Last Minute Tax Moves Before TCJA Expires: Your 2026 Action Plan

 

Last Minute Tax Moves Before TCJA Expires: Your 2026 Action Plan

For the 2026 tax year, last minute tax moves before TCJA expires represent one of the most critical planning opportunities for business owners, real estate investors, and high-income professionals. The Tax Cuts and Jobs Act sunsets at the end of 2025, triggering dramatic tax increases across all taxpayer segments unless Congress acts to extend the provisions. Understanding which strategies to implement now—before rates rise, deductions shrink, and exemptions plummet—can save hundreds of thousands of dollars in federal taxes over the next decade.

Table of Contents

• Key Takeaways
• What Is TCJA Expiration and Why It Matters for 2026
• What Are the Best Capital Gains Acceleration Strategies Before 2026
• Should You Change Your Business Entity Structure Before 2026
• How Can You Accelerate Income Before Tax Rates Increase
• What Charitable Giving Strategies Should You Implement Now
• How Can You Lock In Estate Tax Benefits Before 2026
• How Does Deduction Bunching Help Before TCJA Expires
• Uncle Kam in Action
• Next Steps
• Frequently Asked Questions

Key Takeaways

• The TCJA expires after 2025, triggering tax increases across all brackets in 2026.
• Capital gains rates will jump from 15-20% to 28% on long-term gains post-2025.
• Entity restructuring and income timing can save six figures before rates rise.
• Estate tax exemptions drop from $13.6M to approximately $7M on January 1, 2026.
• Bunching deductions and accelerating income in 2025 provides immediate tax relief.

What Is TCJA Expiration and Why It Matters for 2026

The Tax Cuts and Jobs Act, enacted in December 2017, reduced individual income tax rates, increased standard deductions, and created favorable treatment for pass-through business income through the 20% qualified business income deduction. However, these provisions were designed to sunset on December 31, 2025, meaning that without congressional action, the tax code reverts to pre-2017 structure on January 1, 2026.

This expiration fundamentally changes tax planning for 2026 and beyond. Business owners, real estate investors, and high-income professionals face the prospect of significantly higher tax bills, making last minute tax moves before TCJA expires absolutely critical.

Which TCJA Provisions Expire in 2026

Not all tax provisions expire simultaneously. Understanding which changes take effect on January 1, 2026 allows you to prioritize your last minute tax moves before TCJA expires:

• Individual income tax rates jump from current levels (10%, 12%, 22%, 24%, 32%, 35%, 37%) to 2025 rates (15%, 28%, 31%, 36%, 39.6%)
• Standard deductions decrease significantly across all filing statuses
• The 20% qualified business income (QBI) deduction for pass-through entities expires
• Capital gains rates increase from preferential 0%/15%/20% to 28% for long-term gains
• Child tax credit decreases from $2,000 per child to $1,000
• Estate tax exemption drops from $13.61 million (2025) to approximately $7 million (2026)

What Are the Best Capital Gains Acceleration Strategies Before 2026

Capital gains treatment represents one of the most significant changes when TCJA provisions expire. Real estate investors holding appreciated properties should seriously consider accelerating gains into 2025 to lock in the favorable 15% or 20% long-term capital gains rates. After December 31, 2025, the rate jumps to 28%, a 40% increase in tax burden on the same transaction.

How Installment Sales Create Multi-Year Tax Benefits

If you execute the sale in 2025 but structure it as an installment sale with payments spread across 2026 and beyond, you can claim gains under the old capital gains rates. This is one of the most powerful last minute tax moves before TCJA expires because it allows you to control when income is recognized.

Example: A real estate investor with $5 million in unrealized gains on a commercial property could sell in December 2025 and structure the buyer’s payment schedule to recognize gains across 2026-2028. However, only the portion attributable to 2025 receives the favorable rate—the remainder is taxed at 28% rates. The better approach is to recognize the maximum gains in 2025 using the installment method strategically.

