Can I open a Solo 401(k) in the last week of December?

Yes—you must establish the plan by December 31. Contributions can be made later, up to your tax filing deadline.

Is there a downside to tax-loss harvesting?

The main risk is the wash sale rule, which disallows the loss if you buy a substantially identical security within 30 days. Cryptocurrency currently has no wash rule.

Should I form an S-Corp before year-end?

The S-Corp election for 2027 must be filed by March 15, 2027. Forming an LLC can be done now, but the election itself has a later deadline.

End-of-Year Tax Moves for Online Earners 2026: Reduce Your Bill Before Dec 31

December 31 isn't just the end of the year—it's the last day to act on most tax-saving strategies for 2026. For online earners whose income can swing wildly between months, proactive year-end planning is the difference between a painful April surprise and a refund you can reinvest in your business. This guide walks through seven moves you can still make before the ball drops, each with the exact dollar impact, deadlines, and tools to pull it off.

$7,200+

Potential tax savings from maxing a Solo 401(k)

20%

Possible QBI deduction on pass-through income

Capital gains tax on harvested losses (offset unlimited)

Seven Year-End Tax Moves

Move 1: Accelerate Business Expenses Into This Year
Move 2: Defer Income to January (If It Makes Sense)
Move 3: Max Out Retirement Contributions
Move 4: Harvest Investment Losses
Move 5: Optimise the QBI Deduction
Move 6: Use a Donor Advised Fund for Charitable Giving
Move 7: Review Your Business Structure & Payroll
End-of-Year Moves to Avoid
Frequently Asked Questions

Move 1: Accelerate Business Expenses Into This Year

Prepay or Purchase Business Essentials Now

If you’ve been putting off buying equipment, software, or paying contractors, do it before December 31. Any business expense paid in 2026 is deductible on your 2026 return, lowering your taxable income.

Common accelerable expenses: Laptops, cameras, software annual subscriptions, online courses, contractor retainers, prepaid ad spend

Tax savings: At a 24% federal bracket, every $1,000 spent saves $240 in taxes (plus self-employment tax savings)

Key date: Payment must be made (credit card charged or bank transfer cleared) by Dec 31

Documentation: Keep receipts and proof of payment; for equipment over $2,500, use Section 179 to expense the entire cost immediately

This move is particularly powerful for online businesses planning growth—buying that new MacBook Pro or a year of Adobe Creative Cloud now not only upgrades your workflow but directly reduces your taxable profit. Just make sure the expense is ordinary and necessary for your business. See our full Tax Deductions for Online Businesses 2026 for what qualifies.

Pro Tip: Pay Contractors Early

If you work with freelance designers, VAs, or developers, pay their December invoices before year-end. The 1099-NEC obligation for 2026 is based on payments made in the calendar year—and you get the deduction now, even if the work was completed in early 2027.

Move 2: Defer Income to January (If It Makes Sense)

Delay Invoicing or Payments Until January 2027

For cash-basis taxpayers (most online earners), income is taxed in the year you receive it. If you expect to be in the same or a lower tax bracket next year, pushing some income into 2027 can lower this year's bill.

How to do it: Send December invoices with a January 2 due date; delay signing new contracts until January; postpone large one-time projects

When NOT to defer: If you anticipate a much higher income next year (e.g., a product launch), recognize the income now while rates are lower

Impact: Deferring $10,000 of income from the 32% bracket to the 24% bracket saves $800 in tax

Deferral is a timing game. Use our Tax Planning for Variable Income guide to model your brackets across years. Don't defer if it triggers late-payment penalties; clients may not appreciate the inconvenience, so use this only for amounts you can truly control.

RELATED: STRATEGIC TAX PLANNING

Tax Strategy for High-Income Online Earners in 2026

Advanced techniques for earners above $150K, including S-Corp optimisations and defined benefit plans.

Move 3: Max Out Retirement Contributions

Solo 401(k), SEP IRA, or HSA: Shelter Thousands

Retirement contributions reduce your taxable income dollar-for-dollar. As your own boss, you have access to accounts with contribution limits far beyond a regular IRA.

Solo 401(k) limit for 2026: Up to $69,000 (employee deferral $23,000 + employer profit-sharing ~20% of net SE income). If 50+, additional $7,500 catch-up.

SEP IRA limit: 25% of compensation, maximum $66,000

HSA limit (self-only): $4,150; family $8,300 (triple tax-advantaged if high-deductible plan)

Deadline: Solo 401(k) must be opened by Dec 31, but contributions can be made until tax filing deadline; SEP IRA can be opened and funded until filing deadline

If you’ve had a good year, a Solo 401(k) is the most powerful tool. You can contribute as both employee and employer, dramatically cutting your current tax bill while building wealth. See our comparison: Solo 401(k) vs SEP IRA in 2026. And for the full retirement picture, read Retirement Planning for Online Business Owners.

Warning: Don’t Wait Until April

While SEP IRA contributions can be made until tax day, a Solo 401(k) must be *established* by December 31. Open one now even if you fund later—otherwise you lose 2026’s contribution space forever.

Move 4: Harvest Investment Losses

Tax-Loss Harvesting in Taxable Accounts

If you hold stocks, ETFs, or crypto in a taxable brokerage account, selling losers can offset capital gains—and up to $3,000 of ordinary income per year—without permanently leaving the market.

How it works: Sell an investment that has lost value, realise the loss, and immediately buy a similar (but not substantially identical) asset to maintain exposure.

Offset priority: Losses first offset capital gains of the same type (short-term vs long-term), then the other type, then up to $3,000 of ordinary income

Crypto note: Wash sale rules don’t apply to crypto currently—you can sell Bitcoin at a loss and rebuy immediately, locking in the loss.

