Answer (2026): Year-end tax planning is the last check, before December 31, of what each return in the household will owe and which decisions can still change it. For a household with a business, a trust, or K-1 income, that means more than one return: your Form 1040, any non-grantor trust's Form 1041, and the partnership or S corporation returns that send you K-1s. Most of the useful moves are about timing (estimated payments, distributions, gifts, and when income lands), and several have deadlines after December 31, not on it.
Context: Written for households whose income is lumpy or arrives on K-1s, who own an operating business or real estate through an LLC, or who have a trust that files its own return. Tax figures are for tax year 2026 and come from IRS and statutory sources listed at the end.
Last reviewed: September 23, 2026.
- Start by listing which return each decision affects. A trust distribution, an S corporation salary change, and a charitable gift all move different returns.
- For most K-1 households, the prior-year safe harbor is the planning anchor: 110% of your 2025 tax if your 2025 AGI was over $150,000. You can't know this year's K-1 numbers in December, but you can know last year's tax.
- Extra withholding in December counts as if it were paid evenly all year. A late estimated payment only counts from the day you make it.
- Trusts reach the 37% bracket above $16,000 of taxable income in 2026. A married couple filing jointly doesn't reach it until $768,700.
- Two trust decisions can be made after year end, within 65 days: counting early-2027 distributions as 2026 distributions, and passing the trust's estimated payments to beneficiaries.
If any of these are true, a one-page projection won't cover it, and this guide is for you:
- At least one person in the household gets a K-1, or you own a business that issues them.
- A trust files its own return, or you aren't sure whether it does.
- This year's income will look different from last year's because of a sale, a bonus, vesting shares, or a large distribution.
Before anyone runs numbers, write down every return the household files and who prepares it. The same dollar can be taxed in very different places:
| Where the income or deduction lands | Who files | What a year-end move changes |
|---|
| Your Form 1040 | You, or your CPA | Withholding, estimated payments, gifts to charity, capital gains and losses, retirement contributions |
| A partnership or multi-member LLC (Form 1065) | The entity, which sends you a K-1 | Your share of income, and when the entity's return and your K-1 are ready |
| An S corporation (Form 1120-S) | The entity, which sends you a K-1 | Your salary versus distributions, and any entity-level state tax election |
| A grantor trust, including most revocable living trusts | Reported on your own return | Nothing separate: its income is yours for income tax |
| A non-grantor trust (Form 1041) | The trustee | Distributions to beneficiaries, the trust's own estimated payments, the 65-day election |
The table matters because the people who can make each move are different. You control your withholding. The trustee controls trust distributions. The business's CPA controls when your K-1 is ready. If nobody writes this down, each professional plans for their own return and the gaps show up in April.
For tax year 2026, individual estimated payments are due April 15, 2026, June 15, 2026, September 15, 2026, and January 15, 2027. You can skip the January payment if you file your 2026 return by February 1, 2027 and pay the full balance, but households waiting on K-1s rarely can.
You generally avoid the underpayment penalty if your withholding and timely estimated payments cover the smaller of:
- 90% of your 2026 tax, or
- 100% of your 2025 tax, or 110% if your 2025 AGI was more than $150,000 ($75,000 if married filing separately in 2026).
Two rules make the difference at year end:
- Withholding is treated as paid evenly through the year, unless you choose to show the actual dates. So if you're behind in December, raising withholding on a final paycheck, a bonus, or an IRA distribution can cover earlier quarters. An estimated payment made in January only counts from January.
- The annualized income method lets you match payments to when income actually arrived. It helps when most of the year's income came late, such as a fourth-quarter sale. It takes more work to document (Form 2210, Schedule AI), so ask your CPA whether it's worth it for you.
Trusts make their own estimated payments on the same schedule. The main exception is a decedent's estate, and certain trusts treated as owned by the decedent, for tax years ending within two years of the death.
For calendar-year entities, partnership and S corporation returns are due March 15, and an extension moves that to September 15. So your K-1 can arrive in September for a return you owe in April. Three year-end habits help:
- Ask each entity's CPA for an estimate of your 2026 share now, not the final K-1. A range is enough to decide whether you're near the safe harbor.
