Year-end tax moves for the self-employed and gig workers, 2026

Under the cash method most self-employed people use, an expense generally counts in the year you pay it, so a business expense paid by December 31, 2026 belongs on the 2026 return and the same expense paid in January belongs on the 2027 one. Publication 538 puts the rule this way: under the cash method you generally report income in the tax year you receive it and deduct expenses in the tax year you pay them.

Paying ahead has a limit. An expense paid in advance is generally deductible only in the year it applies to, unless it qualifies for the 12-month rule: the benefit it buys does not extend beyond the earlier of 12 months after it begins or the end of the tax year after the year you pay. A year of software paid in December can qualify; a three-year subscription cannot, and is spread over the years it covers.

Equipment counts for 2026 only if it is placed in service by December 31, which the IRS defines as ready and available for a specific use, not merely ordered or paid for. A laptop ordered in December that is not delivered until January is 2027 equipment. Under the July 2025 tax law, certain business property acquired after January 19, 2025 qualifies for 100% bonus depreciation, so the business-use cost can come off in the first year; for a vehicle, the IRS notes that business use has to be more than 50%, and passenger cars stay subject to the yearly depreciation limits for them.

A SEP-IRA does not have to be opened by December 31: the IRS says it can be set up for a year as late as the due date, including extensions, of the business’s income tax return for that year. Contributions for 2026 can be made by the same date, so the amount can be decided once the year’s profit is known.

Other retirement plans, such as a solo 401(k), have their own deadlines for setting up the plan and for each kind of contribution. Check the plan’s rules with its provider before counting on a contribution made after December 31.

The fourth 2026 installment, for income earned September 1 to December 31, is due January 15, 2027. You do not have to make it if you file your 2026 return by February 1, 2027 and pay the entire balance with it.

For the underpayment penalty, the IRS treats income tax withheld from wages as paid in equal parts on each due date, so extra withholding from a December paycheck also counts toward the installments that were due earlier in the year. If you also have a job, a new Form W-4 for the last paychecks of the year can make up for estimated payments that were missed. A late estimated payment, by contrast, counts only from the day it is paid.

The mileage deduction rests on a log made at or near the time of each trip, so December is the month to finish it, not to start it. For 2026 the business rate is 72.5 cents a mile from January 1 to June 30 and 76 cents from July 1 to December 31, so the log needs dates as well as miles.

Fewer clients will send a Form 1099-NEC for 2026, because the reporting threshold rose for payments made after 2025, and the income is taxable whether or not a form arrives. The threshold is now $2,000, up from $600. Payment apps and online marketplaces have to send a Form 1099-K only when payments total more than $20,000 and there are more than 200 transactions, though they may send one below that. Your own records of what each client paid are what the return is built on.