2026 year-end tax planning tips and items to consider
Like with prior years, I feel the need to give the disclaimer here that most of what you’re about to read is recycled from previous articles I’ve written. And a lot of it is copy and pasted verbatim. But that’s because most of these items are always things to consider as part of each year’s year-end tax planning and are therefore “evergreen” topics. It’s not just me being lazy and not wanting to write this whole thing from scratch. But I must say, it does save me a great deal of time in not having to come up with a full-blown article from the ground up! 😊
However, there are also some new things to bring up for 2026, thanks to last year’s passage of the One Big Beautiful Bill Act that put in place some tax code changes, some starting with the 2026 tax year. And I’ll make mention of the 2026-specific things below accordingly.
Without further ado, below are some tax planning tips and things to consider as we enter the final couple of months of the year. And note that these are just in reference to federal income tax; I’m not addressing any state-specific tax issues here.
Contributions to qualified plans – If you’re eligible to make contributions to qualified retirement plans such as IRAs, Roth IRAs, 401(k)s, 403(b)s, 457s or the federal Thrift Savings Plan (“TSP”), or if you are eligible to contribute to a Health Savings Account (“HSA”), now would be a good time to check to see if you’ve made (or will make) all of the contributions you planned for the year.
The deadline to make 2026 contributions to IRAs, Roth IRAs and HSAs is April 15, 2027. Specifically, you have until you file your tax return (assuming you file your return on time), plus extensions, to contribute for the 2026 tax year.
The deadline to make contributions to the various employer-sponsored retirement plans (i.e. 401(k)s, 403(b), 457 or the TSP) is December 31, 2026. While the technical deadline is December 31, the practical deadline is whenever your last paycheck is for the year, as contributions need to be made via payroll deductions.
Roth conversions – if doing Roth conversions is part of your 2026 tax plan, be sure to get the conversion(s) done by close of business December 31st (but don’t cut it too close, as I’ll mention at the end of this article).
Unlike making contributions to Roth IRAs, where you can contribute up until filing your tax return next year, making a conversion to a Roth IRA needs to happen before the end of this calendar year.
Qualified plan distributions – if you plan on doing 2026 distributions from any of your qualified retirement plans (e.g. IRA, 401(k), etc.), be sure to do them prior to end of December 31st so they count for this year.
Like with doing 2026 Roth conversions, if you want a distribution from a qualified plan to count for 2026, you have to actually do it in 2026. It’s not like making contributions to some plans such as IRAs and Roth IRAs where you can make a 2026 contribution up until you file your 2026 tax return in 2027.
Required Minimum Distributions (“RMDs”) – similar to the point above about qualified plan distributions, if you are required to take RMDs from a qualified plan, be sure to take it prior to the end of December 31st, as that’s the deadline for the RMD to count for the year.
RMDs may apply to your own qualified retirement plans, or to qualified plans you inherited from someone else. There are penalties for not taking RMDs when you were supposed to, so be sure to get them in before the end of the year.
The specific types of inherited accounts I’m referencing are inherited pre-tax accounts where the original account owner 1) died after 2019, 2) was of an age where they were required to start their own RMDs and 3) left the account to someone who is a “noneligible designated beneficiary.”
A noneligible designated beneficiary is a person who is NOT:
- the original owner’s spouse
- a child under the age of majority
- more than 10 years younger than the original owner
- permanently disabled
- chronically ill
A noneligible designated beneficiary has to fully distribute the inherited account by the end of the 10th year after the year of the original owner’s death. However, in the case where the original owner was of their own RMD age, the beneficiary also needs to take a minimum amount of distribution from the inherited account each year along the way, and then still empty it before the end of the 10th year.
Up through 2024, the IRS temporarily waived the penalties for beneficiaries not taking the annual distributions from inherited accounts. That's because there was a lot of confusion around which beneficiaries actually have to take annual RMDs and which don't. However, starting last year, the IRS stopped waiving penalties. Therefore, people need to take this year’s RMD from the inherited account, if applicable.
Charitable donations (but not Qualified Charitable Distributions; I discuss those later) – if you’re charitably inclined and want a potential 2026 tax benefit for your donations, be sure to make them before the end of this year.
Depending on how you’re making the donation, there are certain deadlines to be aware of.
If you’re gifting securities, the date of the donation is the date the transfer of securities from your account to the account of the charity. So be sure to get the transfer/gift processed at your custodian before the end of December 31st.
If you’re writing a check to the charity, the date of the donation is the date you send the check; not the date the charity cashes. But there is potentially more nuance to it.
If you deliver the check yourself, the donation date is the date you deliver it.
If you mail the check via USPS, the donation date is the date of the postmark. This is known as the “mailbox rule.”
However, if you use a private delivery service like FedEx, the date of the donation is the date the charity receives the check and NOT the date you shipped it (i.e. the mailbox rule does not apply in this case).
There are a few new charitable donation rules that went into effect for 2026.
First, if you'll use the standard deduction because you won't have enough itemized deductions to benefit from itemizing your donations, you can still deduct up to $1,000 of cash charitable donations made in 2026 if you’re single, or up to $2,000 if you’re married and file a joint return.