- Anchor on last year's tax. If you pay 110% of your 2025 tax on time, a late K-1 can raise what you owe in April without adding a penalty.
- Plan to extend your own return if the K-1s are late. An extension gives you more time to file, not to pay. Estimate and pay by April 15.
These are the conversations to have with the business's CPA while there is still time to act:
- S corporation salary. Salary versus distributions changes payroll tax and the qualified business income deduction. The IRS expects reasonable pay for services, so this is a documentation question as much as a tax one. See S corporation reasonable compensation.
- Qualified business income deduction. The 20% deduction is now permanent. For 2026, its limits start phasing in above $403,500 of taxable income for joint filers ($201,750 for most others) and are fully phased in at $553,500 ($276,750). Starting in 2026, an otherwise eligible taxpayer with at least $1,000 of qualified business income from businesses they materially participate in gets a deduction of at least $400. Taxable income close to a threshold is a reason to look at timing.
- State and local tax deduction. For 2026 the cap is $40,400. Above $505,000 of modified AGI it is reduced by 30% of the excess, but not below $10,000 (the amounts are half for married filing separately). Many states let a partnership or S corporation elect to pay state income tax at the entity level, and qualifying entity-level payments aren't subject to the individual cap. Each state sets its own election and payment deadlines and its own credit for owners, so whether it's worth it this year is a question for the entity's CPA before year end.
- Equipment and property placed in service. For 2026, the Section 179 election is limited to $2,560,000, and the limit shrinks dollar for dollar once qualifying property placed in service passes $4,090,000. Eligibility rules and a business income limit can reduce it further. Separately, the 2025 tax law restored 100% bonus depreciation for eligible property acquired after January 19, 2025, which has its own rules. For either one, what matters at year end is when property is placed in service, not when it's ordered.
- Losses on a K-1. A projected loss only helps if you can use it. Ask the entity's CPA for your basis, your amount at risk, and whether the activity is passive for you, before counting a loss in December.
Trusts that file their own return hit high rates quickly. For 2026, a non-grantor trust pays 37% on taxable income above $16,000, and its long-term capital gains move to the 20% rate above $16,250. For a trust, the 3.8% net investment income tax generally applies to the lesser of its undistributed net investment income or its AGI above $16,000. For individuals, that tax starts at $250,000 of modified AGI for joint filers and $200,000 for most others.
That gap is why distribution decisions matter. A distribution the trust document allows can carry the trust's distributable net income out to beneficiaries on a K-1, where it's taxed at their rates. It doesn't carry everything: capital gains allocated to principal generally stay taxable to the trust, so how the trust allocates gains is a question for the trust's CPA before anyone counts on a distribution lowering the trust's tax. Whether a distribution is allowed, and whether it's wise, is the trustee's decision under the trust document, not a tax calculation alone.
Two elections give the trustee time after December 31:
- The 65-day rule. A trustee can elect to treat distributions made in the first 65 days of 2027 as if they were made on December 31, 2026. For a calendar-year trust, the distribution has to be made by March 6, 2027, and the election itself is made on the trust's timely filed 2026 Form 1041.
- Passing estimated payments to beneficiaries. A trust can elect to treat some of its estimated tax payments as if a beneficiary made them. The election is made on Form 1041-T, which is due on the 65th day after year end. For 2026 that falls on a Saturday, so the due date is March 8, 2027. It's useful when the trust paid estimates during the year and then distributed the income.
A revocable living trust is usually a grantor trust, so none of this applies: its income is already on your return.
- Annual gifts. In 2026 a qualifying gift of a present interest of up to $19,000 per recipient doesn't use your lifetime exemption. A married couple can reach $38,000 per recipient by splitting gifts, which takes the other spouse's consent and usually a gift tax return (Form 709). The lifetime exclusion for gifts and estates is $15,000,000 per person for 2026. A gift generally has to be complete by December 31 to count for 2026, which for a check or transfer means asking your bank or advisor what that requires.
