Year-End Planning
The decisions that close on December 31, and the ones that can wait.
Most planning can happen in any month. A handful of decisions close on December 31, and at higher incomes each one can be worth a great deal.
1 · Year-end planning deadlines
What has to be finished, and by when
Anything in the first column has to be finished by December 31, not just started.
2 · Year-end tax thresholds for 2026
Most year-end decisions come down to where income lands against a few lines. For a married couple filing jointly:
| Income level | What changes there |
|---|---|
| $250,000 | The 3.8% tax on investment income begins (modified adjusted gross income) |
| $403,550 | The 24% bracket ends and the 32% bracket begins (taxable income) |
| $505,000 | The $40,400 cap on state and local tax deductions starts shrinking, reaching $10,000 by about $606,000 (modified adjusted gross income) |
| $613,700 | Long-term capital gains move to the 20% rate (taxable income) |
| $768,700 | The 37% bracket begins, and itemized deductions are worth 35 cents per dollar (taxable income) |
| $1,000,000 | California estimated taxes must be based on 90% of this year’s tax; last year’s tax no longer sets a safe amount (California adjusted gross income) |
Single filers have lower thresholds for most of these. All of them are on The Tax Numbers.
3 · Year-end tax-loss harvesting and capital gains
California taxes capital gains as ordinary income, so one gain can be taxed at the top federal rate, the 3.8% tax on investment income, and California’s top rate together: up to about 37% in all.
| Check before December 31 | Why |
|---|---|
| Losses to harvest | They offset gains realized this year. Up to $3,000 more can reduce ordinary income, and the rest carries forward |
| Repurchases | Buying the same or a substantially identical security within 30 days before or after the sale disallows the loss |
| Mutual fund distributions | Funds in taxable accounts can distribute taxable gains even in a year they lost value. Check a fund’s estimate before buying it in December |
| Concentrated positions | Losses harvested elsewhere can absorb the gain from trimming a large position |
4 · Year-end Roth conversions and tax brackets
A Roth conversion moves money from a pre-tax account to a Roth account and is taxed as income in the year it happens. It cannot be undone, so the amount is decided once. Before converting, check how much room is left below the next line in the table above.
Medicare premiums are set using income from two years earlier, so a large conversion at 63 or older can raise them. Conversions tend to fit best in lower-income years, often between retiring and claiming Social Security. When to Claim Social Security covers that window.
5 · Year-end charitable giving and family gifts
The rules for deducting charitable gifts changed in 2026. Itemizers can now deduct only the giving above 0.5% of adjusted gross income. With $2 million of income, that means the first $10,000 given this year is not deductible. And in the top 37% bracket, each dollar deducted is worth 35 cents rather than 37.
| Approach | How it holds up under the 2026 rules |
|---|---|
| Giving appreciated stock | Still avoids the capital gain entirely. The new limits reach the deduction, not the gain avoided |
| Grouping several years of giving | The 0.5% floor applies once instead of every year. A donor-advised fund is the usual way to do it |
| IRA distributions to charity | Available from age 70½. Excluded from income rather than deducted, so neither new limit applies |
| Giving cash | Subject to both the floor and, in the top bracket, the 35-cent limit |
| Giving more in a high-income year | A larger gift in the year of a business sale or large bonus is deducted against income taxed at the top rates. A donor-advised fund lets the deduction land now while the grants follow over time |
Family gifts follow their own calendar. Each person can give $19,000 to each recipient in 2026 without using any lifetime exemption, and a 529 contribution can count five years of that amount at once, up to $95,000 from each giver to each beneficiary. Larger gifts draw on the lifetime exemption, $15 million per person in 2026. Estate Planning When the Estate Is Large covers when using it makes sense.
6 · Year-end planning for business owners
| Decision | Deadline |
|---|---|
| Set up a 401(k) | In time for this year’s last paychecks, so salary deferrals can start. An owner with no employees has until the filing deadline, without extensions |
| Set up a profit-sharing plan | The tax filing deadline, including extensions |
| Set up and fund a SEP IRA | The tax filing deadline, including extensions |
| Equipment purchases | Placed in service by December 31 to be deducted this year |
| Other business expenses | Paid by December 31 to count this year for a cash-basis business, or deferred to next |
For California owners of S corporations and partnerships, the pass-through entity tax is available through 2030. It lets the business pay California tax at the entity level and deduct it federally, outside the cap on state and local tax deductions, which shrinks back to $10,000 for most owners at higher incomes. For many, the entity-level election remains a way to deduct California tax federally.
7 · Year-end planning in a high-income year
The year a business sells, a large bonus vests, or a concentrated position is sold is the year everything above is worth the most.
| In a high-income year | What to consider |
|---|---|
| California estimated taxes | Above $1 million of California income, estimates must cover 90% of this year’s tax. Paying 110% of last year’s tax no longer protects you in California |
| Charitable giving | A gift made this year is deducted against income taxed at the top rates |
| Roth conversions | Usually better left for a lower-income year |
| Harvesting losses | Losses offset gains taxed at the highest combined rate |
Where this lands
Everything in the first column of the calendar has to be finished by December 31, and most of it goes better started in October. Where income lands against the thresholds decides which decisions are worth the most, and in a high-income year nearly all of them are. The rest can wait for the filing deadline.
- A handful of planning decisions close on December 31. Most of the rest can wait until the filing deadline.
- Six income levels decide most of the year-end math, from $250,000 to $1 million.
- California taxes capital gains as ordinary income, so one gain can be taxed at up to about 37% in all.
- From 2026, itemizers deduct only charitable giving above 0.5% of income. With $2 million of income, the first $10,000 given is not deductible.
- Appreciated stock, grouped giving, and IRA distributions to charity hold up better than cash under the new rules.
- Above $1 million of California income, paying 110% of last year’s tax no longer protects you in California.
- A high-income year is when nearly every year-end decision is worth the most.
We start year-end reviews in October.
Working through these decisions with clients and their CPAs before the deadlines arrive is part of what we do.
Begin a conversation →Educational content only. This article is for informational and educational purposes and does not constitute personalized investment, tax, or legal advice, and does not create an advisory relationship. It does not recommend any transaction, conversion, gift, or election. Tax figures are stated as they stand for 2026 and change annually; deadlines are general and apply to calendar-year taxpayers; and how any rule applies depends on individual circumstances. Confirm current figures at The Tax Numbers and with your CPA before acting. The firm and its related persons may or may not hold any security, fund, or asset class mentioned, and any such position may change at any time. No return, outcome, projection, or performance is shown or implied anywhere in this article. All investing involves risk, including possible loss of principal.
TenBroeck Wealth Management, LLC is an investment adviser registered with the State of California (DFPI). Registration does not imply a certain level of skill or training. The firm does not provide tax preparation or legal services; tax and estate strategies are developed in coordination with your CPA and attorney, who confirm and implement tax filings and legal documents. The firm is affiliated through common ownership with TenBroeck Insurance Services, a licensed insurance agency; the firm or its representatives may receive commissions on insurance products implemented for clients — compensation separate from advisory fees that creates a conflict of interest. Clients are under no obligation to purchase insurance through the affiliate. This and other material conflicts are described in the firm's Form ADV Part 2A, available upon request.
Written by Schad TenBroeck, CFP®. CFP Board owns the marks CFP® and CERTIFIED FINANCIAL PLANNER® in the United States.
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