As year-end quickly approaches, it’s time to think about some planning opportunities and contribution changes. Today, we’re going to hit on a variety of topics in brief. We’ll introduce the change and then give just one or two sentences about ways you may want to think about these changes. If you want to explore any of these in greater detail as they relate to your own financial plan, we invite you to reach out to schedule a time to chat.
CONTRIBUTION LIMITS
As is common, contribution limits on retirement accounts and health savings accounts are being adjusted upward for 2026. Here is a link to a chart highlighting the most relevant changes.
Planning implication
If you can afford to do so, we encourage you to annually try to increase your contribution percentage to your retirement accounts. You can manually make this adjustment or use the auto-escalate feature available on most workplace accounts. If you are already at the max, you simply need to work with your employer and plan recordkeeper (workplace accounts) or us (IRA, SEP, HSA, etc.) to ensure your contributions are adjusted to capture the new max amounts.
TAX BRACKETS AND STANDARD DEDUCTION INCREASE
In addition, the tax brackets for 2026 are seeing some updates, and things like the standard deduction are increasing concurrently. These annual adjustments help ensure that inflation doesn’t cause inadvertent effective tax hikes on individuals and families. For a full look at the 2026 tax tables and other important details (such as the standard deduction changes), please click here. And if you’re a senior, don’t forget that there is now the expanded deduction for seniors, which can be taken whether you itemize or use the standard deduction, so long as you qualify based on income. For a refresher on this topic, revisit our post from July 2025 (access here).
Planning implication
Because these are adjusted for inflation, they should not have a tremendous impact on your tax planning considerations. However, this new bonus deduction for seniors does add a new wrinkle to things like Roth conversions, as these conversions potentially disqualify you from this deduction – making the effective tax cost quite meaningful. Reach out to us to run some calcs before you pull the trigger on things like this.
YEAR-END PORTFOLIO AND TAX CONSIDERATIONS
Much of what we’re going to discuss below involves tax planning considerations. To properly tax plan, it’s critical that you understand current tax rates and how marginal tax rates work. Regarding the latter, your marginal rate is not the same as your effective rate, as your first dollars of income are taxed at lower rates than your last dollars. For example, you may be in the 32% marginal bracket and yet have a 22% effective rate on your overall income.
Roth conversions – This is one we highlight at every year-end, as it may provide opportunities to meaningfully save on taxes over the long-term. There is no blanket advice that applies here, as many factors go into deciding whether a Roth conversion is appropriate for you, especially if you are already in retirement and/or you are staring at a potential estate tax bill at the state or federal level. This includes considering how your increased Adjusted Gross Income (AGI) resulting from the conversion may impact things like Social Security taxation, Medicare Part B and D premiums, and more. One nice thing is that the OBBBA did make the current tax rates “permanent” (as that term goes in politics), so we can have more confidence in projecting tax burdens moving forward. But, as noted earlier, the new bonus deduction for seniors is a new layer of complication in this equation. Please reach out for a personalized evaluation of whether this is the right move for you (and how much).
Charitable giving – As you may recall from an earlier post (July 2025), some changes are coming in 2026 on the deductibility of charitable giving. For many, this means it may be financially wise to make your 2026 gifts in 2025. A “Donor Advised Fund” (DAF) can be a great tool to facilitate this accelerated giving. Also, after a good year in the stock market, many are sitting on long-term gains across their non-retirement accounts. Use these appreciated assets to fund your giving, rather than giving cash. This will reduce your tax bill while still allowing you to fulfill your giving goals in their entirety. We love talking about giving wisely, so please don’t hesitate to reach out for guidance.
Special consideration – with the state and local tax (SALT) deduction limit increasing from $10k to $40k (with limitations), you may find yourself itemizing rather than using the standard deduction. For some, “bunching” your 2026 charitable giving into 2025 can have a further positive impact when combined with this expanded SALT deduction. Along these lines, you may also benefit from accelerating payment of some state and local taxes, to the extent permissible, into 2025 – and even accelerating your January mortgage payment into December.
Non-charitable giving – Every person can give up to $19,000 per year to any other person without any gift and estate tax implications. This can be a tremendously effective estate planning technique to reduce future estate tax burdens, while also allowing you to give while you are still around to enjoy seeing that gift put to good use. Gifts above this annual exclusion amount are certainly permissible, and you can avoid gift taxes on these amounts by filing a gift tax return and claiming part of your Lifetime Exemption Amount. We can (and will soon) write a much lengthier piece on this, as this is just scratching the surface of this topic and how it impacts both state and federal estate tax considerations. For now, reach out to us with any questions.
