Tax and legal planning doesn’t have to be complicated, but it does have to be intentional. The most expensive mistakes I see every year come from people asking the right questions too late. Avoiding these ten issues in 2026 will save you far more than chasing one-off deductions ever will.
1. Starting With the Wrong Entity
An LLC is still the right starting point for most businesses. It’s flexible, inexpensive, and gives you liability protection while you’re getting traction. You can deduct expenses, open bank accounts, and operate legitimately without overcomplicating things too early.
Once net profits consistently land around $40,000 to $50,000, that’s usually when S corporation taxation becomes worth discussing. That’s where self-employment tax savings start to matter. The mistake is jumping too soon or waiting too long. Start simple, then upgrade when the numbers justify it.
2. Renting Property to Family Without a Plan
Renting to family at a discount feels harmless, but the IRS doesn’t see it that way. If rent isn’t at fair market value, the property may be treated as personal use, which means losing depreciation, repairs, utilities, and other deductions you were counting on.
Your options are straightforward:
- Rent at market value and gift money back if you want
- Treat the property as personal and forget the write-offs
- Or operate it as a true rental and report everything properly
Trying to split the difference usually costs you.
3. Putting Vehicles Into a Living Trust Unnecessarily
For most families, personal vehicles don’t belong in a revocable living trust. In many states, vehicles transfer easily with a death certificate and basic paperwork, no probate required.
Adding vehicles to a trust often creates more administrative hassle than protection. Unless you own collectible or high-value vehicles or have a specific estate planning reason, keeping cars out of the trust is usually the cleaner move.
4. Relying on Umbrella Insurance Alone
Umbrella insurance adds extra liability coverage on top of your auto and homeowner policies once those limits are exhausted. It’s designed to protect you from large lawsuits, not everyday risks, and it only applies to claims that are already covered by your underlying policies.
If you own rentals, run a business, or have visible assets, umbrella coverage can be a useful layer. Just don’t confuse insurance with asset protection. Insurance is a backstop. Structure is the foundation.
5. Ignoring the Real Power of the Home Office
The home office deduction itself is modest. Even under the simplified method, it caps at $1,500 per year. That’s not why it matters.
The real value is what it unlocks. Once your home qualifies as your principal place of business, vehicle mileage, travel expenses, and related deductions become much easier to support. This deduction isn’t about square footage. It’s about positioning your business correctly.
6. Investing With a Partner Without Documents
Doing business with a friend, fiancé, or long-term partner without formal agreements is one of the fastest ways to create future problems.
At a minimum, you need:
- A properly structured LLC with ownership clearly defined
- A buy-sell agreement covering death, exit, and disputes
- Separate estate plans so personal issues don’t spill into the business
Good relationships don’t replace good documents. They rely on them.
7. Keeping Rentals Trapped Inside Trusts
Trusts are powerful planning tools, but they’re not designed to hold income-producing assets forever. Trust tax brackets climb fast, which means income can get hit with higher taxes much sooner than it would outside the trust.
If beneficiaries are financially stable adults, distributing rental properties out of the trust often makes sense. If minors or at-risk beneficiaries are involved, keeping assets in trust may be appropriate. The mistake is leaving assets stuck there by default instead of choosing intentionally.
8. Claiming a New State Without Proving It
You don’t save state income tax by announcing a move. States look at facts, not intentions.
Driver’s licenses, voter registration, time spent, bank accounts, property ownership, and social ties all matter. If you don’t document the move properly and cut ties with the old state, you may still be taxed there. Residency planning is about evidence, not vibes.
9. Leaving Your Business Exposed in Divorce
Without a prenup or postnuptial agreement, a business built during marriage is usually marital property. That means if there’s a divorce, your spouse may be entitled to a share of the business value, even if they never worked in the business. You’ll usually keep operating control, but you may be forced to buy out their interest to settle the claim.
Planning while things are stable gives you leverage. Waiting until divorce removes it.
10. Treating Crypto Mining Like a Hobby
Crypto mining isn’t passive investing. It’s an active business that generates ordinary income, which means it’s subject to self-employment tax if you run it personally. Treating it like a side hobby is one of the fastest ways to overpay the IRS and undercut your cash flow.
When mining activity reaches a meaningful income level, proper structure matters. Running operations through an S corporation can reduce taxes by splitting income between reasonable salary and distributions, while also allowing you to deduct legitimate business expenses like equipment, electricity, hosting, repairs, and management costs. If mining is producing consistent revenue, it needs to be treated like a business, structured like one, and planned for like one.
The Bottom Line
Good tax and legal planning means making intentional decisions while you still have leverage. Most costly mistakes don’t come from doing something wrong. They come from waiting too long, using the wrong structure, or assuming problems will sort themselves out later.
If any of these mistakes sound familiar, don’t wait for the IRS, a creditor, or a divorce attorney to bring them to the surface. My team at KKOS Lawyers helps business owners clean up broken structures, close dangerous gaps, and lock in tax and legal strategy before the window closes. Book a free 15 minute call now to get the clarity you need going into 2026. Because waiting until something blows up is the most expensive way to plan.
