Year-End Tax Planning in Illinois: 2026 Checklist

Year-end tax planning in Illinois comes down to a handful of decisions that close on December 31: whether you have paid enough tax during the year, when to take income and gains, how to use retirement accounts, and which gifts to make. A few steps can wait until January or April. This checklist uses the IRS’s 2026 figures and the Illinois Department of Revenue’s current rules.

Families, executives and business owners each face their own version of these questions. Our tax planning and preparation services in Barrington revisit estimates, retirement contributions, Roth conversions, charitable gifts, and investment gains and losses as your circumstances and the rules change.

What should year-end tax planning in Illinois cover?

Start with the steps that must happen by December 31, then the ones due in January and April:

By December 31, 2026. Retirement plan deferrals from your remaining paychecks, required minimum distributions (a first RMD can wait until April 1, 2027), Roth conversions, qualified charitable distributions, charitable gifts you want counted for 2026, gifts that use the 2026 annual exclusion, Illinois 529 contributions you plan to subtract on your 2026 Illinois return, and investment sales that realize gains or losses.
By January 15, 2027. The fourth federal and Illinois estimated tax payments for 2026.
By April 15, 2027, for most people. IRA contributions for 2026.
By your business’s tax filing deadline, including extensions. Setting up and funding a SEP for 2026. For a calendar-year S corporation or partnership, the deadline before extensions is March 15, 2027.

Are your Illinois estimated tax payments and withholding on track?

Check now, while there is still time to fix a shortfall. The IRS and Illinois both compare what you paid during the year with this year’s tax or last year’s tax.

Illinois. Form IL-1040-ES calls for estimated payments if you reasonably expect your 2026 Illinois tax, after withholding and credits, to be more than $1,000. The rate is a flat 4.95% of net income. The fourth 2026 payment is due January 15, 2027, and you can pay through MyTax Illinois. Illinois waives the late-payment penalty on estimates if you timely paid the lesser of 90% of this year’s tax or 100% of last year’s tax.

Federal. Under the 2026 Form 1040-ES, you generally must pay estimated tax if you expect to owe at least $1,000 after withholding and refundable credits, and those will cover less than the smaller of 90% of your 2026 tax or 100% of your 2025 tax. The 100% becomes 110% if your 2025 adjusted gross income was more than $150,000 ($75,000 if married filing separately).

Withholding counts evenly. The IRS treats federal income tax withheld as paid in equal parts on each payment due date unless you show otherwise (Form 2210 instructions). Illinois also considers withholding paid evenly over the year unless you send pay stubs or an employer letter (IL-2210 instructions). Extra withholding from a December paycheck or bonus can therefore help cover an earlier shortfall, while an estimated payment counts from the date you make it.

Bonuses. Employers can withhold federal tax on bonuses and other supplemental wages at a flat 22%, and must use 37% on supplemental wages above $1 million for the year (IRS Publication 15). For 2026, the 35% bracket starts above $512,450 of taxable income for married couples filing jointly ($256,225 for single filers). A $100,000 bonus withheld at 22% but taxed at 35% leaves $13,000 of federal tax to pay later. Ask your employer how it withholds on stock compensation, too.

What tax strategies matter for high-income earners in 2026?

Public Law 119-21, the 2025 federal tax law, made the current tax brackets permanent and changed several deductions. For higher-income households, these are the 2026 items to review (IRS Publication 505):

The SALT deduction. For 2026, the limit on state and local tax deductions is $40,400. It shrinks once modified AGI exceeds $505,000, but not below $10,000. Married couples filing separately use half of each figure.
Charitable gifts if you itemize. Starting in 2026, only charitable contributions above 0.5% of your AGI are deductible. Grouping two years of gifts into one year can help you clear the standard deduction; ask how the new floor changes the result.
Charitable gifts if you don’t itemize. You can deduct up to $1,000 of cash gifts to eligible charities ($2,000 for married couples filing jointly).
The limit on itemized deductions. If your 2026 taxable income, figured before itemized deductions, is above $768,700 for joint filers or $640,600 for single filers (where the 37% bracket begins), your itemized deductions are reduced. The cut is 2/37, about 5.4%, of the smaller of your itemized deductions or the amount over that line.
Net investment income tax. A 3.8% tax applies to the lesser of net investment income or the amount by which modified AGI exceeds $250,000 for joint filers ($200,000 for single filers) (IRS).
Capital gains brackets. For 2026, joint filers pay 0% on long-term gains while taxable income stays at or below $98,900, 15% up to $613,700 and 20% above that.
Alternative minimum tax. If you exercised incentive stock options this year, you may be subject to AMT for the year of exercise (IRS Topic 427). The 2026 AMT exemption is $140,200 for joint filers and begins to phase out above $1,000,000 of alternative minimum taxable income ($500,000 for single filers).
The senior deduction. For 2025 through 2028, each taxpayer 65 or older can deduct up to $6,000, whether or not they itemize. Married couples must file jointly to claim it, and the deduction shrinks once modified AGI exceeds $75,000 ($150,000 for joint filers).

Common responses include grouping charitable gifts into one year, giving from an IRA after age 70½, and spreading income-raising moves across tax years. Each depends on a projection of your full return.

Should you realize gains or losses before December 31?

Only when the sale also fits your investment plan. Capital losses offset capital gains, and up to $3,000 of net capital loss ($1,500 if married filing separately) can offset other income each year, with the rest carried forward (IRS Topic 409). Gains on investments held more than one year are long-term.

Watch the wash sale rule. A loss is disallowed if, within 30 days before or after the sale, you buy substantially identical stock or securities, including in your IRA or Roth IRA, or your spouse does. The disallowed loss is usually added to the cost of the new shares, but not when the purchase is in an IRA. An IRS example applies the rule to an employee who receives another award of the same company’s stock within 30 days of a loss sale (IRS Publication 550).