Note that this gifting can also include funding a 529 plan for your children, grandchildren, or others. Gift tax rules apply to these contributions, with one notable exception that allows you to “super fund” a 529 in certain circumstances. Also, payments made to help with health care expenses or education do not count against this $19,000 limit – so long as the payments are made directly to the health care or education provider. Reach out if you want to learn more!
Tax-loss harvesting – Every year, it’s good to look for any unrealized capital losses in your non-retirement accounts and decide whether realizing these losses can be a prudent move from an investment and tax planning perspective. Can you use these losses to offset gains realized elsewhere in your portfolio, or even reduce your ordinary taxable income? If so, you may want to sell before year-end. Reinvest the proceeds so that you remain invested towards your long-term goals. Just be mindful of “wash sale” rules when you do. If we manage your non-retirement account, we will be actively pursuing smart tax loss opportunities on your behalf. If you have an account outside our management, you are welcome to consult with us to ensure this is done properly. Also, if you would like a refresher on how losses are utilized on your tax return, please reach out. It’s a bit more to explain than what we have room for here today.
Tax-gain harvesting – Less discussed, but often just as powerful, is the idea of intentionally realizing long-term capital gains. Often forgotten in tax planning is the fact that some long-term capital gains are taxed at a 0% rate, for those whose incomes qualify. By selling a security and paying a 0% rate, you can reset the cost basis at no cost, thus reducing your tax burden over the long-term. To better understand the mechanics of this, you can read this piece we published back in 2021 as part of a series on understanding capital gains taxes. Note that the applicable levels at which the 0% rate applies have adjusted slightly from what you’ll see in that 2021 write-up. These current levels, which represent net taxable income (AGI minus the standard or itemized deductions) can be seen below:
Business owners may be able to transform net operating losses into tax-free income -Business owners recording a net operating loss (NOL) this year may be able to use it to their advantage. Unlike net capital losses, where taxpayers are limited to using only $3,000 annually to offset ordinary income, NOLs can generally be applied against 80% of taxable income. Some taxpayers carrying forward large NOLs can use those losses to offset the additional income from a Roth IRA conversion. The rules are complicated, and it is critical for an individual to consult with a qualified tax professional.
Rebalance – Year-end provides a great time to rebalance your portfolio back to its long-term targets. It’s also a good time to review your targets against your financial plan. Have your needs changed? If they haven’t changed, simply run a rebalance and get things back in-line with your risk tolerance and stated goals. If they have changed, identify what allocation changes are needed to help you work towards your revised financial plan and then adjust your holdings accordingly.
RMDs – Don’t forget to take your RMDs before year-end! This applies not only to those age 73 and older with a pre-tax retirement account, but also to many (but not all) who have inherited an IRA, regardless of their age. The inherited IRA rules are quite complicated these days, especially for accounts inherited in 2020 and later, so please reach out or consult this piece to learn more.
A few other things –
Things like HSA, IRA, SEP-IRA, and solo 401(k) funding can take place for 2026 after the turn of the year. These deadlines vary, but generally correspond with your tax filing deadlines (with extensions, in some cases). Reach out to us to discuss specific deadlines and whether funding these accounts for 2025 lines up with your financial plans (and is permissible under the myriad of rules that apply).
Year-end is a great time to review your beneficiary designations. Along those lines, please reach out if you want to do a deep dive into your estate plan in the new year.
If you are receiving Social Security benefits, you’ll be glad to know that a 2.8% cost of living adjustment will apply in the New Year. While this is welcomed news, unfortunately much of this increase will be offset by increases in your Medicare premiums, as the monthly base premium for Medicare Part B will increase by nearly 10%, going from $185.00 to $202.90. Also, the annual deductible for all Medicare Part B beneficiaries will rise to $283 from $257. For those that had high incomes in 2024, you may also see more substantial increases in your Medicare premiums due to the IRMAA surcharges. Here’s what that looks like for Part B (additional surcharges also apply for Part D).
LET’S WRAP IT UP!
Year-end is a great time to take stock of your financial plan. You have a clear sense of your income and portfolio performance for the year, giving you the info you need to effectively perform tax and gift planning, as well as make needed adjustments to your portfolios. Of course, we didn’t write this to simply leave you to do it on your own. If you haven’t done so already (or haven’t heard from us), please reach out to schedule a time to talk through all of these year-end considerations and give your financial plan a thorough review as we head into the new year.