Financial Planning
Year-End Financial Checkup: Tax-Smart Strategies to Consider Before December 31
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Article Summary
A year-end review can help you evaluate investment decisions, maximize savings opportunities and prepare for the year ahead.
As the year draws to a close, it's a natural time to reflect on your financial progress and consider whether any adjustments could strengthen your plan for the future.
While many people focus on taxes during filing season, some of the most meaningful tax planning opportunities happen before the calendar year ends. Decisions involving retirement savings, investments, charitable contributions and other financial assets can affect your tax situation long before you prepare a return.
Taking time to review these areas can help you identify opportunities, avoid missed deadlines and make more intentional decisions about your money.
Here are six areas worth reviewing before December 31, along with a few opportunities that may remain available after year-end.
1. Review Retirement Contributions and Required Distributions
Retirement accounts are an important place to begin a year-end financial review. Whether you're still working or already retired, contribution limits and distribution requirements may affect your current tax situation and long-term financial goals.
Maximize workplace retirement contributions when appropriate
If you're contributing to a workplace retirement plan, review how much you've contributed during the year and whether you have room to increase that amount.
For 2026, the IRS allows employees to contribute up to $24,500 to most 401(k), 403(b) and governmental 457 plans, as well as the federal Thrift Savings Plan.[2]
Additional catch-up contributions may be available based on age:
- Age 50 and older: An additional $8,000, for a total of $32,500.
- Ages 60 through 63: An enhanced catch-up contribution of $11,250, for a total of $35,750.[2]
Increasing eligible pretax retirement contributions may help reduce current taxable income while supporting long-term retirement savings goals.
If your employer offers a matching contribution, confirm that you're contributing enough to receive the full match available under your plan.
Keep in mind that beginning in 2026, certain higher-income employees must make catch-up contributions on a Roth, or after-tax, basis. The requirement generally applies when prior-year FICA wages from the employer sponsoring the plan exceeded $150,000.[10]
Don't overlook required minimum distributions
If you're retired or approaching retirement, year-end is also an important time to review required minimum distributions, or RMDs.
RMDs generally begin at age 73 for individuals born from 1951 through 1959, with the starting age increasing to 75 for those born in 1960 or later. Most required annual distributions must be taken by December 31, although special timing rules apply to a person's first RMD and certain employer-sponsored retirement plans.[1]
Missing an RMD can be costly. The IRS generally imposes a 25% excise tax on amounts not withdrawn as required, although that rate may be reduced to 10% if the error is corrected within the applicable period.[1]
If you're subject to RMD requirements, confirm that you've withdrawn the correct amount from each applicable account and understand how the distributions may affect your taxable income.
2. Evaluate Your Investment Portfolio for Tax Opportunities
A year-end portfolio review is about more than investment performance. It's also an opportunity to evaluate how investment decisions may affect your taxes.
Market movements throughout the year can change the balance of your portfolio. Some investments may have appreciated significantly, while others may have declined.
Before making adjustments, consider whether your current allocation still reflects your financial goals, investment timeline and tolerance for risk.
Consider tax-loss harvesting
Tax-loss harvesting involves selling investments at a loss to help offset realized capital gains.
For example, if you realized $10,000 in capital gains during the year and sold another investment at a $4,000 loss, the loss may help reduce your net taxable capital gains.
If total capital losses exceed capital gains, the IRS generally allows individuals to deduct up to $3,000 of net capital losses against ordinary income annually, or $1,500 for married individuals filing separately. Additional unused losses may be carried forward to future tax years.[3]
This strategy may be particularly relevant if you've realized significant gains from selling investments, rebalancing a portfolio or diversifying a concentrated position.
Be mindful of wash-sale rules
Tax-loss harvesting comes with important limitations.
Under the IRS wash-sale rule, a loss may be disallowed if you sell a stock or security at a loss and purchase substantially identical securities within 30 days before or after the sale.[4]
These rules can also apply to certain purchases made through retirement accounts or by a spouse.[4]
Before selling investments solely for tax purposes, consider the broader investment impact and consult a tax professional.
A tax strategy should support your long-term financial plan rather than drive investment decisions on its own.
3. Determine Whether a Roth Conversion Makes Sense
For individuals with tax-deferred retirement savings, year-end may be a useful time to evaluate a Roth conversion.
