Year-End Tax Planning Moves to Set Yourself Up for Success in 2027

Matt Johnston is an attorney in Sophisticated Planning Strategies at Northwestern Mutual.

As the year winds down, it’s natural to wonder whether there’s more you could be doing to make the most of your money—and whether changing tax rules could affect your plans. A thoughtful year-end review can help replace that uncertainty with clarity. By considering key tax strategies and opportunities under the new tax law, you and your advisor can identify adjustments that fit your broader financial picture and help you move into 2027 feeling more confident about what’s ahead.

Here, we’ll cover four year-end tax strategies to help you manage your tax impact before 2026 ends.

How to time income and deductions before year-end

In general, maximizing deductions and minimizing income each year may help defer taxes. Tax deferral tends to be more beneficial when tax rates stay the same or decline. However, you may want to reverse this strategy if you expect to be in a higher tax bracket in the future. These are key moves to consider before year-end to help you’re your income and make the most of available deductions for 2026.

Use tax-loss harvesting to offset gains

Tax-loss harvesting involves selling investments at a loss to offset current or future capital gains and—within applicable limits—ordinary income. Investors with unrealized losses in taxable accounts may benefit most, and loss carryforwards from prior years may also reduce your 2026 tax bill.

The wash-sale rule generally prevents you from claiming the loss if you buy the same or a substantially identical security within 30 days before or after the sale. Before acting, weigh the tax benefit against your long-term investment strategy so your allocation remains aligned with your goals.

Consider realizing capital gains at a potentially lower tax rate

Depending on your income streams, capital gains harvesting could be an option. If you are married filing jointly (MFJ) and your 2026 taxable income is below $98,900, or if you are single and your income is below $49,450, you can pay a 0 percent tax rate on your capital gains to the extent your capital gains and ordinary income stay below those thresholds.

This can be a smart strategy if you own a pass-through business entity and expect a net operating loss this year but anticipate a return to profitability. Investors in or near these income brackets, including retirees with lower-income years, may benefit most. Realizing gains now resets your cost basis but may create future tax exposure, so model the impact with a tax advisor before acting.

Consider bunching property tax payments to maximize the SALT deduction

The state and local tax (SALT) deduction cap is $40,400 for 2026, subject to a phaseout based on your modified adjusted gross income (MAGI). If your MAGI is less than $505,000, you get the full $40,400 deduction. If your MAGI is between $505,000 and $606,333, the cap phases down to $10,000; above that range, the cap is $10,000.

Depending on local rules, you may be able to pay next year’s property taxes in advance. By bunching property tax payments and fourth-quarter estimated tax payments into alternating years, you can maximize deductions, particularly if your income falls below the phaseout threshold.

Alternatively, if you have a high MAGI this year but expect a lower MAGI next year, you may benefit from deferring your fourth-quarter estimated income tax payments and property tax payments to the following year. Higher-income taxpayers in high-tax states who itemize may benefit most, and a Certified Public Accountant can model whether bunching SALT with other deductions makes sense.

Time expenses to make the most of itemized deductions

A new limit on itemized deductions now applies to taxpayers in the highest tax bracket. If you are in that bracket this year and have significant itemized deductions, consider how the limit could affect deductions you may be able to time, such as charitable contributions. Because the limit reduces the total tax savings itemizers in the highest tax bracket can receive, it may influence when you make large deductible contributions.

Taxpayers whose itemizable expenses exceed the standard deduction may benefit from itemizing, though the decision requires documentation and may not be worthwhile in simpler situations. The new 2026 deductions for seniors, tips, overtime, and auto loan interest may increase the overall tax benefits available to some taxpayers. Because these deductions can generally be claimed whether a taxpayer itemizes or takes the standard deduction, taxpayers should carefully evaluate which approach produces the greater overall tax savings.

How to maximize the tax benefits of charitable giving

Coordinating your giving with the rest of your financial plan may help you receive tax benefits while supporting the causes you care about. Here are three giving tactics to consider in 2026.

Use a qualified charitable distribution for tax-efficient giving

If you are at least 70½ and an Individual Retirement Account (IRA) owner, a qualified charitable distribution (QCD) can allow you to send distributions directly from your IRA to a qualified charity without impacting your adjusted gross income (AGI). QCDs, which can be up to $111,000 in 2026, count toward your required minimum distribution (RMD) without adding to your taxable income. This is a tax-efficient way to make a charitable contribution, especially if you are taking the standard deduction. Funds must go directly to a qualified charity, not a donor-advised fund, so confirm the charity’s eligibility and coordinate with your IRA custodian.

