Year-End Tax Planning Strategies Investors Should Consider
Part of the Riverstone Tax Planning Series
Every year around October and November, I start having the same conversation with clients.
Not because they called me. Because I called them.
Year-end tax planning is one of those things that almost everyone agrees is important and almost everyone puts off until it's too late. By the time December 31st arrives, most of the meaningful decisions are already off the table. The window to act has closed, and whatever tax bill is coming is largely baked in.
In nearly 19 years working in financial services, I've watched clients pay more in taxes than they needed to — not because they made bad investments or earned too much, but simply because nobody had the conversation early enough. That's the problem I'm trying to solve with this article.
The strategies I'll cover here are not exotic or complicated. They are the decisions that come up year after year for investors who are serious about managing their tax burden over time. Some of them apply to almost everyone. Others depend on your specific situation. All of them have a deadline.
Why year-end planning has to start before year-end
The most important thing to understand about year-end tax planning is that it requires knowing where you stand before you can act intelligently.
That means estimating your taxable income for the year, understanding which tax bracket you are in and how close you are to the next threshold, reviewing your capital gains and losses in taxable accounts, and looking at how your retirement account contributions stack up against the annual limits.
None of this is complicated. But it requires a conversation, not just a transaction. And it has to happen while there is still time to do something about it — ideally in October or November, not the week before Christmas.
The clients who come out of each year in the strongest tax position are almost always the ones who had this conversation early enough to act on it. The ones who wait until January to review their prior year tax return are reviewing history, not managing outcomes.
Maxing out retirement account contributions
This one sounds obvious. It isn't always.
The annual contribution limits for 401(k) plans and IRAs reset every January 1st and disappear every December 31st. Any contribution room you don't use is gone permanently. And for investors in their peak earning years, the tax savings from maxing out these accounts can be significant.
For 2026, the 401(k) contribution limit is $23,500 for individuals under 50, with an additional $7,500 catch-up contribution available for those 50 and older. IRA contributions are limited to $7,000, with a $1,000 catch-up for those 50 and older.
For clients who are self-employed or own a small business, the options expand considerably. SEP IRAs, Solo 401(k)s, and SIMPLE IRAs all offer higher contribution limits and meaningful tax deductions that can make a real difference on this year's return.
One nuance worth knowing: IRA contributions can actually be made up until the tax filing deadline in April. But 401(k) contributions must come from payroll, which means if you want to increase your 401(k) contribution for the current year, you need to act while there are still pay periods remaining. Waiting until January is too late.
Tax loss harvesting before December 31st
I covered tax loss harvesting in the market volatility article earlier in this series, but it deserves a specific mention here because the year-end deadline is firm.
If you have positions in a taxable brokerage account that are sitting at a loss, December 31st is the last day to sell them and realize that loss for the current tax year. Those losses can offset capital gains elsewhere in your portfolio and, if losses exceed gains, up to $3,000 can be used to reduce ordinary income.
The wash sale rule applies — you cannot repurchase the same or a substantially identical security within 30 days of the sale. But you can immediately purchase a similar investment that maintains your market exposure without triggering the wash sale restriction.
In a year like 2026, where market volatility has created real losses in many portfolios, tax loss harvesting opportunities may be more available than in a typical year. This is worth reviewing before the calendar turns.
Reviewing capital gains distributions from mutual funds
This is one that catches investors off guard every year, particularly those who hold mutual funds in taxable accounts.
Mutual funds are required to distribute capital gains to shareholders at the end of the year. Even if you did not sell any shares yourself, if the fund's manager sold securities inside the fund at a gain, you may receive a capital gains distribution that is taxable to you in the current year.
These distributions are typically announced in November and paid in December. Reviewing them before year-end gives you the opportunity to plan around them — for example, by offsetting them with harvested losses elsewhere in your portfolio.
If you are considering purchasing shares of a mutual fund in a taxable account late in the year, it is worth checking the expected distribution date first. Buying shares just before a large capital gains distribution means paying tax on gains you did not actually participate in.
Roth conversions before December 31st
Roth conversions must be completed by December 31st to count in the current tax year. There is no grace period and no filing-deadline extension the way there is for IRA contributions.
As I covered in detail earlier in this series, Roth conversions are most valuable when done during lower-income years or when account values have declined. They are least valuable when they push you into a meaningfully higher tax bracket or trigger IRMAA surcharges on Medicare premiums.
Year-end is the moment when the full picture for the current tax year comes into focus. Once you know approximately what your income will be, you can calculate precisely how much room remains in your current tax bracket and whether a partial conversion makes sense before December 31st.
For clients who have been considering a Roth conversion and haven't acted, the fourth quarter is the decision point. Waiting until January means starting the analysis over for a new tax year.