A Roth conversion involves transferring eligible assets from a traditional IRA or other tax-deferred retirement account into a Roth account. Previously untaxed amounts converted are generally included in taxable income in the year of conversion.[7]
The potential benefit is that qualified Roth distributions may be tax-free in retirement.[7]
Why timing matters
A Roth conversion may be worth considering if you expect to be in a higher tax bracket in the future or want to reduce the amount held in accounts subject to future RMD requirements.
For example, individuals who experience a temporary reduction in income may have an opportunity to convert some tax-deferred assets at a lower marginal tax rate.
However, converting a large amount in one year could increase taxable income enough to move you into a higher bracket.
Conversions may also affect other financial planning considerations, including Medicare premiums and the taxation of Social Security benefits.
Because Roth conversions generally cannot be reversed, it's important to evaluate the tax implications before making a decision.[7]
The goal is not necessarily to convert as much as possible. It's to determine whether paying taxes today may provide a long-term benefit based on your individual circumstances.
4. Make Charitable Giving Part of Your Tax Strategy
For individuals and families who support charitable organizations, year-end can be an opportunity to align giving goals with financial planning.
Charitable contributions may provide tax benefits, but the rules depend on the type of contribution, the recipient organization and whether you itemize deductions.
Review charitable deduction opportunities
Beginning with the 2026 tax year, individuals who do not itemize deductions may be eligible to deduct up to $1,000 in qualifying cash contributions to eligible charitable organizations, or $2,000 for married couples filing jointly.[5]
For taxpayers who itemize, new rules also apply. Beginning in 2026, deductible charitable contributions generally must exceed 0.5% of adjusted gross income, subject to other applicable limitations.[5]
For example, a taxpayer with $200,000 in adjusted gross income would have a $1,000 charitable deduction floor. Under the general rule, only qualifying contributions above that amount would be deductible.
These changes make it especially important to understand how charitable giving fits within your overall tax situation.
Consider donating appreciated investments
For individuals holding appreciated investments in taxable accounts, donating eligible securities directly to a qualified charitable organization may provide advantages over selling the investments and donating the proceeds.
Depending on the circumstances, donating investments held for more than one year may help avoid realizing capital gains while potentially allowing an itemized charitable deduction based on the investment's fair market value, subject to applicable limits.[6]
This approach may be particularly useful for individuals with significant unrealized investment gains who already intend to make charitable gifts.
Explore qualified charitable distributions
For IRA owners age 70½ or older, qualified charitable distributions, or QCDs, may offer another way to support charitable causes.
A QCD allows eligible individuals to transfer funds directly from an IRA to a qualified charitable organization. When the requirements are met, the distribution generally is excluded from taxable income and may count toward the individual's RMD for the year.[11]
For 2026, the annual QCD exclusion limit is $111,000 per eligible individual.[11]
QCDs can be useful because the tax treatment does not depend on itemizing charitable deductions.
However, gifts must meet specific IRS requirements, and not all charitable organizations or giving arrangements qualify.
5. Review Gifting and Estate Planning Opportunities
Year-end is also a good time to revisit financial gifts to family members and other loved ones.
Whether you're helping a child with education costs, supporting a family member or transferring assets to the next generation, gifting can be part of a broader financial and estate planning strategy.
Understand annual gift tax exclusions
For 2026, the federal annual gift tax exclusion is $19,000 per recipient. Married couples may generally give a combined $38,000 per recipient when each spouse uses the annual exclusion, subject to applicable gift tax rules.[12]
For example, a married couple with two adult children could generally give each child $38,000 in qualifying gifts during 2026 without using their lifetime federal gift and estate tax exclusion.
These gifts do not generally reduce the donor's income taxes, but they may help transfer assets outside the donor's taxable estate over time.
Giving amounts above the annual exclusion does not automatically mean gift tax is due. However, additional reporting requirements may apply, and the excess may use part of the donor's lifetime exclusion.[12]
Before transferring significant assets, consider how the gifts may affect your own retirement income needs, liquidity and estate planning goals.
6. Check Whether Other Financial Decisions Need Attention
Not every year-end financial decision fits neatly into a retirement, investment or charitable giving category.
