As the end of the year approaches, taxes may not be the first thing on your mind. But the decisions you make before December 31 can have a meaningful impact on what your tax return looks like next spring.
Unlike tax preparation—which primarily looks backward at what already happened—tax planning looks ahead. It gives you an opportunity to evaluate your income, investments, retirement accounts, charitable giving, and other financial decisions while there may still be time to make adjustments.
Here are seven year-end tax planning strategies to consider before 2026 comes to a close.
1. Review Your Income and Tax Withholding
A good place to start is by estimating where your income will land for the year.
Your tax situation may look very different from last year if you:
Received a raise or bonus
Changed jobs
Started a business or side business
Sold investments or real estate
Exercised stock options
Began receiving retirement income
Took a large distribution from a retirement account
Received significant interest or dividend income
Once you have a clearer picture of your expected income, review how much you have already paid through federal income tax withholding and estimated tax payments.
If you appear to be underpaying, there may still be time to adjust withholding or make an estimated payment.
The goal is to avoid reaching tax season and being surprised by a much larger bill than expected.
2. Consider Maximizing Retirement Contributions
Increasing contributions to a workplace retirement plan can be one of the most straightforward ways to strengthen your long-term financial plan while potentially reducing your current taxable income.
For 2026, the employee contribution limit for most 401(k), 403(b), and governmental 457 plans is $24,500. The standard catch-up contribution for many participants age 50 and older is $8,000, with a higher catch-up limit potentially available for certain participants ages 60 through 63.
The 2026 contribution limit across traditional and Roth IRAs is generally $7,500, with an additional $1,100 catch-up contribution for individuals age 50 or older. Eligibility and deductibility depend on factors such as income and participation in an employer-sponsored retirement plan.
If you have not reached your retirement savings goal for the year, consider reviewing whether increasing your contributions makes sense for your broader financial plan.
3. Review Your Investment Portfolio for Tax-Loss Harvesting Opportunities
Not every investment will be a winner every year.
If you have investments in a taxable brokerage account that have declined in value, selling certain positions at a loss may allow those losses to offset realized capital gains elsewhere in your portfolio.
This strategy is commonly referred to as tax-loss harvesting.
If your capital losses exceed your capital gains, individuals may generally use up to $3,000 of net capital losses against other income, with unused losses potentially carried forward to future years.
However, investment decisions should not be made for tax reasons alone.
Before selling an investment, consider:
Why you originally purchased it
Whether it still fits your portfolio
Your long-term investment strategy
Potential transaction costs
The wash-sale rules
Whether realizing a gain instead might be advantageous
Tax-loss harvesting can be valuable, but it works best when coordinated with your overall investment strategy rather than treated as a stand-alone tax tactic.
4. Evaluate Whether a Roth Conversion Makes Sense
A Roth conversion involves moving money from a traditional pre-tax retirement account into a Roth IRA.
The amount converted is generally included in taxable income for the year of the conversion, but qualified Roth IRA withdrawals in retirement can potentially be received tax-free.
That means a Roth conversion may make sense when you believe your current tax rate is relatively attractive compared with the rate you could face in the future.
Potential situations worth reviewing include:
A year in which your taxable income is temporarily lower
The period between retirement and required minimum distributions
A significant business loss or other deduction
A desire to build multiple sources of taxable and tax-free retirement income
Estate or legacy planning considerations
A Roth conversion is not automatically beneficial. Converting too much in a single year could increase your taxable income and potentially affect other areas of your financial plan.
This is one area where tax planning and financial planning should ideally be coordinated.
5. Review Your Charitable Giving Strategy
If charitable giving is already part of your plan, the end of the year is a good time to review how you are making those gifts.
Instead of automatically writing a check or using a credit card, some taxpayers may benefit from alternative strategies.
Depending on your situation, possibilities could include:
Donating appreciated investments
Using a donor-advised fund
Making qualified charitable distributions from an IRA if eligible
Grouping multiple years of charitable gifts into a single year
Coordinating charitable gifts with other itemized deductions
For example, donating appreciated securities directly to a qualified charity may allow an eligible taxpayer to support an organization without first selling the investment and potentially realizing the associated capital gain.
The right approach depends on your tax situation, charitable goals, investment portfolio, and eligibility.
6. Make Sure Required Minimum Distributions Are Addressed
If you are subject to required minimum distributions, or RMDs, make sure the appropriate amount is distributed before the applicable deadline.
RMD rules can apply to various retirement accounts once an account owner reaches the required age, and special rules may also apply to inherited retirement accounts.
Failing to take the appropriate distribution can result in tax consequences.
Rather than treating an RMD as an isolated transaction, consider how the distribution fits into your overall plan.
For example:
Do you actually need the money for living expenses?
Should additional taxes be withheld from the distribution?
Could part of the distribution be used for charitable giving?
Should excess cash be reinvested in a taxable account?
How does the distribution affect your overall taxable income?
These decisions can become particularly important for retirees with several different sources of income.
7. Look Ahead to Major Financial Changes Coming in 2027
One of the most overlooked parts of year-end tax planning is looking beyond the current year.
Think about what may change next year.
Are you planning to:
Retire?
Sell a business?
Purchase or sell a home?
Exercise stock options?
Receive a large bonus?
Sell a significant investment?
Start taking Social Security?
Begin retirement account withdrawals?
Make a major charitable gift?
Transfer wealth to children or grandchildren?
A financial event occurring next year may influence decisions that make sense this year.
For example, if you expect your income to increase substantially next year, accelerating or delaying certain income or deductions may be worth discussing with your tax professional.
Planning before the event occurs generally gives you more options than trying to address the tax consequences afterward.
Tax Preparation and Tax Planning Are Not the Same Thing
One of the biggest misconceptions about taxes is that planning begins when it is time to prepare your tax return.
By then, the year has already ended.
Many of the decisions that could have affected your tax situation needed to happen before December 31.
Tax preparation asks:
“What happened last year?”
Tax planning asks:
“What can we do before the year ends?”
Both are important, but proactive planning can help identify potential opportunities before the window to act has closed.
Don't Wait Until December
Year-end tax planning does not have to happen during the final week of December.
In fact, starting earlier can provide substantially more time to:
Gather information
Project income
Coordinate with your financial advisor and tax professional
Evaluate different strategies
Make retirement contributions
Complete charitable gifts
Review investments
Address potential tax liabilities
The earlier you understand where you stand, the more time you have to make thoughtful decisions.
Start Your 2026 Year-End Tax Planning
Taxes are only one part of your financial picture.
Investment decisions, retirement planning, charitable giving, cash flow, estate planning, and taxes are often interconnected. Looking at them together can help you make decisions based on your complete financial situation rather than focusing on one area at a time.
At Generations Tax & Wealth Management, we work with individuals, families, retirees, and business owners to coordinate tax planning with their broader financial goals.
If you would like to review your 2026 tax situation before the end of the year, schedule a conversation with our team today.
This material is intended for general educational purposes only and should not be considered individualized tax, legal, or investment advice. Tax laws and individual circumstances can vary. Consult with qualified tax, legal, and financial professionals regarding your specific situation.