,500 employee limit, although separate total contribution limits apply.
Compare your year to date contributions with your target and remaining paychecks. Payroll deadlines may be earlier than December 31. Also check how the employer match works before making a large final contribution.
IRS employee contribution limits and 2026 age based catch up rules
Check the new Roth catch up requirement
For 2026, an employee whose 2025 wages from the employer sponsoring the plan exceeded $150,000 generally must make applicable catch up contributions as Roth contributions.
This uses prior employer wages, not household AGI. Confirm the calculation and plan procedures with payroll.
A Roth contribution does not provide the same current income tax deduction as a traditional pretax contribution. Reaching the maximum contribution limit therefore does not necessarily mean the entire amount reduces current taxable wages.
IRS guidance: Roth catch up contributions
2. HSA accounts: check eligibility before contributing the maximum
An HSA can provide a deduction or payroll exclusion for eligible contributions, tax deferred earnings, and tax free withdrawals for qualified medical expenses.
The 2026 contribution limits are:
| HSA coverage | Basic 2026 contribution limit |
|---|---|
| Self only | $4,400 |
| Family | $8,750 |
| Additional contribution for an eligible person age 55 or older | $1,000 |
Employer contributions count toward these limits. Contributions already excluded through payroll cannot be deducted again.
If both spouses are eligible and at least 55, each generally needs an HSA in their own name for their own $1,000 catch up. The family limit is generally shared, not doubled.
Eligibility depends on qualifying coverage and other insurance. A general purpose health FSA covering you, including through a spouse, can interfere with eligibility. Medicare enrollment also matters, including possible retroactive coverage.
You may qualify for less than a full annual contribution if coverage changes. The last month rule can sometimes permit more, but it has a testing period.
Eligible 2026 HSA contributions generally can be made through April 15, 2027. Reviewing the account now can still help with payroll planning and excess contribution corrections.
IRS 2026 HSA limits, HSA eligibility and contribution rules, and 2026 contribution deadline
3. Consider an IRA separately from your workplace plan
For 2026, the combined contribution limit for traditional and Roth IRAs is $7,500, or $8,600 if age 50 or older, subject to eligible compensation.
Having a workplace retirement plan does not automatically prevent an IRA contribution. However, income and workplace coverage can limit the deduction for a traditional IRA. Roth IRA contributions have their own income restrictions and are not deductible.
A spouse without earnings may be eligible for a spousal IRA contribution when the couple files jointly and has sufficient qualifying compensation.
Eligible 2026 IRA contributions generally can be made through April 15, 2027, without extending that contribution deadline simply by extending the tax return. Designate the contribution year correctly.
IRS 2026 IRA contribution limits and IRA contribution and deduction rules
4. Sole proprietors and partners: calculate retirement contributions using adjusted earnings
Business owners often hear “25% profit sharing” and apply it directly to Schedule C profit. That can produce the wrong contribution.
For a self employed owner, plan compensation requires adjustments. In a common arrangement using a 25% employer contribution rate, the owner’s effective rate generally becomes 20% of net earnings after the deductible portion of self employment tax, before subtracting the owner’s employer contribution.
For example, assume the amount remaining after the deductible portion of self employment tax is $100,000. The employer contribution at the effective 20% rate would be $20,000, subject to the plan and other limits. It is not $25,000.
A solo 401(k) generally covers an owner without eligible common law employees, or the owner and spouse. It may allow employee deferrals as well as employer contributions, but compensation and overall limits still apply. A day job’s 401(k) does not generally give you a second personal employee deferral limit.
Partners should coordinate through the partnership’s retirement plan. Partnership distributions alone do not determine plan compensation.
IRS calculation guidance for self employed owners, percentage worksheets, and solo 401(k) rules
5. S corporation owners: separate wages, deferrals, and employer profit sharing
S corporation retirement contributions generally depend on qualifying employee compensation. Shareholder distributions are not earned income for retirement plan purposes.
In a straightforward owner only 401(k) arrangement, an employer contribution of up to 25% of eligible compensation may be available, subject to plan terms, deduction rules, and contribution limits.
For 2026, the overall defined contribution limit generally is the lesser of 100% of compensation or $72,000, excluding eligible catch up contributions. Employee deferrals and employer contributions share that overall limit. It is not $72,000 for each category.
