How to Lower Your 2026 Tax Bill Before December 31 (Self-Employed Edition)

Every October, the same question shows up in tax forums: "How can I reduce my tax bill for the rest of the year?"

It’s a good question, and the timing matters. You have about ten weeks left in 2026. That’s enough time to do real things, and not enough time to wait around. Here’s what actually moves the needle for a self-employed person, and what only sounds clever.

First, know your number

You can’t lower a bill you haven’t estimated. Before you do anything else, get a rough read on where 2026 is heading:

• Income so far this year (everything that hit your account, not just what you invoiced)
• Business expenses so far
• What you’ve already paid in estimated taxes

Net income (income minus expenses) is the number that gets taxed. Self-employment tax and income tax both start there. If you don’t have this on hand, a quick pass through your bank and card statements will get you close enough for planning.

Move 1: Make sure you’re not underpaying

This one isn’t glamorous, but it protects you from penalties. The fourth estimated payment for 2026 is due January 15, 2027. If you’ve skipped payments or paid too little, you can still catch up. A bigger Q4 payment won’t erase an earlier shortfall entirely, but it limits the damage. See our guide to quarterly estimated taxes for the safe-harbor rules.

Move 2: Put money into retirement

For most self-employed people, this is the biggest lever.

• SEP IRA. Generally you can contribute for 2026 up until your filing deadline (including extensions), so you may not need to decide by December 31.
• Solo 401(k). Up to $24,500 as the employee plus roughly 20% of net earnings as the employer, capped at $72,000 combined for 2026 before catch-up. A brand-new sole-proprietor plan can be opened as late as April 15, 2027 and still take a 2026 employee deferral (SECURE 2.0’s first-year rule); an existing plan needs the deferral election by December 31. Limits and deadlines are in our Solo 401(k) contribution limits and tax savings post.
• Traditional IRA. Deductibility depends on your income and whether you’re covered by a workplace plan.

A retirement contribution is money you keep, just in a different account. It lowers taxable income now and you pay tax later. See how much tax a Solo 401(k) can save for how the two contribution types work.

Move 3: Time your income and expenses (carefully)

If you use the cash method (most solo businesses do), income counts when you receive it and expenses count when you pay them. That creates a little flexibility:

• Buy supplies or equipment you were going to buy anyway in December instead of January.
• If you’re comfortable with it, and your clients are too, delay sending a December invoice until early January.

Two warnings. First, don’t buy things you don’t need just to create a deduction (more on that in our post about the "spend money to save taxes" myth). Second, pushing income into next year only helps if next year’s bracket won’t be higher. If you expect a bigger 2027, you may want the opposite.

Move 4: Check the deductions you might be missing

ate in the year is a good time to sweep for things that slipped through:

• Mileage. Business miles, logged. The IRS standard rate for 2026 is 72.5 cents per mile for trips through June 30 and 76 cents per mile from July 1, so log the date with every trip.
• Home office, if you have a space used regularly and exclusively for business.
• Health insurance premiums for yourself, in many cases.
• Software, subscriptions, phone and internet (the business-use share).
• Education and licensing that’s tied to your current work.
• The QBI deduction, a deduction of up to 20% of qualified business income that many solo owners overlook. It has income limits and rules, so check current guidance.

Move 5: Clean up your books now

Nobody enjoys this one, but December 31 is a lot easier when the year isn’t a pile of unlabeled transactions. Categorize what you have. Save receipts for anything big. Separate personal from business spending.

What doesn’t work

• "I’ll just buy a new car/equipment so I don’t owe." Spending a dollar to save thirty cents is still losing seventy cents.
• Waiting until April. Most of the big options expire or get complicated after December 31.
• Ignoring your state. Many states have their own estimated payments and rules.

This is why Toozi exists

Year-end tax planning is hard because you’re doing it with incomplete information. Toozi tracks your income and expenses all year by text, tells you what you owe so far, and flags deductions you may be missing, so October is a check-in, not a scramble.

The Toozi team

Toozi isn’t your CPA and this isn’t formal tax advice. It’s the plain-English version. Limits, deadlines, and rules change, so check current IRS guidance or talk to a pro about your specific situation.