Consider bunching charitable gifts to help maximize deductions

Bunching charitable gifts means combining multiple years of charitable gifts into one tax year so your itemized deductions may exceed the standard deduction. The strategy may be most useful for taxpayers near the itemizing threshold who have flexibility in when they give.

For 2026, charitable deductions for taxpayers who itemize are generally limited to the amount above 0.5 percent of adjusted gross income. Taxpayers who take the standard deduction may also deduct up to $1,000, or $2,000 for married couples filing jointly, for qualifying cash gifts to public charities. Because bunching front-loads future giving and can affect cash flow, coordinate the timing with your broader plan.

Donate appreciated securities to support charity and avoid capital gains tax

Depending on how your investments have performed, you may have an opportunity to donate appreciated stocks or other publicly traded securities in kind. This serves two purposes:

1. It gives you a tax deduction equivalent to the fair market value of the securities, assuming the assets go to a public charity and do not exceed 30 percent of your AGI (or 20 percent of AGI if giving to a private foundation).
2. You pay no tax on your gains.

Investors with highly appreciated holdings who are charitably inclined may benefit most. Securities must be held more than one year to qualify for the fair-market-value deduction, so coordinate with the charity’s brokerage process and your financial advisor.

How to fine-tune your retirement plan before year-end

If you are preparing to retire soon or are already retired, consider these three planning options in 2026. Reviewing contribution levels, distributions, and conversion opportunities together can help your retirement strategy adapt as your income, tax picture, and goals change.

Maximize contributions to build retirement savings

For 2026, the employee contribution limit is $24,500 for 401(k) and 403(b) plans and $17,000 for SIMPLE IRAs. If you are age 50 or older, you may be able to contribute more through catch-up contributions. And if you turn 60, 61, 62, or 63 in 2026, higher catch-up limits give you an opportunity to save even more—helping you make up ground and build toward the retirement you want, even if you did not save as aggressively earlier in your career.

Traditional and Roth IRA contributions are limited to $7,500, plus a $1,100 catch-up contribution for eligible savers age 50 or older. Contributions from an employer-sponsored plan generally must be made by December 31, 2026, while 2026 IRA contributions can be made through April 15, 2027. Earned income, plan participation, and adjusted gross income can affect eligibility or deductibility, so prioritize accounts in the context of your cash flow and broader retirement plan.

Plan RMDs to manage your tax impact

Most account owners subject to RMDs must take the 2026 amount by December 31, 2026. Missing an RMD can trigger an excise tax of up to 25 percent of the amount not withdrawn.

If you turned 73 in 2026, you may delay your first RMD until April 1, 2027, but doing so means taking two RMDs in 2027. That additional income could affect your tax bracket and future Medicare Part B and Part D premiums. Inherited IRAs may follow different distribution rules, including the 10-year SECURE Act rule for many non-spouse beneficiaries, so confirm the deadline and model the income impact before year-end.

Consider a Roth conversion to balance retirement distributions

Converting some traditional retirement assets to a Roth IRA can give you another source of tax-free income in retirement. Having a mix of taxable and tax-free accounts can provide more flexibility when deciding where to draw income and help balance your tax impact over time.

A Roth conversion increases your taxable income in the year it occurs and cannot be undone. It may also affect your SALT deduction cap, the taxation of Social Security benefits, Medicare Income-Related Monthly Adjustment Amount (IRMAA) surcharges, premium tax credits, and other income-based thresholds. Work with your financial advisor and tax advisor to model whether a conversion—and how much to convert—fits your broader retirement distribution plan.

How to plan year-end gifts and estate transfers

Here are four estate planning ideas to consider before year-end 2026. These decisions can help protect what you have built and transfer wealth in a way that supports both your family and your vision for the future.

Use the annual gift tax exclusion to transfer wealth

The federal annual gift tax exclusion is $19,000 per donor, per donee for 2026. You can make the gift by check or by transferring securities or life insurance. Annual exclusion gifts do not count toward your lifetime gift and estate tax exemption, and the exclusion is generally a use-it-or-lose-it benefit each year.

Married couples can give a total of $38,000 to each child, grandchild, or other recipient through the annual exclusion. This can help you support loved ones’ goals during your lifetime—such as a home purchase or other financial needs—while gradually transferring wealth without using your lifetime gift and estate tax exemption, which is $15 million in 2026. Gifts above the annual exclusion may count against the lifetime exemption, so track gifts throughout the year to stay within the limits.