Depending on your circumstances, the final months of the year may also be a good time to review:
- Equity compensation, including stock options or restricted stock units
- Significant investment gains or losses
- Changes in income, bonuses or business distributions
- Estimated tax payments and paycheck withholding
- Flexible Spending Account balances and applicable plan deadlines
- Upcoming retirement, relocation or major financial transactions
- Changes to beneficiary designations and estate planning documents
These areas can have different tax consequences depending on timing and individual circumstances.
For example, exercising certain employee stock options may create taxable income, while selling appreciated investments may result in capital gains.
Reviewing these decisions together can help identify whether actions in one area may affect planning opportunities in another.
Some Tax-Saving Opportunities Continue After December 31
While certain financial decisions must be completed before the end of the calendar year, others may remain available until the tax filing deadline.
Traditional and Roth IRA contributions
Eligible individuals can generally make IRA contributions for the 2026 tax year until April 15, 2027.[8]
For 2026, the combined contribution limit for traditional and Roth IRAs is $7,500, or $8,600 for individuals age 50 or older, subject to compensation, income and other eligibility requirements.[8]
Traditional IRA contributions may be deductible depending on income and participation in an employer-sponsored retirement plan. Roth IRA contributions are not deductible, but qualified withdrawals may be tax-free.[7][8]
Health Savings Account contributions
Eligible individuals with qualifying health coverage may also be able to make Health Savings Account contributions for the 2026 tax year until the applicable tax filing deadline.[9]
For 2026, HSA contribution limits are:
- $4,400 for eligible individuals with self-only coverage
- $8,750 for eligible individuals with family coverage
- An additional $1,000 catch-up contribution for eligible individuals age 55 or older[9]
HSAs can provide valuable tax benefits because eligible contributions may be deductible, account earnings can grow tax-free and withdrawals used for qualified medical expenses generally are not taxed.[9]
Unlike traditional workplace retirement contributions, eligible IRA and HSA contributions may provide additional planning time after year-end.
A Year-End Financial Checklist
As you review your financial plan, consider using the following questions to guide the conversation.
Retirement savings
- Have I contributed enough to receive my employer's full retirement plan match?
- Should I increase retirement contributions before year-end?
- Have I satisfied applicable RMD requirements?
Investments
- Does my current portfolio still reflect my goals and risk tolerance?
- Have I realized gains that could be offset by capital losses?
- Are there concentrated positions or other investment risks I should review?
Tax planning
- Would a Roth conversion make sense this year?
- Do I need to adjust withholding or estimated tax payments?
- Are there tax decisions that should be coordinated with other financial events?
Charitable giving and estate planning
- Have I completed planned charitable contributions?
- Could appreciated assets or a qualified charitable distribution support my giving goals?
- Should I review annual gifts, beneficiary designations or other estate planning decisions?
Looking ahead
- Are there income or life changes expected next year?
- Should I revisit retirement, education or other savings goals?
- Would working with a financial advisor or tax professional help me evaluate more complex decisions?
Final Thoughts
Year-end financial planning is not simply about reducing this year's tax bill. It's an opportunity to make sure your investment decisions, retirement savings, charitable giving and other financial choices continue to support your long-term goals.
Some strategies may create immediate tax benefits. Others may help position your finances for future years.
The important thing is to approach these decisions thoughtfully rather than making last-minute changes based solely on potential tax savings.
A coordinated review with your financial advisor and tax professional can help you identify which opportunities may be relevant to your circumstances, understand potential tradeoffs and make informed decisions before important deadlines pass.
Sources
[3] https://www.irs.gov/taxtopics/tc409
[4] https://www.irs.gov/publications/p550
[5] https://www.irs.gov/newsroom/working-families-tax-cuts; https://www.irs.gov/publications/p505
[7] https://www.irs.gov/taxtopics/tc309; https://www.irs.gov/publications/p590a
[9] https://www.irs.gov/publications/p969
[11] https://www.irs.gov/irb/2025-49_IRB; https://www.irs.gov/publications/p590b
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Investment advisory services offered through OneDigital Investment Advisors LLC (“ODIA”). ODIA and their associates are not tax nor estate planners and cannot provide tax or legal advice. Consult your estate-planning attorney or qualified tax advisor for specific advice regarding your situation.