- Charitable giving and itemized deductions. Starting in 2026, itemizers can deduct charitable gifts only to the extent they exceed 0.5% of their contribution base, which for most people is AGI. Also new for 2026, the tax benefit of itemized deductions is limited for households in the 37% bracket. If you give in large, irregular amounts, ask your CPA to model both rules together with the state and local tax cap, and whether grouping gifts into one year, for example through a donor-advised fund, changes the result.
- Capital gains and losses. For 2026, joint filers pay 0% on most long-term gains while taxable income, including the gains, is up to $98,900, 15% up to $613,700, and 20% above that. Some gains, such as collectibles and part of the gain on depreciated real estate, are taxed at different rates. Losses offset gains, and up to $3,000 of net loss ($1,500 if married filing separately) can offset ordinary income. If you sell stock or securities at a loss and buy substantially identical ones within 30 days before or after the sale, the wash sale rule disallows the loss for now.
| Date | What's due | Who acts |
|---|
| October to November | Ask each entity's CPA for an estimate of your 2026 K-1 income. Run a projection for your own return. | You, the entity CPAs |
| Before December 31 | Withholding changes, entity salary and elections, placing equipment in service, gifts, charitable gifts, harvesting losses | You, the business, your advisor |
| January 15, 2027 | Fourth individual and trust estimated payment | You, the trustee |
| March 6, 2027 | Last day for a trust distribution to count as a 2026 distribution under the 65-day rule | The trustee |
| March 8, 2027 | Form 1041-T due, to pass trust estimated payments to beneficiaries | The trustee |
| March 15, 2027 | Partnership and S corporation returns, or their extensions | The entity CPAs |
| April 15, 2027 | Individual and calendar-year trust returns, or extension requests, and payment of any balance. Extended trust returns are due September 30, 2027, and extended individual returns October 15, 2027. | You, the trustee |
- Every return the household files, with who prepares each one (the table in Step 1).
- Year-to-date pay stubs showing withholding, and a list of every estimated payment made in 2026, by date and by return.
- Your 2025 tax and AGI from last year's return, so the safe harbor number is exact.
- An estimate of each 2026 K-1 from the entity's CPA, even a range.
- Any sale, vesting, bonus, or large distribution expected before year end.
- For each trust: whether it's a grantor trust, year-to-date income, distributions made so far, any it's considering, and how the trust document allocates capital gains.
- Gifts made or planned in 2026, by recipient.
- A note of anything that changed this year: a new entity, a trust funded, a property bought or sold, a move to another state.
Any of those changes can move the projection, so it's worth listing them even when they seem unrelated to tax.
- Based on what we know today, are we above or below the safe harbor, and by how much?
- Would raising withholding in December cover the gap more cheaply than an estimated payment?
- Should the trust distribute before year end, or wait and use the 65-day election, and how much of its income is capital gain that would stay with the trust either way?
- Can we use the losses on our K-1s this year, given our basis, at-risk amounts, and passive activity rules?
- Is an entity-level state tax election available to our business this year, and is it worth it?
- Which of our returns will likely need an extension, and what should we pay by April 15 regardless?
A married couple, 2025 AGI of $900,000, owns 40% of an operating partnership and is the income beneficiary of a family trust. In November the partnership's CPA estimates their 2026 share at $600,000 to $800,000, about a third above last year. Their withholding and estimates so far cover 95% of their 2025 tax.
- On the prior-year route they need 110% of their 2025 tax, so they're 15 points short. Their CPA compares that with 90% of their projected 2026 tax and asks whether extra withholding from one spouse's December bonus could close the gap. Because withholding counts as paid evenly, it would also cover the earlier quarters.
- The trust has $120,000 of undistributed investment income, well above the $16,000 point where the trust reaches 37%. The trustee and the trust's CPA look at whether a distribution the trust allows, made by March 6 under the 65-day rule, would carry that income to the beneficiary, and how much of it is capital gain that would stay with the trust.
- Their CPA plans to extend their return and the trust's, because the partnership files on extension. They pay an estimate of the balance on April 15.
This is an illustration, not a recommendation for any real household.
- You: list every return in the household and who prepares it, using the table in Step 1.
- You, with each entity's CPA: ask for a range for your 2026 K-1 income, and confirm the entity's own year-end decisions.