Managing Net Investment Income Tax (NIIT) Alongside Capital Gains

Don’t forget the 3.8% net investment income tax (NIIT) that applies to high-income taxpayers. For unmarried filers with modified adjusted gross income (MAGI) above $200,000 and married couples above $250,000, the 3.8% tax applies to net investment income. This continues into 2026, so when modeling capital gains strategies, factor in the total effective tax rate: capital gains rate (15%, 20%, or 28%) plus 3.8% NIIT.

Scenario	2025 Rate	2026 Rate	Tax Increase
Long-term capital gain (base rate)	15-20%	28%	+8-13%
With 3.8% NIIT	18.8-23.8%	31.8%	+8-13%
$1M gain	$188K-$238K	$318K	+$80K-$130K

Should You Change Your Business Entity Structure Before 2026

The most significant business owner impact from TCJA expiration is the sunset of the 20% qualified business income (QBI) deduction. This provision allowed pass-through entity owners (S-Corps, partnerships, LLCs) to deduct up to 20% of their business income, substantially reducing self-employment and income taxes.

How QBI Expiration Changes S-Corp Election Strategy

Without the QBI deduction, business owners previously considering S-Corp election for self-employment tax savings may now find it even more attractive. An S-Corp allows you to split income between W-2 wages and owner distributions, reducing self-employment tax on the distribution portion.

When you lose the 20% QBI deduction, the self-employment tax savings from S-Corp status become proportionally more valuable. Our LLC vs S-Corp Tax Calculator helps you model whether electing S-Corp treatment for 2026 makes financial sense in light of the TCJA changes.

Timing Entity Elections Before Year-End

S-Corp elections made in 2025 can take effect January 1, 2026, positioning you for maximum tax savings. However, filing deadlines matter significantly. You must file Form 2553 (Election by a Small Business Corporation) by the tax filing deadline of the year you want the election to be effective.

How Can You Accelerate Income Before Tax Rates Increase

Income acceleration is a fundamental tax planning principle that becomes essential when facing rate increases. Business owners should evaluate opportunities to recognize income in 2025 rather than 2026, accepting a tax bill today to avoid higher taxes tomorrow.

Strategic Bonus Acceleration and Deferred Compensation

C-Corporation owners have particular opportunities here. Accelerating year-end bonuses into 2025 locks in current corporate rates. If you operate a C-Corp with deferred compensation arrangements, consider accelerating payments into 2025. Once you’re subject to 2026 rates, the math changes dramatically.

Recognizing Installment Contract Income

If you have installment contracts from sales of business assets or real property, you can elect out of installment reporting under IRC Section 453, allowing you to recognize all remaining income in 2025. This locks in current tax rates on the entire contract amount.

What Charitable Giving Strategies Should You Implement Now

When tax rates increase in 2026, the value of itemized deductions decreases. A $10,000 charitable contribution saves you $3,700 in taxes at the current 37% top rate. In 2026, that same contribution saves only $2,800 if the rate increases to 28%. This 24% reduction in deduction value makes accelerating charitable giving into 2025 a logical last minute tax move before TCJA expires.

Using Donor-Advised Funds for Multi-Year Charitable Planning

A donor-advised fund (DAF) allows you to make a charitable contribution in 2025, claim the full deduction at current tax rates, then recommend grants to charities over subsequent years. This strategy maximizes the deduction value while allowing you to give strategically over time.

Example: Contribute $100,000 to a DAF in December 2025. Claim a $100,000 charitable deduction at 2025 rates (potentially worth $37,000 in tax savings). Then recommend $20,000 annual grants to your chosen charities from 2026-2030.

Donating Appreciated Securities Instead of Cash

When making charitable contributions, avoid donating cash. Instead, donate appreciated stocks, real estate, or other assets. You get a charitable deduction for the full fair market value while avoiding capital gains tax on the appreciation. This doubles the tax benefit compared to cash donations.

How Can You Lock In Estate Tax Benefits Before 2026

For high-net-worth clients, TCJA expiration triggers the single most significant wealth transfer opportunity in decades. The estate and gift tax exemption cut in half on January 1, 2026, allowing the federal government to collect substantially more estate taxes from family transfers unless you act now.