It’s important to note that these extra deductible donations only apply to cash donations you make; not non-cash donations such as securities, household goods, etc. Additionally, they do not apply to donations you make to Donor Advised Funds, even if the donation is made in cash.
So, be sure to keep track of your cash donations this year, even if you end up using the standard deduction, because you’ll get some tax benefit for them.
The other 2026 change to charitable donations applies to people who do actually itemize their deductions. In the past, you used to be able to include in your itemized deductions every dollar of charitable donation you made during the year. But, starting this year, you can only itemize deductions that are in excess of 0.5% of your Adjusted Gross Income, or AGI.
For example, assume your AGI for 2026 is going to be $100,000. You can only itemize donations that were in excess of 0.5% * $100,000, or in excess of $500. So if you donated $10,000 worth of cash, securities and household goods, as an example, you would only be able to include $10,000 - $500 = $9,500 on Schedule A of your tax return.
And in case you’re wondering, the above-mentioned $1,000 or $2,000 deductions for single or married folks are NOT subject to the 0.5% of AGI hurdle. And that’s because the $1,000 and $2,000 deductions are separate and unrelated to itemized deductions. Like I said, these new deductions only apply if you use the standard deduction.
Qualified Charitable Distributions (“QCDs”) – A QCD is when you donate money directly from a pre-tax IRA to a qualified charity. You need to be at least 70 ½ to do a QCD (you need to actually be 70 ½; it’s not good enough to simply be in the year you turn 70 ½), and the money needs to go directly from your IRA custodian to the charity; you cannot take the distribution to yourself and then turn around and donate the cash to the charity. Well, you can, but then it’s not a QCD. Then it’s just a normal taxable IRA distribution and subsequent donation.
What makes a QCD special and different from just taking an IRA distribution and then turning around and donating the cash is that if the money goes directly from the custodian to the charity (as opposed to first getting paid to you), the amount of the distribution does not show up in your gross income. And hence the QCD won’t potentially impact things driven off your gross income like Medicare premium surcharges, how much of your Social Security is taxable, whether or not the Net Investment Income Tax applies, etc.
Furthermore, QCDs can take the place of your RMD for the year. For example, if you have to take a $30,000 RMD from your IRA this year, but you don’t actually need all of that money AND you’re charitably inclined, you can do a QCD instead. Let’s say you distribute to yourself $20,000. But that’s $10,000 less than your RMD; you still need to take out another $10,000. However, instead of taking it as an additional $10,000 taxable distribution to yourself, you can do a QCD for $10,000 to a charity. And like I said before, that $10,000 won’t even show up in your gross income on your tax return (but remember to reflect the QCD accordingly in your tax return, otherwise, you might mistakenly reflect the QCD as an ordinary taxable distribution).
The total amount of QCD that can be done in 2026 is $111,000 per person. Which means a married couple could collectively QCD up to $222,000 this year.
There is one 2026-related change to QCDs, and that's how they get reported on the year's 1099-R from your IRA custodian. Prior to 2026, the 1099-R for the year would not make any special note or distinction about how much, if any, of the distributions from the IRA were QCDs vs normal outright taxable distributions. Which meant it was up the account holder to proactively and manually make an adjustment in their tax return to account for the fact that some or all of their reported IRA distribution was actually a QCD. Otherwise, if they didn't remember to account for the QCD on their tax return, all of the QCD would be reported as fully taxable. Which isn't cool.
Starting this year, IRA custodians should be reporting QCDs on 1099-R with the code of "Y" in box 7 of the 1099-R. However, it's not yet clear exactly how they will report this in terms of splitting out QCD amounts vs normal distribution amounts. As such, at least for this year, still pay close attention to your IRA's 1099-R for the year if you did QCDs, to make sure you ultimately report it all properly on your tax return.
Making large gifts – if you plan on gifting large sums of money, securities, etc. to family or friends (not charities; that would be covered under donations like I mentioned before), consider trying to break up your gifts into multiple years to try to not exceed each year’s annual gift exclusion. If/when you gift to someone more than the respective year’s gift exclusion amount, you need to file a Form 709 gift tax return to report the gift. It likely won’t be taxable, but it is nonetheless required to be reported to the IRS.
For 2026, the annual gift exclusion amount in making gifts to any one person is $19k, which is the same as it was in 2025. For example, assume you plan on soon giving your child $30k to buy a car. Instead of giving them $30k in one shot, thus triggering the requirement for you to file a gift tax return, consider breaking it up into two; one gift of no more than $19k in 2026, and then another gift of the remaining $11k in 2027.
Tax loss or tax gain harvesting – Tax loss harvesting is when you consciously sell a position at a loss in a nonqualified (i.e. regular) brokerage account. Conversely, tax gain harvesting is when you consciously sell something at a gain in a nonqualified brokerage account.
There is more to it than this but, in a nutshell, tax loss harvesting is when you want to realize the loss on a position in the current year to help reduce a realized gain you have for the year on another position, or to help reduce the taxability of the rest of your income (as you can typically deduct up to $3k of net realized loss against your other sources of income on your tax return).