Qualified Charitable Distributions for those 70½ and older
For clients who are 70½ or older and charitably inclined, a Qualified Charitable Distribution can be one of the most tax-efficient moves available before year-end.
A QCD allows you to transfer up to $105,000 directly from your IRA to a qualified charity. The transfer satisfies your Required Minimum Distribution for the year and is not included in your taxable income. For clients who don't itemize deductions, this is often more tax-efficient than simply taking the RMD and then writing a charitable check separately.
QCDs must be completed by December 31st. The check must be made payable directly to the charity, not to you. And the contribution cannot be placed in a donor-advised fund — it must go directly to a qualifying charitable organization.
For clients managing IRMAA exposure, a QCD can also help reduce Modified Adjusted Gross Income below a threshold that would otherwise trigger higher Medicare premiums the following year.
Reviewing Required Minimum Distributions
If you are 73 or older, your Required Minimum Distribution for the current year must be taken by December 31st. Missing it triggers a penalty of up to 25% of the amount that should have been distributed.
The one exception is the year you turn 73, when you have the option to delay your first RMD until April 1st of the following year. However, taking that delay means you will have two RMDs in the same year — the delayed first distribution plus the regular second-year distribution — which can push income significantly higher than anticipated. Whether to delay or take the first distribution on schedule is a decision worth thinking through carefully with your advisor.
For clients who have inherited IRAs and are subject to annual distributions under the 10-year rule, the December 31st deadline applies to those accounts as well.
Reviewing your overall income picture before year-end
Beyond the specific strategies above, year-end is the right time to step back and look at the full income picture for the current year.
Are you close to a tax bracket threshold where a small adjustment in timing could keep you in a lower bracket? Are there deductions you haven't maximized — health savings account contributions, business expenses, charitable giving? Have there been any unusual income events this year, like a bonus, a property sale, or a large IRA distribution, that need to be planned around?
These questions are easier to answer and act on in November than in April. By April you are filing, not planning.
Working with a financial advisor in Morris County on year-end tax planning
For individuals and families throughout Chester, Mendham, Far Hills, Bernardsville, Morris County, and the broader northern New Jersey area, year-end tax planning conversations are some of the most valuable I have with clients each fall. The decisions made in the last 60 to 90 days of the year can meaningfully reduce the tax bill that arrives the following spring.
At Riverstone Wealth Planners, I work with clients to review the full picture before year-end — retirement contributions, capital gains, Roth conversion opportunities, charitable strategies, and RMDs — and make sure nothing important is left on the table.
If you would like to schedule a year-end review, I would encourage you not to wait until December. The earlier in the fourth quarter we have this conversation, the more options we have.
Riverstone Wealth Planners is located at Chester Woods Professional Park, 385 Route 24, Suite 3E, Chester, NJ 07930. We work with clients throughout Morris County, the NJ/NY metro area, and nationally through a fully virtual planning experience.
Frequently Asked Questions
When should I start year-end tax planning? Ideally in October or November, while there is still time to act on what you find. Waiting until December limits your options, and waiting until January means you are reviewing history rather than managing outcomes.
What is the deadline for 401(k) contributions? 401(k) contributions must come from payroll, so the effective deadline is your last paycheck of the year. If you want to increase contributions for the current year, contact your HR or plan administrator as early as possible in the fourth quarter.
Can I still make an IRA contribution after December 31st? Yes. IRA contributions for the current tax year can be made up until the tax filing deadline in April, including extensions. However, Roth conversions and 401(k) contributions must be completed by December 31st.
What is a Qualified Charitable Distribution and when must it be completed? A QCD allows individuals age 70½ or older to transfer funds directly from an IRA to a qualified charity, satisfying RMD requirements without the amount counting as taxable income. QCDs must be completed by December 31st of the tax year in which you want the benefit to apply.
Where can I find a financial advisor in Morris County NJ for year-end tax planning? Riverstone Wealth Planners, based in Chester, New Jersey, works with individuals and families throughout Morris County and northern New Jersey on year-end tax planning, retirement income strategy, and long-term wealth management. You can schedule a complimentary conversation at the link above.
This material is for informational purposes only and should not be considered individualized financial, tax, or legal advice. Individuals should consult with a qualified financial professional, tax advisor, or attorney regarding their specific situation. Advisory services are offered through Riverstone Wealth Planners. Securities and advisory services may be offered through LPL Financial, a registered investment advisor and member FINRA/SIPC. Tax laws are subject to change, and contribution limits referenced are for illustrative purposes and may be adjusted annually by the IRS. The impact of any strategy will vary based on individual circumstances.
