The Value of Year-End Tax Planning
As the calendar winds down, many people focus on holiday plans, family gatherings, and wrapping up another busy year. Yet some of the most valuable financial decisions happen during these final months.
The reason is simple: Many tax planning opportunities disappear when the clock strikes midnight on December 31.
The good news is that year-end tax planning does not have to become a year-end scramble. With the right planning process, many of the most important decisions can be identified well before deadlines arrive.
Tax Planning Works Best When It’s Connected
If you’re a Foster Group client, your advisor is already reviewing many of these planning opportunities as part of your broader financial plan. Tax decisions do not happen in isolation. They are connected to your investments, retirement goals, charitable intentions, healthcare considerations, and the future you are working toward.
If you’re managing these decisions on your own, it can be difficult to know which opportunities apply to your situation and which ones may be easy to overlook. Many tax-saving strategies are less about finding a last-minute deduction and more about coordinating dozens of financial decisions that influence one another. A Roth conversion may affect future Medicare premiums. An investment decision may impact charitable giving opportunities. A retirement planning decision may create or eliminate tax-saving opportunities years down the road.
That is where thoughtful advice can add value. Foster Group advisors help connect the dots, evaluate tradeoffs, and identify opportunities that might otherwise go unnoticed. Not every item will apply to every household. That is the point. Good planning is not about checking every box. It is about finding the few decisions that can make the greatest difference for your situation.
Whether you’re confirming you’re on the right track or looking for areas that deserve a closer look, the checklist below highlights some important planning opportunities to consider before December 31. This checklist is intended for general informational purposes only and should not be considered tax advice. Please consult your tax advisor, CPA, or other qualified tax professional regarding your individual tax planning circumstances.
2026 Tax Planning Checklist
Key Planning opportunities to review before December 31
1. INCOME AND TAX BRACKET PLANNING
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Estimate your 2026 taxable income.
Include salary, bonuses, equity compensation, business income, investment income, retirement distributions, and other one-time items.
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Compare your current and expected future tax brackets.
A higher- or lower-income year can change the timing of deductions, income, Roth conversions, and capital gains.
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Review withholding and estimated payments.
Use updated income estimates to determine whether year-end withholding or a quarterly payment should be adjusted.
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Identify income-based thresholds.
Consider where modified adjusted gross income may affect deductions, credits, Medicare premiums, or other planning opportunities.
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Account for major life changes.
Marriage, divorce, relocation, retirement, a career move, a business transaction, an inheritance, or a death in the family can materially change the tax picture.
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2. RETIREMENT SAVINGS AND CASH FLOW
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Confirm workplace retirement contributions.
For 2026, the employee deferral limit for most 401(k), 403(b), and governmental 457 plans is $24,500. The general age-50 catch-up is $8,000, and a higher catch-up may apply at ages 60 through 63.1
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Review Roth versus pre-tax contributions.
The best choice depends on today’s tax rate, expected future income, available cash flow, and the need for tax diversification.
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Review IRA and HSA funding opportunities.
Confirm eligibility, contribution timing, deductibility, and whether contributions fit your broader savings priorities.
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Plan for next year’s cash needs.
Coordinate portfolio withdrawals, retirement plan distributions, large purchases, and charitable giving before raising cash.
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3. ROTH CONVERSION AND RETIREMENT INCOME PLANNING
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Evaluate a partial Roth conversion.
Lower-income years, early retirement, or years before required minimum distributions can create an opportunity to move selected dollars into a Roth account.
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Model the full impact before converting.
Include federal and state income taxes, cash available to pay the tax, Medicare-related thresholds, charitable plans, and future required distributions.
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Consider a multi-year conversion strategy.
Several measured conversions may offer more control than one large transaction.
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Review distribution sequencing.
Coordinate withdrawals across taxable, tax-deferred, and Roth accounts rather than relying on a single rule of thumb.
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Confirm required minimum distributions.
If you are subject to an RMD, verify the amount, account source, timing, and whether an inherited retirement account has separate requirements.
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4. INVESTMENT TAX MANAGEMENT
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Review realized gains, losses, and year-end distributions.
Look across taxable accounts and consider expected capital gain distributions from mutual funds.
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Evaluate tax-loss harvesting.
Losses may help offset realized gains and, when losses exceed gains, may offset a limited amount of ordinary income. Your advisor can coordinate implementation across the portfolio.
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Consider strategic gain realization.
Realizing gains intentionally may be useful in a favorable tax year, when repositioning a concentrated holding, or when improving future portfolio flexibility.
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Rebalance tax-efficiently.
Use cash flows, charitable gifts, gains, losses, and asset location to move the portfolio toward its target while managing the tax impact.
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Review concentrated positions and equity compensation.
Coordinate diversification, option exercises, restricted stock, vesting schedules, and estimated taxes with the rest of the financial plan.
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Clarify this year’s giving goals.
Identify the people and causes you want to support, then determine what should be completed before December 31.
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Consider appreciated assets.
A direct gift of eligible long-term appreciated securities may provide a charitable deduction while avoiding realization of the embedded capital gain.
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Evaluate a donor-advised fund.
A donor-advised fund can separate the timing of the tax deduction from the timing of grants to charities and may support a bunching strategy.
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Review qualified charitable distributions if eligible.
IRA owners age 70½ or older may be able to direct eligible distributions to qualified charities. Coordinate timing and documentation carefully.2
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Sources:
1 https://www.irs.gov/newsroom/401k-limit-increases-to-24500-for-2026-ira-limit-increases-to-7500
2 https://www.congress.gov/crs_external_products/IF/PDF/IF11377/IF11377.3.pdf