Example with $100,000 of qualifying compensation
Assume the owner is under 50, has no other employee deferrals, and the plan permits:
| Contribution | Illustrative amount |
|---|---|
| Employee deferral | $24,500 |
| Employer contribution at 25% | $25,000 |
| Combined contribution | $49,500 |
The owner cannot automatically contribute $72,000 with those facts.
For plans covering additional employees, allocation formulas, testing, and employer deduction limits need a separate review. A 25% deduction limit is not a universal promise that every participant can receive the same allocation.
Review reasonable compensation and final payroll before year end. Do not raise or lower wages solely to reach a retirement target without considering payroll taxes, actual duties, and the overall result.
IRS S corporation retirement compensation rules, owner 401(k) contributions, and 2026 overall limits
6. Compare the other retirement options available to business owners
The right plan depends on employees, compensation, consistent cash flow, and administration.
| Option | What to consider for 2026 |
|---|---|
| SEP IRA | Employer contributions generally up to 25% of eligible employee compensation, subject to a $72,000 limit. Self employed owners use the adjusted calculation. No regular employee salary deferrals or age based catch ups. |
| SIMPLE IRA | Regular employee salary reduction limit of $17,000. Higher limits apply to certain plans. Employer contributions are required under the applicable formula. |
| 401(k) with profit sharing | Combines employee deferrals with employer contributions. Safe harbor designs and other allocation methods may help, but employee costs and testing matter. |
| Cash balance or other defined benefit plan | May allow larger deductible funding for some owners, but requires professional design, actuarial calculations, and ongoing funding commitments. |
For regular SIMPLE plans, the standard age 50 catch up is $4,000 in 2026, with a $5,250 catch up for ages 60 through 63. Certain enhanced SIMPLE arrangements have different limits.
A SEP generally requires contributions for eligible employees under the plan’s allocation rules. An owner should not compare only their personal deduction and overlook the employee cost.
Also, a new SIMPLE plan for an existing business generally must be established by October 1. Limited new employer exceptions exist. By late October, some 2026 setup choices have already narrowed.
IRS SEP limits, 2026 plan limits, SIMPLE setup rules, profit sharing plans, and defined benefit plans
7. Business owners should review more than retirement contributions
Reconcile the books before estimating tax. Review income, owner transactions, shareholder basis, payroll, and expenses paid personally.
For an S corporation shareholder owning more than 2%, health insurance payment and wage reporting can affect the personal deduction. HSA contributions for these shareholders also have special reporting rules rather than the normal employee benefit treatment.
If equipment is needed, review expensing options before ordering. In 2026, the Section 179 maximum is $2,560,000, with the phaseout beginning above $4,090,000 of qualifying property placed in service. Other restrictions apply.
Eligible property may qualify for 100% bonus depreciation under current acquisition and service date rules. Paying for equipment in December is not enough if it is not ready and available for use until January.
Finally, calculate how deductions affect QBI and the personal return. A deduction that reduces business income may also reduce the QBI deduction, so multiplying an expense by a tax bracket can overstate the savings.
IRS shareholder insurance rules, HSA benefit rules, depreciation guidance, and QBI calculations
8. Retirees: confirm your required minimum distributions
For someone turning 73 in 2026, the first traditional IRA RMD generally is for 2026, with a deadline of April 1, 2027. Subsequent annual RMDs generally are due by December 31.
Waiting until April does not eliminate a distribution. It can put the first and second RMDs into the same tax year, because the 2027 RMD would still be due by December 31, 2027.
Some workplace plans permit a delay while you remain employed, subject to plan rules and ownership restrictions. That exception generally does not apply to traditional IRAs.
A simple RMD example
Using the Uniform Lifetime Table, a person age 73 in 2026 with a December 31, 2025 balance of $500,000 would divide by 26.5, producing an RMD of approximately $18,867.92. A different table can apply when a sole beneficiary spouse is more than 10 years younger.
Roth IRAs and designated Roth workplace accounts generally have no lifetime RMD for the original owner. Inherited accounts have separate rules.
A missed RMD can face a 25% excise tax, potentially reduced to 10% with timely correction under the rules. Seek advice promptly about correction and any available waiver.
IRS RMD deadlines, Uniform Lifetime Table, and RMD account rules and penalties
Check the additional deduction for seniors
Eligible people age 65 or older may claim an additional deduction of up to $6,000 each for 2026, whether they itemize or use the standard deduction. It starts phasing out above modified AGI of $75,000, or $150,000 for joint filers. Married taxpayers generally must file jointly.