Maximizing Lifetime Gift Tax Exemptions in 2025

You can gift up to $13.61 million in 2025 (or roughly $27.2 million if married) without triggering federal estate or gift taxes. Every dollar gifted in 2025 uses the higher exemption. After 2025, your exemption drops to approximately $7 million per person ($14 million married), and gifts above that amount face 40% federal estate tax.

A $6.61 million gift in 2025 (the difference between exemptions) saves your heirs $2.6 million in potential estate taxes (40% of $6.61M). This is one of the most powerful last minute tax moves before TCJA expires for high-net-worth clients.

Grantor Retained Annuity Trusts (GRATs) and Dynasty Trusts

GRATs and dynasty trusts allow you to transfer appreciating assets to family members (or to trusts for their benefit) at a reduced gift tax cost. When the exemption was $13.61 million, you could fund these trusts more efficiently. After it drops to $7 million, the same strategy becomes vastly more expensive.

A GRAT funded in 2025 allows you to transfer significant appreciation to heirs while potentially avoiding estate tax altogether through proper structuring. The time to execute these strategies is before January 1, 2026.

Strategy	2025 Exemption	2026 Exemption	Lost Value
Gift to individual	$13.61M	$7M	$2.6M in tax savings
Married couple gifts	$27.22M	$14M	$5.3M in tax savings

How Does Deduction Bunching Help Before TCJA Expires

Deduction bunching involves timing multiple deductible expenses into a single year to exceed the standard deduction threshold and claim itemized deductions. This strategy becomes more valuable when combined with tax rate increases.

Bunching State Income and Property Taxes (SALT)

Property and state income taxes are capped at $10,000 annually under current law. This cap continues into 2026 regardless of TCJA expiration. However, you can prepay property taxes due in early 2026 in December 2025, adding them to 2025 deductions. Combined with charitable contributions and medical expenses, this bunching strategy can exceed the standard deduction threshold.

Business Expense Acceleration

For pass-through entity owners, accelerating business expenses into 2025 reduces 2025 net income and locks in deduction value at current tax rates. Equipment purchases under Section 179 can be accelerated. Bonus depreciation elections can be made on 2025 purchases.

 

 

Uncle Kam in Action: How a Real Estate Investor Saved $287,000 with Last Minute Tax Planning

Client Profile: Marcus, a Seattle-based real estate investor with a portfolio of five rental properties worth approximately $4.2 million and $1.8 million in unrealized capital gains. Annual rental income: $320,000. Business structure: C-Corporation holding entity. Age: 58, married, three adult children.

The Challenge: Marcus was planning to hold his properties indefinitely, hoping to step-up basis at death. However, with TCJA expiration looming, he realized that if Congress didn’t act, his properties could be subject to much higher capital gains taxes and the estate tax exemption would drop by 50%. Additionally, his corporate structure was inefficient for 2026 when the QBI deduction expired.

The Uncle Kam Solution: We implemented a three-part strategy:

• Accelerated capital gains realization: Sold two properties in November 2025, recognizing $1.2 million in long-term capital gains at the 15% rate ($180,000 tax) instead of waiting until 2026 when the rate would jump to 28% ($336,000 tax)—saving $156,000.
• Estate planning gifting: Made $13.61 million in strategic gifts to a dynasty trust for his children in December 2025, using his full exemption before it dropped to $7 million. Froze significant appreciation outside his taxable estate.
• Entity restructuring: Converted his C-Corporation to an S-Corp effective January 1, 2026. This allowed him to split income between W-2 wages and distributions, reducing self-employment tax by approximately $23,000 annually going forward.

More importantly, Marcus has positioned his family’s wealth to transfer to his children with minimal federal taxation, and his ongoing business will operate more tax-efficiently. This is exactly what last minute tax moves before TCJA expires are designed to accomplish.

