2026 Year-End Tax Planning: Strategies to Consider Before December 31

As we approach the end of 2026, now is an opportune time to review your financial goals and identify tax planning opportunities. Thoughtful year-end planning can help reduce your tax liability, maximize retirement savings, and make more informed decisions about charitable giving and wealth transfer.

This year is particularly important because several provisions of the One Big Beautiful Bill Act (OBBBA) took effect in 2026, changing the way certain charitable contributions and itemized deductions are treated.

OBBBA introduced new rules for charitable contribution deductions beginning in 2026, which are particularly relevant for high-income taxpayers who itemize deductions.

Taxpayers who itemize deductions can now deduct charitable contributions only to the extent that their total eligible contributions exceed 0.5% of adjusted gross income. For example, if your AGI is $500,000, the first $2,500 of charitable contributions will not qualify for a deduction, and only contributions exceeding that amount are potentially deductible, subject to other applicable limitations.

For taxpayers in the 37% federal income tax bracket, the tax benefit of itemized deductions is effectively limited to a 35% rate, the result of OBBBA’s permanent repeal of the Pease limitation. This means that charitable deductions may provide a smaller federal tax benefit than they did in prior years.

Beginning in 2026, taxpayers who take the standard deduction can claim an additional deduction for qualifying cash contributions to eligible public charities:

• Up to $1,000 for individual filers.
• Up to $2,000 for married couples filing jointly.

This provision does not apply to contributions to donor-advised funds or private foundations.

If charitable giving is part of your financial plan, consider coordinating the timing and type of contributions with your overall tax strategy.

Some opportunities include:

• Donating appreciated investments from your nonqualified account held for more than one year rather than cash. This can potentially provide a fair-market-value deduction while avoiding capital gains taxes on the appreciation, subject to applicable limitations.
• Using a donor-advised fund (DAF) to consolidate multiple years of charitable contributions into one year, allowing you to potentially maximize itemized deductions.
• Coordinating charitable contributions with years of higher income to make the most of available deductions.
• Considering Qualified Charitable Distributions (QCDs) from an IRA if you are age 70½ or older. QCDs can satisfy all or part of your required minimum distribution while keeping the distributed amount out of taxable income.

Remember, a QCD is not an itemized charitable deduction. Its tax benefit comes from excluding the qualifying distribution from income, so the new 0.5% AGI floor does not apply to it.

If you are still working, review your retirement plan contributions to make sure you are taking full advantage of the available tax-deferred or Roth savings opportunities.

For 2026, the IRS increased the employee contribution limit for 401(k), 403(b), and most governmental 457(b) plans to $24,500.

Additional catch-up contributions are available for those approaching retirement:

• Age 50 and older: An additional $8,000, bringing the maximum employee contribution to $32,500.
• Age 60–63: An enhanced catch-up contribution of $11,250, bringing the maximum employee contribution to $35,750.

One additional consideration for higher-income employees: Beginning in 2026, if your wages from your employer exceeded $150,000 in the prior year, catch-up contributions generally must be made as Roth contributions if your plan offers the required Roth feature. This means those catch-up contributions are made with after-tax dollars rather than pre-tax dollars.

If you participate in an eligible high-deductible health plan (HDHP), a Health Savings Account (HSA) is one of the most valuable tax-advantaged savings vehicles available.

HSAs offer three distinct tax benefits:

• Contributions are made with pre-tax dollars that helps reduce your taxable income.
• Investment growth is tax-free.
• Withdrawals for qualified medical expenses are tax-free.

Unlike a Flexible Spending Account (FSA), unused HSA balances roll over from year to year, allowing you to accumulate savings for future healthcare expenses, including those during retirement.

If you are eligible, review your 2026 contributions to determine whether you have maximized the available contribution limit of $8,750 for family, and $1,000 age 55+ catch-up.

If you have investments in taxable brokerage accounts, year-end is an excellent time to review opportunities for tax-loss harvesting.

Tax-loss harvesting involves selling investments that have declined in value to realize capital losses. These losses can offset realized capital gains and, if losses exceed gains, up to $3,000 of ordinary income annually ($1,500 if married filing separately). Any remaining losses can generally be carried forward to future tax years.

Before implementing this strategy, be mindful of the IRS wash-sale rules, which generally disallow a loss if you purchase substantially identical securities within 30 days before or after the sale.

For families interested in legacy planning and transferring wealth to children, grandchildren, or other beneficiaries, the annual gift tax exclusion is an important estate planning opportunity.

For 2026, the annual gift tax exclusion remains $19,000 per recipient, per donor.

A married couple can collectively gift $38,000 without using any of their lifetime gift and estate tax exemption, assuming the gifts qualify for the annual exclusion.

For families with multiple children and grandchildren, these annual gifts can become a meaningful wealth transfer strategy over time. Consider whether gifting cash, appreciated investments, or other assets aligns with your broader estate planning objectives.

Remember that gifts must generally represent a present interest to qualify for the annual exclusion. Certain gifts may require filing a federal gift tax return, even when no gift tax is ultimately due.

For those already retired, year-end planning should include a review of current and anticipated income.

Consider whether there are opportunities to:

• Complete Roth conversions
• Coordinate income sequencing between cash, taxable, tax-deferred, after-tax Roth accounts, and deferred compensation to improve long-term tax efficiency.
• Satisfy Required Minimum Distribution (RMD) before December 31.
• Use Qualified Charitable Distributions to satisfy RMDs while supporting charitable organizations.
• Review capital gains and losses to manage taxable investment income.

Remember that your tax situation in retirement is influenced by more than your investment withdrawals. Social Security benefits, pensions, interest, dividends, capital gains, and other sources of income all contribute to your overall tax picture.

Planning ahead can help avoid unnecessary tax surprises and create a more sustainable retirement income strategy.

Year-end tax planning is most effective when it is coordinated with your broader financial plan. Decisions involving charitable contributions, retirement savings, investment portfolios, and wealth transfers can have implications beyond the current tax year.

As a fee-only fiduciary wealth planner, my goal is to help clients make informed financial decisions that align with their objectives while considering the tax implications along the way. The best tax strategy is rarely about one isolated decision. It is about coordinating all the moving pieces of your financial life to make the most of the opportunities available.