Compare 529 plans and Trump Accounts for children’s savings

A 529 plan allows tax-deferred growth and tax-free withdrawals for qualified education expenses. In 2026, a donor can elect to treat up to $95,000 of 529 contributions ($190,000 for a married couple) as if the gifts were spread over five years of annual exclusions. This can accelerate education funding, but it uses five years of annual exclusion for that beneficiary and requires careful gift-tax reporting as if the gifts were spread over five years of annual exclusions.

A Trump Account is a separate children’s savings option beginning in 2026. Families can generally contribute up to $5,000 a year for an eligible child under 18 with a valid Social Security number. Certain U.S. citizen children born from 2025 through 2028 may also qualify for a one-time $1,000 federal pilot contribution. Families should compare the purpose, timing, and estate-planning effects of each account before funding one.

Consider lifetime gifts under the higher exemption

The gift, estate, and generation-skipping transfer tax exemptions are $15 million for 2026. The One Big Beautiful Bill Act (OBBBA) increased the exemption to $15 million per person starting in 2026, with inflation adjustments beginning after 2026. If you have substantial wealth, this higher exemption may create additional flexibility for lifetime gifts and other wealth-transfer strategies.

Using the exemption now means it will not be available later. However, portability between spouses may allow a surviving spouse to use the deceased spouse’s unused exemption. High-net-worth individuals whose wealth exceeds the exemption and who want to transfer assets before future legislative changes may benefit most. Large gifts can have complex legal and tax implications, so work with an estate attorney to structure them properly.

Consider a charitable remainder trust for income and a charitable legacy

Charitable remainder trusts (CRTs) have become more popular in the higher interest rate environment. A CRT provides distributions to a beneficiary during the trust term, with the remainder payable to charity. It allows you to make a gift to charity while preserving an income stream for yourself or another beneficiary.

When appreciated assets are transferred to the trust, the CRT can sell them without paying tax on the gains at the time of sale, and you may receive an immediate charitable income tax deduction. However, payments to you or another noncharitable beneficiary may be taxable based on the type of income and gains the trust has generated. A CRT works well in a high interest rate environment because it creates a larger upfront charitable tax deduction. Higher-net-worth individuals with appreciated assets who want income and a charitable legacy may benefit most. The trade-off is that CRTs are complex and require legal setup and ongoing administration, so an estate attorney and tax advisor should structure the trust.

What additional deductions are available in 2026?

Four additional federal deductions are available in 2026 for eligible seniors, qualified tip income, qualified overtime compensation, and qualified passenger vehicle loan interest. These deductions can be claimed whether a taxpayer takes the standard deduction or itemizes, although income phaseouts and other eligibility rules apply. Reviewing the deductions alongside the rest of your year-end plan can help you understand how changing tax rules and personal circumstances may affect your choices.

Deduction for seniors

From 2026 through 2028, an eligible taxpayer who is age 65 before the end of the tax year may claim up to a $6,000 additional deduction. A married couple filing jointly may claim up to $12,000 if both spouses qualify. The deduction begins to phase out above $75,000 of MAGI for single filers and $150,000 for married couples filing jointly, and it is available whether the taxpayer takes the standard deduction or itemizes.

Deduction for tips

Eligible employees and self-employed workers may deduct up to $25,000 of qualified tip income in 2026. The deduction begins to phase out above $150,000 of MAGI for single filers and $300,000 for married couples filing jointly. Qualified tips must meet reporting and occupation requirements, and the deduction is available whether the taxpayer takes the standard deduction or itemizes.

Deduction for overtime

Eligible workers may deduct qualified overtime compensation of up to $12,500 for single filers or $25,000 for married couples filing jointly in 2026. Qualified overtime generally means the portion paid above the regular rate that is required under the Fair Labor Standards Act. The deduction begins to phase out above $150,000 of MAGI for single filers and $300,000 for married couples filing jointly, and it is available whether the taxpayer takes the standard deduction or itemizes.

Deduction for auto loan interest

Eligible taxpayers may deduct up to $10,000 of qualified passenger vehicle loan interest in 2026. The loan generally must finance a new vehicle purchased for personal use, be secured by a first lien on the vehicle, and meet U.S. final-assembly requirements. The deduction phases out based on MAGI and is available whether the taxpayer takes the standard deduction or itemizes.

