Year-End Tax Moves: A Checklist for December

Most tax-saving opportunities expire at midnight on December 31. Proactive year-end tax planning is crucial for optimizing your financial position, potentially saving thousands in taxes. These moves fall into four categories: maximizing tax-advantaged contributions, timing deductions and income, managing investments, and positioning for next year. A systematic approach ensures you leverage all available tax benefits.

**401(k), 403(b), 457 plans:** For 2026, the employee deferral limit is $24,500. Those 50 or older can contribute an additional $8,100, totaling $32,600. Contributions must be made via payroll deductions. Review year-to-date contributions by October and adjust withholding to maximize savings.

**Health Savings Account (HSA):** HSAs offer a triple tax advantage. For 2026, contribution limits are $4,300 for self-only coverage and $8,550 for family coverage. Those 55 and older can contribute an extra $1,000. Personal contributions for the prior year can be made until April 15, but employer contributions must occur within the plan year. Invest your HSA balance for long-term, tax-free compounding.

**IRA contributions:** You have until April 15 to contribute to a traditional or Roth IRA for the prior tax year, with a 2026 limit of $7,500. Roth conversions, however, must be completed by December 31 to be counted for the current tax year. Evaluate your tax bracket to determine if a Roth conversion is advantageous.

**SEP-IRA or Solo 401(k):** Self-employed individuals can contribute to these plans until April 15 (or October 15 with an extension). For 2026, the total Solo 401(k) limit is $72,000 ($77,500 with catch-up). A Solo 401(k) must be established before December 31 to contribute for that tax year.

**Bunch deductions:** The 2026 standard deduction is $16,100 for single filers and $32,200 for married couples filing jointly. If your itemized deductions are near these thresholds, consider bunching. This strategy involves accelerating or delaying expenses like charitable giving, medical procedures, or property tax prepayments into a single tax year to exceed the standard deduction. The SALT cap for 2025-2029 is $40,000 ($20,000 for MFS).

**Charitable donations:** Cash and non-cash donations must be completed by December 31. Donating appreciated securities directly to a charity or Donor-Advised Fund (DAF) avoids capital gains tax on appreciation and allows a deduction for fair market value. Initiate stock transfers well before year-end.

**Defer income:** If you control when you receive income (e.g., freelancers, business owners), deferring invoices into January can shift income to the next tax year. This is useful if you anticipate being in a lower tax bracket or wish to avoid specific income thresholds.

**Tax-loss harvesting:** Sell investments with unrealized losses by December 31 to offset realized capital gains. Excess losses can offset up to $3,000 of ordinary income, with any remainder carrying forward indefinitely. Be mindful of the wash-sale rule.

**Gain harvesting:** For those in the 0% long-term capital gains bracket, year-end offers an opportunity to harvest gains tax-free. For 2026, this bracket applies to single filers with taxable income up to $49,200 and MFJ with taxable income up to $98,400. Selling appreciated assets and immediately repurchasing them steps up your cost basis without incurring federal tax, reducing future tax liabilities.

**Required Minimum Distributions (RMDs):** If you are subject to RMDs from retirement accounts, you must take the full amount by December 31. Failure to do so incurs a significant 25% excise tax on the amount not withdrawn. Proactive planning is essential to avoid penalties.

**Roth conversion:** A Roth conversion involves moving pre-tax IRA funds to a Roth IRA, paying income tax on the converted amount now for tax-free growth and withdrawals later. Consider a Roth conversion by December 31 if you have "bracket room"—meaning you can convert funds without pushing yourself into a higher tax bracket. This strategy is effective during years of lower income or market downturns.

**Alternative Minimum Tax (AMT):** For 2026, the AMT exemption is $89,500 for single filers and $139,100 for MFJ, with phase-outs beginning at $636,900 (single) and $1,273,800 (MFJ). The AMT rate is 26% up to $232,600 and 28% above. Understanding your potential AMT liability can influence year-end decisions.

**Estate & Gift Tax:** The 2026 annual gift exclusion is $19,000 per recipient. The lifetime exemption is $14.26 million per person ($28.52 million for MFJ), with a federal estate tax rate of 40% above this exemption. Strategic gifting can reduce your taxable estate.

**Medicare:** For 2026, the Part B standard premium is $185.00/month. High-income earners may be subject to Income-Related Monthly Adjustment Amounts (IRMAA), with thresholds beginning at $106,000 for single filers and $212,000 for MFJ. Planning income to stay below these thresholds can avoid higher premiums.

**1099-K Threshold:** For 2026, the 1099-K reporting threshold for third-party payment networks is $5,000. This impacts individuals receiving payments for goods or services through platforms like PayPal or Venmo.

**Child & Dependent Care Tax Credit:** This credit allows up to $3,000 in qualifying expenses for one child and $6,000 for two or more, with a credit rate of 20-35% depending on AGI. It is generally non-refundable.

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*Related: [Standard vs. itemized deductions](./standard-vs-itemized-deductions) — the bunching strategy in detail. [Tax-loss harvesting](./tax-loss-harvesting) — the investment move in more depth.*