Many online earners are also investors. If your side portfolio has some red, harvest those losses before year-end. For guidance on building a tax-efficient portfolio, check out Index Fund Investing for Online Earners and Crypto vs Index Funds.

Move 5: Optimise the QBI Deduction

Qualified Business Income Deduction (Section 199A)

If your online business is structured as a sole proprietorship, LLC, or S-Corp (pass-through entity), you may be eligible for a deduction of up to 20% of qualified business income—before you even itemise.

Maximum deduction: 20% of QBI, subject to taxable income limits and W-2 wage or property basis limitations for higher earners

Thresholds for 2026 (estimated): Single filers phase‑out begins at ~$191,000; married filing jointly at ~$382,000

S-Corp strategy: Setting a reasonable salary affects QBI—since shareholder distributions are not QBI, optimising salary between payroll tax savings and QBI deduction is crucial

If you’re approaching these income levels, year-end moves like accelerating expenses or maxing retirement accounts can reduce your taxable income just enough to stay under the phase-out, preserving the full 20% deduction. For high-income scenarios, read our deep dive: Tax Strategy for High-Income Online Earners.

Move 6: Use a Donor Advised Fund for Charitable Giving

Donor Advised Fund (DAF) Strategy

Bunch several years’ of charitable donations into 2026 using a Donor Advised Fund. You get the full tax deduction this year, while grants to charities can be made over time.

How it works: Contribute cash or appreciated stock to a DAF (e.g., Fidelity Charitable, Schwab Charitable). You receive an immediate tax receipt for the full amount.

Tax benefit: Deduction is taken in 2026, lowering taxable income. If you donate appreciated stock, you also avoid capital gains tax.

Deadline: DAF contributions must be completed by Dec 31 to count for 2026—electronic transfers clear quickly, but stock donations may take days

This move is especially powerful if your income spiked in 2026 but you expect a lower year ahead. Bunching allows you to itemise deductions in the high-income year. For more on charitable deduction strategies, see Tax Strategy for High-Income Earners.

Move 7: Review Your Business Structure & Payroll

S-Corp Reasonable Salary & Entity Check

If you operate as an S-Corp, December is the last chance to fine-tune your reasonable salary and any year-end distributions. It’s also the time to decide if a structure change makes sense for 2027.

Reasonable salary: Ensure your W-2 wages from the S-Corp are defensible based on industry norms for your role. Too low triggers IRS scrutiny.

2027 planning: If your net income crossed $60K+ this year, moving from sole proprietor to S-Corp could save thousands in self-employment tax. See LLC vs Sole Proprietor vs S-Corp.

S-Corp election deadline: For 2027, file Form 2553 by March 15, 2027 (or within 75 days of the year start).

Also, if you hired contractors this year, make sure you’ve collected W-9s and are ready to issue 1099-NECs by January 31. Hiring Contractors vs Employees covers all the tax implications.

End-of-Year Tax Moves That Can Backfire

Not every “tax trick” works for online earners. Avoid these common traps:

Buying things you don’t need just for the deduction. Spending $1 to save $0.30 is not a good business decision.
Over-deferring income to the point of cash-flow problems. Don’t starve your business in January to save a few hundred in taxes.
Forgetting to coordinate estimated tax payments. If you defer income, your January 15 estimated tax payment should reflect the lower Q4 income—otherwise you overpay. Use our quarterly tax guide to recalculate.
Ignoring state tax deadlines. Many states have separate year-end deadlines for entity filings or franchise taxes.

Which year-end move should be your top priority?

Answer two quick questions to get a personalised recommendation.

What best describes your 2026 online income?

Under $80,000 (still growing) $80,000 – $200,000 (solid earner) Over $200,000 (high earner)

What’s your biggest year-end worry?

I'll owe way too much in April I'm behind on retirement savings I have crypto/stock gains I want to offset

Read the full guide

Frequently Asked Questions

Yes—as long as you have proof of payment. Credit card statements and emailed receipts are sufficient. Focus on large obvious items: annual software subscriptions, hardware purchases, contractor payments. Use a receipt tracking app like Dext or Hubdoc to quickly digitise what you have before year-end.

Yes—but you must establish the plan (sign the adoption agreement) by December 31. The provider (e.g., Vanguard, Fidelity, Schwab) can walk you through this quickly. Contributions can be made later, up to your tax filing deadline. Don’t miss the plan establishment window; even funding $0 now preserves your 2026 space.

Absolutely. Estimated payments are just prepayments—if your final tax liability is lower because of these moves, you’ll receive a refund or apply the overpayment to next year. The key is ensuring you’ve met the safe harbor to avoid underpayment penalties, which is typically 100% (or 110% for higher earners) of last year’s tax. Any overpayment beyond that is refundable.

The main risk is the “wash sale” rule: if you buy a substantially identical security within 30 days before or after the sale, the loss is disallowed. For stocks, swapping an S&P 500 ETF for a total market ETF avoids this. For crypto, there is currently no wash rule, so you can repurchase immediately. The other downside is resetting your holding period—new shares start short-term, which may affect future gains.

Forming an LLC is quick, but the S-Corp election for 2027 must be filed by March 15, 2027. There’s no rush to incorporate by December 31; however, if you plan to make entity-level purchases or set up payroll for 2027, starting the process now gives you a clean January 1 effective date. See our LLC vs S-Corp comparison for full details.

Then your 2026 tax outcome is whatever your raw income and expenses produce—likely resulting in a larger balance due in April. Each of these moves requires a little action now but can save anywhere from a few hundred to tens of thousands of dollars. Pick the one that fits your situation and implement it this week. For a complete checklist, see the Online Earner Finance Checklist 2026.