Summary of Key Points
- 2026 is the first tax year for several provisions of the federal tax law passed in July 2025, so a year-end plan built on last year's rules can point you in the wrong direction.
- Itemizers now lose the first 0.5% of AGI in charitable gifts, while people who take the standard deduction can deduct up to $1,000 ($2,000 joint) in cash gifts.
- The Form 1099-NEC and 1099-MISC reporting threshold rises from $600 to $2,000 for payments made in 2026.
- North Carolina's pass-through entity tax election deserves a fresh look for S corporations and partnerships now that the federal SALT cap is higher.
- A year-end projection with a CPA shows which moves actually lower your tax before December 31.
Most year-end tax checklists get reused every fall with a few numbers updated. That does not work for 2026. Several provisions of the federal tax law passed in July 2025 take effect for the first time this year, and some of them change the math on moves business owners have made for a decade, like when to give to charity.
For Charlotte business owners and higher-income households, the window to act is short. Most of these decisions have to be made by December 31, and the right answer depends on your own numbers. Our tax planning and preparation services are built around that window. Below is what changed and where it tends to matter most.
What Is Different About Year-End Tax Planning in 2026?
Here is a quick look at the changes most likely to affect a year-end plan this year.
| Item | 2025 | 2026 |
|---|---|---|
| Charitable deduction if you itemize | No floor | Only gifts above 0.5% of AGI are deductible |
| Charitable deduction if you take the standard deduction | None | Up to $1,000 single or $2,000 joint, cash gifts only |
| Tax value of itemized deductions in the top bracket | Full 37% | Capped at 35% |
| State and local tax (SALT) deduction cap | $40,000 | $40,400, reduced for MAGI above $505,000 |
| Form 1099-NEC and 1099-MISC threshold | $600 | $2,000 |
How Do the 2026 Charitable Deduction Changes Affect Your Giving?
The charitable rules now cut both ways, depending on whether you itemize.
If you itemize, only gifts above 0.5% of your adjusted gross income are deductible. At $400,000 of AGI, the first $2,000 you give produces no deduction at all. For taxpayers in the top bracket, the tax value of itemized deductions is also capped at 35 cents on the dollar.
If you take the standard deduction, you can now deduct up to $1,000 in cash gifts to qualifying charities, or $2,000 on a joint return. Gifts of property and contributions to donor-advised funds do not count toward this deduction.
For many itemizers, the practical answer is bunching. Giving two or three years of planned donations in a single year clears the floor once instead of every year, and a donor-advised fund lets you take the deduction now while granting to charities over time. Which approach wins depends on whether you itemize in 2026, 2027, or both.
What Is the 1099 Threshold for 2026?
For payments made during 2026, businesses generally file Form 1099-NEC or 1099-MISC only when a payee reaches $2,000 for the year, up from $600. The forms are due in early 2027, and the threshold will be adjusted for inflation for payments made after 2026.
Fewer forms is good news, but you still need a W-9 on file for each vendor, you still need to track every payment to know who crosses $2,000, and backup withholding now keys off the same $2,000 level. December is the right time to clean up the vendor file: confirm W-9s and flag contractors who are close to the threshold.
Year-End Moves for Business Owners: QBI and the North Carolina PTET Election
For owners of S corporations, partnerships, and sole proprietorships, the qualified business income (QBI) deduction still depends heavily on where taxable income lands. Year-end decisions about income timing, owner compensation, and retirement contributions can move that number, so they belong in the same conversation. If you are weighing an equipment purchase to reduce 2026 income, our earlier post on Section 179 and bonus depreciation covers the placed-in-service timing that trips people up.
North Carolina also lets eligible S corporations and partnerships elect to pay state income tax at the entity level. Under current federal law, the entity can generally deduct that state tax as a business expense, which is how owners work around the federal cap on state and local tax deductions. The election itself is made on the entity's timely filed North Carolina return, not by December 31. The decision still affects cash now, because a calendar-year taxed pass-through entity generally owes its fourth estimated payment by December 15.
The higher federal SALT cap changes the math for some owners. If your household's state and local taxes now fit under the $40,400 cap, the election may matter less than it used to. If your modified AGI is above $505,000, the cap starts shrinking back toward $10,000, and the election can still be worth real money. The North Carolina Department of Revenue explains the mechanics in its taxed pass-through entity FAQ.
Why a Year-End Projection Beats a DIY Checklist
Every item above depends on one number: your 2026 income. Whether you itemize, whether bunching pays off, whether you are near a QBI threshold, and whether the PTET election helps all come back to an AGI projection. A checklist tells you what exists. A projection tells you which moves are worth making for you.
A CPA can build that projection from your year-to-date books and coordinate the business and personal pieces so one move does not quietly undo another. For owners who also want help with cash flow and longer-range decisions, our financial consulting work starts from the same numbers.
Year-End Tax Planning FAQs
Can I deduct charitable donations if I don't itemize in 2026?
Yes. Starting with 2026, taxpayers who take the standard deduction can deduct up to $1,000 in cash gifts to qualifying charities, or $2,000 for married couples filing jointly. Gifts of property and contributions to donor-advised funds do not qualify.
What is the 1099 threshold for 2026?
For most payments made in 2026, the Form 1099-NEC and 1099-MISC reporting threshold is $2,000 per payee, up from $600. The amount will be indexed for inflation for payments made after 2026.
What should I do before December 31 to lower my taxes?
Start with a projection of your 2026 income. From there, the common moves are timing charitable gifts, confirming that planned equipment will be placed in service before year-end, reviewing owner compensation and retirement contributions, and deciding whether your pass-through entity should elect North Carolina's PTET.
Year-End Tax Planning 2026: Act Before December 31
2026 is not a repeat of 2025. The charitable rules, the 1099 threshold, and the higher SALT cap all change familiar year-end decisions, and most of those decisions close on December 31. The owners who come out ahead usually run the numbers in November, not the week after Christmas.
Scharf Pera & Co., PLLC has helped Charlotte individuals and businesses plan their taxes since 1977. Contact our team today to schedule a year-end tax planning meeting before December 31, or call 704-372-1167.
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