Whenever there are major federal tax changes, keep in mind that state tax treatment may not match the federal rules described in this article. States vary widely in how they conform to federal tax law changes, and some may decouple from specific provisions. In fixed-date conformity states, a state may follow the Internal Revenue Code only as of a prior date, meaning newer federal changes may not automatically apply for state income tax purposes. Before relying on a federal year-end planning strategy, check with your tax professional to confirm whether your state follows, modifies, or rejects the relevant federal rule.

How can your financial advisor help with year-end tax planning?

Life changes, and your priorities may change with it. Checking in with your financial advisor regularly—especially near year-end—can help ensure you are on the same page and that your decisions align with where you want to go. Your advisor can help you understand your options; prepare questions; and coordinate next steps with your legal, accounting, or tax advisers.

Starting now gives you more time to act before December 31, so you can enter 2027 with clarity and confidence.

Frequently Asked Questions

When is the deadline for 2026 year-end tax planning moves?

Most year-end tax strategies must be completed by December 31, 2026, including contributions to 401(k), 403(b), and SIMPLE IRA plans, charitable contributions, gifts, and most deduction-timing tactics. The one major exception is IRA contributions: You have until April 15, 2027, to make a 2026 contribution to a traditional or Roth IRA. If you turned 73 in 2026, you can delay your first RMD until April 1, 2027, but you will then need to take two RMDs in 2027.

Do I need to itemize my deductions to benefit from these strategies?

Not for all of them. Some year-end tax strategies do not require itemizing, including qualified charitable distributions and annual exclusion gifts. The additional deductions for eligible seniors, qualified tips, qualified overtime compensation, and qualified vehicle loan interest are also available whether you take the standard deduction or itemize. Other strategies, including charitable deduction bunching and the state and local tax deduction, matter primarily when itemized deductions exceed the standard deduction. The better choice depends on your total eligible expenses, income, and filing status.

What’s new for taxes in 2026 under the OBBBA?

For 2026, the One Big Beautiful Bill Act affects several widely used tax-planning areas. Key changes include a $40,400 state and local tax deduction cap before applicable phaseouts; a 0.5 percent adjusted gross income floor for certain charitable deductions; a $15 million federal lifetime gift and estate tax exemption; and additional deductions for eligible seniors, qualified tips, qualified overtime compensation, and qualified vehicle loan interest. The law also created Trump Accounts, a children’s savings option with a general $5,000 annual contribution cap and a one-time $1,000 federal pilot contribution for certain eligible children born from 2025 through 2028. Some provisions do not have scheduled expiration dates, but Congress can change them in the future.

Can I still make retirement contributions after December 31?

Yes, but only for IRAs. Contributions to 401(k), 403(b), and SIMPLE IRA plans must be made by December 31, 2026. Traditional and Roth IRA contributions for the 2026 tax year can be made until April 15, 2027. If you or your spouse actively participates in a qualified employer plan, AGI phaseouts may limit your ability to contribute or take a deduction, so check with your accountant or advisor to confirm your eligibility and contribution limits before filing your return.

How do I know if a Roth conversion makes sense for me?

A Roth conversion may make sense if you expect to be in a higher tax bracket in retirement or if you are in a temporarily low-income year. The conversion is taxable in the year it occurs, so you want to be confident the long-term benefits outweigh the upfront tax cost. A conversion increases your MAGI, which can affect your SALT deduction cap and Medicare IRMAA surcharges. Because conversions cannot be undone, model the amount with a tax advisor before acting.

How much can I gift without paying taxes in 2026?

You can gift up to $19,000 per recipient in 2026 without using any of your lifetime gift and estate tax exemption or $38,000 per recipient if you are married and your spouse also gives. Annual exclusion gifting is a use-it-or-lose-it benefit each year. Gifts above the annual exclusion count against your $15 million lifetime exemption. You can also super-fund a 529 plan with up to $95,000 ($190,000 if married) by spreading the gift over five years of annual exclusions.

Should I talk to a financial advisor before making year-end tax moves?

Yes. A financial advisor can help you review your full financial picture; identify which year-end strategies may apply to your situation; and coordinate next steps with your independent legal, accounting, or tax advisers. Your advisor will not provide legal or tax advice but can help you understand your options, prepare the right questions for tax professionals, and ensure your planning aligns with your broader financial goals before the December 31 deadline.

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