If you do harvest losses in a taxable account, be cognizant of the wash sale rule, which could potentially make some or all of those realized losses not able to be realized in 2026.
Under the wash sale rule, if you buy the same or a substantially identical security within 30 days before or 30 days after the date of the sale that generated the realized loss, some or all of that loss may not be recognizable in this tax year.
And wash sales don’t only apply to purchases in the same account where the position was sold. They apply to ALL of your accounts across ALL of the different custodians you might have. And if you’re married, they apply to your spouse’s accounts, too.
For example, if you sell shares of Microsoft at a loss in your brokerage account on November 15th and then your spouse buys shares of Microsoft in his or her IRA on November 30th (i.e. within 30 days after the date of your sale) that will lead to a wash sale.
Tax gain harvesting is when you sell a position to intentionally recognize a gain in the current tax year. One of the more common and beneficial applications of tax gain harvesting is for people with otherwise really low income, where they can realize some long-term capital gains (i.e. gains on positions held more than 12 months) at a federal tax rate of zero.
Also, don’t forget to see if you have any carried over losses from 2025 that will be applied toward your 2026 tax return, as that will impact how much gain or loss you might want to harvest this year.
Prepare a pro forma 2026 tax return – while potentially complicated to do (at least to do accurately), doing a preliminary mockup of what your 2026 tax return should look like can be a helpful exercise.
Even if you already did a projected 2026 tax return for yourself earlier in the year, you most likely want to true it up now because more the year has since passed and there is therefore less of the year for which you have to guess what the income will be.
Doing a projected current year tax return can show if you are thus far short on paying taxes or having taxes withheld, if your income is above or below certain limits (such as if you’re trying to “fill up” a certain tax bracket with Roth conversions and finding out you still have some room left to convert more), if you’re close to being able to itemize deductions and therefore maybe pull some future year donations into the current year, etc.
If you realize you need to pay more tax, you can do so by making estimated payments, or potentially by having taxes withheld from certain income sources. Specifically, you can have taxes withheld from wages, pensions, IRA distributions, annuity income, Social Security and a few other less common sources of income. However, at this point in the year, it may be difficult to have withholdings updated in time. It’s likely too late to update your Social Security withholdings, and it’s cutting it close to update your payroll withholdings at this point in the year. However, if you will be making IRA distributions, you can definitely increase your withholdings on those.
If you don’t have income sources from which you can have taxes withheld, you can also manually make an estimated payment via sending a check or doing an online ACH bank transfer to the government (i.e. either the US Department of Treasury for federal income tax and/or your state’s respective taxing authority for state income tax). However, depending how much you're short in paying taxes for the year, you might be subject to underpayment interest if you didn't pay enough tax earlier in the year, even if you pay up the rest of what you think you owe now. It's complicated. And I'll save the topic of underpayment interest (and how to try to avoid it) for a different article.
If you will be making an estimated payment for the 4th quarter, the deadline to make the payment is January 15, 2027.
Less generous Affordable Care Act (“ACA”) tax credits – this is something that, if it impacts you, you probably would have already accounted for in your tax planning for the year. But in case you can still benefit from this and didn't already know it, here you go!
For people who get health insurance through the ACA, there are potentially tax credits to be received that help defray the cost of the monthly premiums of ACA policies. For 2021 through 2025, there was a temporary expansion of eligibility for said tax credits. The expanded rules removed the hard cap on the income people could have and still qualify for credits (where the cap was 4x the federal poverty level) and made the amount of credits available more generous for any given level of income.
However, starting this year, the temporary expansion rules ceased and reverted back to the original ACA tax credit eligibility rules. Which means if you’re on an ACA insurance policy in 2026, you will not be eligible for any ACA tax credits if your Modified Adjusted Gross Income (which I won’t define here, as it’s a bit beyond the scope of this article) exceeds 4x the federal poverty level for your state and household size. Even if you’re just one dollar over that level, you completely loss all eligibility for ACA tax credits.
So if you’re on ACA and do an income tax projection for 2026 and realize your Modified Adjusted Gross Income might be less than 4x the federal poverty level, perhaps you don’t intentionally give yourself any more gross income for the year so as to not jeopardize getting ACA tax credits. On the other hand, if you do a 2026 tax projection and realize you’re already going to be over the 4x federal poverty level limit, then perhaps you do some proactive longer-term tax planning such as harvesting some gains in a brokerage account, doing Roth conversions, doing additional IRA distributions, etc.
In closing
Another thing to keep in mind with some of the deadlines above – especially those that require some sort of action from your account’s custodian prior to the end of the year, such as in the case of doing a Roth conversion – is to not cut it too close.
Financial firms and custodians get REAL busy late in the year with people trying to jam through last minute distributions, Roth conversions, charitable donations of securities, etc. While each firm has its own formal policy and deadlines, assume if you submit any sort of manual request after mid-December there is a non-trivial chance the request won’t get processed before the end of the year!
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