- Your CPA: run a projection against the 110% safe harbor and decide between a withholding change and a January estimated payment. Put the trust distribution and 65-day decision on the trustee's calendar now.
You can add each K-1, trust statement, and prior-year return to your X1 vault and file it under the entity or trust it belongs to, so the list in Step 1 is written down before the year-end meeting. X1 doesn't prepare returns, give tax advice, or make payments. Your CPA and trustee make these decisions.
For quick numbers, try the Year-End Tax Projection, the Estimated Tax Catch-Up, and the Safe Harbor Calculator.
In October or November, when there is still time to ask each entity's CPA for a K-1 estimate and change withholding before the last paychecks of the year.
You generally avoid the underpayment penalty if withholding and timely estimated payments cover 90% of your 2026 tax or 100% of your 2025 tax. If your 2025 AGI was over $150,000 ($75,000 married filing separately), the prior-year figure is 110%.
January 15, 2027. You can skip it if you file your 2026 return by February 1, 2027 and pay the full balance, which households waiting on K-1s usually can't do.
A trustee can elect to treat distributions made in the first 65 days after year end as made on the last day of the prior year. For a calendar-year trust and tax year 2026, the distribution has to be made by March 6, 2027. The election is made on the trust's timely filed return.
A non-grantor trust pays 37% on taxable income above $16,000 in 2026. A married couple filing jointly reaches 37% at $768,700.
Usually not for income tax. A revocable living trust is generally a grantor trust, so its income is reported on your own return and planned with it.
This guide is for planning and coordination only. It does not provide tax, legal, or investment advice. Tax rules depend on your facts, and trust decisions depend on the trust document. Confirm every decision with a qualified CPA, attorney, or trustee.
- IRS, Form 1040-ES (2026), Estimated Tax for Individuals: payment dates, the 90%, 100%, and 110% safe harbor rules, and the February 1, 2027 filing exception. https://www.irs.gov/pub/irs-pdf/f1040es.pdf
- IRS, Publication 505 (2026), Tax Withholding and Estimated Tax: the annualized income installment method. https://www.irs.gov/publications/p505
- IRS, Revenue Procedure 2025-32: 2026 brackets for estates and trusts, capital gains breakpoints, qualified business income thresholds, Section 179 limits, and the $15,000,000 basic exclusion. https://www.irs.gov/pub/irs-drop/rp-25-32.pdf
- IRS, IR-2025-103 (October 9, 2025), tax year 2026 inflation adjustments, including the $19,000 annual gift exclusion and the 37% bracket thresholds. https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill
- 26 U.S.C. § 164(b)(7): the 2026 state and local tax limit of $40,400 and the $505,000 threshold. https://www.law.cornell.edu/uscode/text/26/164
- 26 U.S.C. § 6654(g) and (l): withholding treated as paid evenly, and estimated tax for estates and trusts. https://www.law.cornell.edu/uscode/text/26/6654
- 26 U.S.C. § 663(b): the 65-day distribution election. https://www.law.cornell.edu/uscode/text/26/663
- 26 U.S.C. § 643(g): passing trust estimated payments to beneficiaries, due by the 65th day. https://www.law.cornell.edu/uscode/text/26/643
- 26 U.S.C. § 1411: the net investment income tax for individuals, estates, and trusts. https://www.law.cornell.edu/uscode/text/26/1411
- 26 U.S.C. § 170(b)(1)(I): the 0.5% floor on charitable deductions for itemizers. https://www.law.cornell.edu/uscode/text/26/170
- Public Law 119-21 (July 4, 2025): the qualified business income minimum deduction, the charitable floor effective for tax years beginning after December 31, 2025, the itemized deduction limitation, and 100% bonus depreciation. https://www.govinfo.gov/content/pkg/PLAW-119publ21/html/PLAW-119publ21.htm
- IRS, Instructions for Form 1041 and Form 7004: the 65-day election, Form 1041-T timing, and trust extension dates. https://www.irs.gov/instructions/i1041
- IRS Notice 2020-75: entity-level state tax payments by partnerships and S corporations. https://www.irs.gov/pub/irs-drop/n-20-75.pdf
