Year-End Tax Moves for Self-Employed Professionals Before December 31

For independent consultants, fractional executives, coaches and every other 1099 professional

Short answer: The highest-impact year-end tax moves for self-employed people are opening and funding a Solo 401(k) or SEP IRA, buying equipment you already need before December 31, timing invoices and expenses on a cash basis, claiming the home office deduction correctly, and planning your January 15 estimated payment. Each one has a deadline, so start with a profit estimate now.

If you are a freelancer, independent contractor, sole proprietor or single-member LLC owner, December 31 is the last day most of your 2026 tax bill is still in your hands. After that, you are reporting what happened. Saving on taxes is the reason many people come to Sumly in the first place: 70% of Sumly users list it as one of their goals when they sign up.

Here are nine moves to make before the year ends, in the order we would tackle them.

1. Why should I estimate my 2026 profit before December?

Every move below depends on one number: your net profit for the year, meaning income minus business expenses. It sets your tax bracket, your self-employment tax and how much you can put into a retirement account.

Take your income to date, add what you expect to invoice through December, and subtract your expenses. Our free Tax Savings Calculator turns that into an estimate of your tax bill and the deductions you might be missing.

2. Should I open a Solo 401(k) or a SEP IRA before year end?

For most self-employed people with no employees, a retirement account is the single biggest year-end lever. Contributions lower your income tax now.

Solo 401(k): for 2026 you can defer up to $24,500 as the "employee" (more if you are 50 or older), plus an employer profit-sharing contribution, up to $72,000 in total. Opening it by December 31 keeps every option open; confirm your plan provider's deadlines for employee deferrals.

SEP IRA: simpler to run, with employer contributions only, up to 25% of compensation (for the self-employed, figured on net earnings after the self-employment tax deduction) and the same $72,000 cap. You can open and fund a SEP IRA up to your tax filing deadline, including extensions.

Worked example. An independent consultant nets $150,000 and is in the 24% federal bracket. She opens a Solo 401(k) in December and defers $20,000. That lowers her federal income tax by about $4,800 ($20,000 x 24%), and the money is still hers, invested for retirement. Retirement contributions reduce income tax, not self-employment tax.

3. Should I buy equipment before December 31?

If you were going to buy it anyway, buying and placing it in service before December 31 can move the deduction into this year. Laptops, monitors, cameras for a coaching practice and office furniture used for business can often be deducted in full in the year they are placed in service, through Section 179 or bonus depreciation.

The rule that matters: the item has to be in service, set up and used for business, by December 31. Ordered but still in the box does not count. Do not buy something you do not need to save tax; a dollar spent to save 30 cents is still 70 cents gone.

4. Can I delay invoices or prepay expenses to lower my taxes?

Most self-employed people use the cash method, which counts income when you receive it and expenses when you pay them. That gives you some control at year end:

Income: if you have a good reason to bill a December project in January, that income usually lands in next year. Payments you have already received, or that are available to you, count this year.

Expenses: paying December business bills before December 31, rather than in January, moves the deduction into this year. Prepaying further ahead is limited; the IRS 12-month rule generally allows it only when the benefit does not extend past 12 months.

Shifting income only makes sense when you expect next year's rate to be the same or lower.

5. How do I claim the home office deduction correctly?

If you use part of your home regularly and exclusively for business, you can deduct it. You have two options:

Before year end, measure the space, gather a year of utility and internet bills, and note the business share of your phone and internet.

6. Can I deduct my health insurance as a self-employed person?

Usually, yes. If you are not eligible for an employer-subsidized plan through your own job or a spouse's, premiums for you, your spouse and dependents are generally deductible. If you have a qualifying high-deductible health plan, contributing to a Health Savings Account before the deadline adds another deduction.

7. What should I do about 1099s for contractors I paid?

If you paid other contractors (a designer, a VA, a bookkeeper), collect a Form W-9 from each now, not in January. For payments made in 2026, the threshold for filing Form 1099-NEC rises from $600 to $2,000, so fewer small payments need a form. Forms for 2026 payments are due to contractors and the IRS by February 1, 2027 (January 31 falls on a Sunday).

8. How much should my January 15 estimated payment be?

Your fourth quarterly estimate covers September through December income and is due January 15, 2027. It is often the biggest payment of the year, and it arrives right after the holidays. Run it now, while you can still adjust with the moves above. If you have been setting aside 20% to 30% of each client payment in a savings account for taxes, most of it should already be there.

9. Why clean up my books before December 31?

Every move above relies on clean numbers. Categorize the last few months of transactions, match receipts to the larger expenses, and separate any personal spending that slipped into business accounts. Clean books in December mean a faster, cheaper filing in the spring.

Year-end checklist for the self-employed

Frequently asked questions

What is the last day to make year-end tax moves as a self-employed person?

December 31 for most moves, including equipment purchases, paying expenses and opening a Solo 401(k). SEP IRA contributions can wait until your filing deadline, including extensions.

Is it worth buying equipment just to lower my taxes?

No. A deduction only returns part of what you spend. Buy what your business needs, and time the purchase before December 31 if it was coming anyway.

Does a Solo 401(k) reduce self-employment tax?

No. Contributions reduce income tax. Self-employment tax is based on net earnings before retirement contributions.

Can coaches and consultants deduct a home office if they also see clients elsewhere?

Often, yes. The space has to be used regularly and only for business, and it can qualify as your principal place of business if you do your administrative work there.

What year-end move matters most for a fractional executive?

Usually retirement contributions, because high income makes each dollar of deduction worth more. A Solo 401(k) allows the largest contributions for someone with no employees.

Sources and further reading

Rules and limits are published by the IRS: One-participant 401(k) plans, SEP plans, Home office deduction, Form 1099-NEC and Estimated taxes. Tax situations vary, so confirm specifics with your tax professional.

Go into January with nothing to catch up on

Sumly tracks income and expenses as they happen, flags deductions automatically and calculates your January 15 estimate, with a real Tax Pro for year-end questions.