In a lower-income year, the opposite move may make sense: realizing gains while taxable income stays within the 0% bracket. Illinois still taxes the gain at its flat 4.95% rate, and the added income can reduce income-based items such as the senior deduction.

Selling for tax reasons alone can change your portfolio’s risk, so weigh the investment decision first. If someone manages your investments, make sure they and your tax preparer are working from the same year-to-date gains and losses before you trade.

Which retirement account moves have a December 31 deadline?

Workplace plan deferrals, required minimum distributions and Roth conversions follow the calendar year. IRA contributions for 2026 can wait until the April 2027 filing deadline.

401(k), 403(b) and governmental 457(b) deferrals. The 2026 limit is $24,500. If the plan allows, catch-up contributions add $8,000 at age 50 or older, or $11,250 at ages 60 through 63 (IRS). Starting in 2026, if your 2025 wages from that employer (box 3 of your W-2) exceeded $150,000, any catch-up contributions must be Roth contributions. If the plan has no Roth option, you can’t make catch-up contributions.
Required minimum distributions. IRA owners generally must begin RMDs at age 73. The first can wait until April 1 of the following year; each later one is due by December 31. A missed RMD can trigger a 25% excise tax, reduced to 10% if corrected within two years (IRS RMD FAQs).
Roth conversions. A conversion is generally taxed federally in the year you convert, and an amount required as an RMD for the year can’t be converted (IRS Publication 590-A). Illinois does not tax the federally taxed portion of a traditional IRA converted to a Roth IRA. Our guide to Roth conversions in a down year covers what to review first.
Qualified charitable distributions. At age 70½ or older, you can give up to $111,000 for 2026 directly from an IRA to an eligible charity. Donor-advised funds and supporting organizations don’t qualify, and an ongoing SEP or SIMPLE IRA can’t be used. The gift counts toward your RMD and is left out of income instead of deducted, so it can help even if you take the standard deduction (IRS Publication 590-B).
IRA contributions. The 2026 limit is $7,500, plus $1,100 at age 50 or older. Contributions for 2026 can be made until your filing deadline, April 15, 2027 for most people.

How do gifts and 529 plans fit into year-end planning?

Both run on the calendar year. For 2026, you can give up to $19,000 to each person without using any of your lifetime exemption, and the federal basic exclusion is $15,000,000 per person.

Illinois has its own estate tax with a $4 million exclusion amount, and the Illinois Attorney General counts adjusted taxable gifts when deciding whether an estate must file. Gifts above the annual exclusion therefore matter for Illinois planning as well. Our article on the Illinois estate tax and its $4 million threshold explains the difference from the federal rules.

For college savings, your Illinois return can subtract contributions made during the year to Bright Start, Bright Directions or College Illinois, up to $10,000, or $20,000 for married couples filing jointly (Schedule M instructions). A contribution made in January counts for 2027, not 2026.

What should Illinois business owners review before year-end?

Several decisions interact, so review them together:

The pass-through entity tax election. Partnerships and S corporations can elect to pay Illinois income tax at the entity level at 4.95%, and owners receive a credit for their share (Illinois Department of Revenue). Public Act 104-0453 extended the election to 2026 and later years, and it is made each year. Under IRS Notice 2020-75, the entity deducts the tax in the year it pays it, and the payment does not count toward the owners’ SALT limit. Whether the election helps depends on the owners’ incomes and other deductions.
Equipment purchases. For 2026, federal law allows up to $2,560,000 of Section 179 expensing, reduced once the cost of qualifying property placed in service exceeds $4,090,000 (Rev. Proc. 2025-32), and 100% bonus depreciation is permanent for qualified property acquired after January 19, 2025 (IRS). Illinois does not follow bonus depreciation: Form IL-4562 adds it back and spreads the deduction over the asset’s federal depreciation period.
The qualified business income deduction. Eligible owners of sole proprietorships, partnerships and S corporations may deduct up to 20% of qualified business income (IRS). For 2026, limits begin to apply above $403,500 of taxable income for joint filers ($201,750 for most other filers).
Owner pay. An S corporation must pay a shareholder who works in the business reasonable compensation before making non-wage distributions (IRS). Compare 2026 wages with the work you did this year.
Retirement plans. A SEP can be set up and funded for 2026 as late as the business’s filing deadline, including extensions. The window for a new 2026 SIMPLE IRA generally closed on October 1, and 401(k) plans have their own deadlines (IRS Publication 560).

If you are weighing an entity change or an S corporation election, see our small business accounting and entity selection services. For the investment side of these decisions, read wealth management for business owners.

What should you bring to a year-end tax review?

Current numbers. A projection is only as good as the year-to-date figures behind it:

A recent pay stub for each spouse showing year-to-date wages and withholding
Federal and Illinois estimated payments made for 2026
Your 2025 federal and Illinois returns
Year-to-date realized gains and losses from each brokerage account
Planned charitable gifts and any required distributions still to be taken
Business year-to-date profit and loss, payroll and planned equipment purchases

Tax and accounting services are provided by NRACPA LLC. Investment advisory services are offered through Archer Investment Corporation under a separate engagement, and clients are not required to use both.

Prospective clients can book a free initial consultation. If you already work with the firm, book a meeting and send your documents securely before it.

Sources

Figures reflect IRS and Illinois guidance available as of October 19, 2026. This article is general information only, not individual tax, legal or investment advice.

This article provides general information only, not individual tax, legal or investment advice. Tax and investment decisions depend on your individual circumstances and current rules. Contact the office to discuss your situation.