This does not make Social Security benefits or retirement withdrawals automatically tax free. Include the deduction and its income limits when evaluating distributions and conversions.
IRS guidance: Additional deduction for seniors
9. Consider a qualified charitable distribution
At 70½ or older, you may transfer funds directly from an eligible IRA to an eligible charity through a qualified charitable distribution, or QCD.
The 2026 exclusion limit is $111,000 per eligible individual, not per account. A qualifying QCD can satisfy an RMD while keeping the eligible distribution out of federal taxable income. You cannot also deduct the excluded amount.
Arrange the transfer with the custodian before year end. Taking a personal withdrawal and then donating cash is different. Active SEP and SIMPLE accounts and certain charities have restrictions.
IRS QCD rules and 2026 QCD limit
10. Review a Roth conversion while you can still control the amount
A year with lower income may provide room to convert eligible traditional retirement funds to Roth. The taxable portion increases income for the conversion year.
For a conversion intended for 2026, coordinate completion before year end rather than assume the IRA contribution deadline applies.
Review projected income, existing IRA basis, available cash for taxes, and effects on income based benefits or credits. A required minimum distribution cannot be converted. Take care of any required distribution before converting additional eligible funds.
A conversion is a planning choice, not an automatic tax saving. Compare the tax paid now with likely future treatment.
IRS IRA conversion guidance and distribution restrictions
11. Review investments, charitable gifts, and tax payments
Investment gains and losses
In a taxable account, capital losses can offset capital gains. Remaining net losses generally can offset up to $3,000 of ordinary income, or $1,500 if married filing separately, with unused losses carried forward.
Watch the wash sale rule when purchasing substantially identical securities within 30 days before or after selling at a loss. Other accounts and automatic reinvestments can matter.
IRS capital loss rules and wash sale guidance
Charitable giving and itemized deductions
Beginning in 2026, eligible nonitemizers can deduct up to $1,000, or $2,000 on a joint return, of qualifying cash gifts to certain charities.
For itemizers, qualifying charitable contributions generally must exceed 0.5% of AGI before a deduction is available, with other limits still applying.
Also revisit itemizing if you previously assumed a $10,000 SALT cap. The 2026 cap is $40,400, or $20,200 for separate filers, with reductions at higher modified AGI. Timing decisions should use your actual deduction calculation.
Withholding and estimated payments
Check payments against projected tax, especially after a bonus, business profit increase, investment sale, or retirement distribution.
The regular fourth federal estimated payment for 2026 is due January 15, 2027. Additional wage withholding before year end may help because federal withholding generally is treated as paid evenly during the year, subject to the applicable rules.
IRS estimated tax and withholding guidance
Which deadlines fall after December 31?
| Action for 2026 | General timing |
|---|---|
| Employee payroll deferrals | Generally through 2026 payroll, subject to plan and processing deadlines |
| Eligible IRA and HSA contributions | Generally April 15, 2027, without a regular return extension extending the contribution deadline |
| Employer SEP or qualified plan contributions | Often by the employer’s return deadline, including a valid extension, subject to plan and deduction rules |
| Most annual RMDs and QCDs | December 31, 2026, with the first RMD exception described above |
| Final regular federal estimated payment | January 15, 2027 |
Plan adoption, deferral elections, payroll deposits, and employer funding are separate requirements. A later funding deadline does not automatically make a late employee election valid. Special first year rules may apply to certain sole proprietor plans.
IRS business retirement plan deadlines
Bring the full picture to your tax planning meeting
Gather current pay statements, retirement and HSA contributions, business financials, investment activity, prior returns, and estimated payment records. Include your spouse’s information when relevant.
Then decide which actions fit both your tax return and your cash needs. Reaching a maximum contribution can be useful, but leaving enough cash for taxes and operating expenses matters too.
At JE Tax Advisors LLC, I help individuals, business owners, and retirees coordinate tax planning with their personal and business returns. Based in Auburn, Georgia, I work with clients throughout metro Atlanta and remotely.
Contact JE Tax Advisors or call (470) 403 0754 to discuss your 2026 planning.
This article addresses federal tax rules for 2026 under guidance available as of October 19, 2026. Plan terms, eligibility, state rules, and special relief can change the applicable limits or deadlines.