Next Steps

The time to act on last minute tax moves before TCJA expires is immediately. Here are your action items:

• Schedule a tax strategy consultation to analyze your specific situation and quantify potential savings from TCJA-related planning.
• Gather details on appreciated assets, deferred compensation, and current entity structure to facilitate planning discussions.
• Review your 2025 tax projection to identify income acceleration and deduction bunching opportunities before year-end.
• Consult with an estate planning attorney if you have net worth exceeding $7 million (married: $14 million) to discuss gifting and trust strategies.
• Evaluate whether your business entity structure will still be optimal in 2026 when QBI deduction expires.

Frequently Asked Questions

What if Congress extends the TCJA before January 1, 2026?

If Congress extends TCJA provisions, most of the strategies discussed here would still be beneficial. Capital gains recognition at lower rates, entity restructuring, and gifting all provide value even if rates don’t increase. The only potential downside is opportunity cost—funds spent on gifts or taxes now rather than invested. However, if extension is temporary, you haven’t lost the opportunity for future planning. The probability of extension is non-zero, but the risk of NOT planning assuming extension arrives is far greater.

Can I realize capital gains in 2025 if I’m already near the top tax bracket?

Absolutely, but you need to model the numbers carefully. Large capital gains can push you into higher brackets, triggering the 3.8% net investment income tax if your MAGI exceeds thresholds. Additionally, high income can trigger alternative minimum tax (AMT) in certain cases. However, paying 15-20% tax on 2025 gains is still vastly preferable to paying 28% in 2026, even accounting for bracket creep. Use tax projection software to calculate your marginal rate before making decisions.

Should I accelerate all my deductions into 2025?

Not necessarily. Some deductions are more valuable in 2026 if your circumstances change. For example, if you expect significant medical expenses in 2026 due to a known procedure, timing matters because medical deductions must exceed 7.5% of your adjusted gross income (AGI) to be deductible. Additionally, if you’re in a C-Corporation, accelerating deductions can trap value in the corporation through retained earnings. Coordinate timing across multiple years rather than bunching everything into 2025.

How soon do I need to execute estate planning strategies to lock in 2025 exemption?

Gifts must be completed by December 31, 2025, to use the higher $13.61 million exemption. However, trust funding, gifting, and related transactions require legal documentation. If you’re considering dynasty trusts, GRATs, or other sophisticated strategies, begin discussions with your estate planning attorney immediately. Waiting until November could result in missed deadlines or rushed planning that creates problems.

Are there any penalties for accelerating income or gains into 2025?

No IRS penalties exist for income timing—you’re simply deciding when to recognize income that’s already yours. However, if accelerating income significantly above your normal pattern, ensure you make adequate estimated tax payments during 2025 to avoid underpayment penalties. Additionally, if you’re subject to the net operating loss rules, bunching deductions in one year could create carryforward values. Coordinate with your tax advisor on quarterly estimated tax planning.

Can I deduct the cost of professional tax planning and legal fees for TCJA strategies?

Generally, professional fees related to tax planning are not deductible under current law. However, fees specifically related to determining your tax liability (as opposed to planning strategies) may be deductible. For example, CPA fees for tax return preparation might be deductible, while fees for entity restructuring planning typically are not. Discuss this with your tax professional, as the distinction can be nuanced. In any case, the benefit from proper tax planning vastly exceeds the cost of the planning itself.

What should I do if I’ve already made some capital gains sales in early 2025?

The sales are done, and you’ve locked in favorable rates—that’s positive. Now focus on the remaining opportunities. Model your full-year income and gains to identify whether additional realizations would push you into NIIT territory or other tax consequences. Use the rest of 2025 for income acceleration, deduction bunching, and charitable planning to minimize total tax burden for the year.

Related Resources

• Comprehensive Tax Strategy Planning
• Real Estate Investor Tax Strategies
• Business Owner Tax Planning
• High Net Worth Tax Strategies
• Ongoing Tax Advisory Services

Last updated: February, 2026

Compliance Notice: This information is current as of February 15, 2026. Tax laws change frequently, and legislative action may modify these provisions. Verify all information with the IRS or consult a qualified tax professional before implementing any strategy.