Tax Planning Moves to Consider Before Year-End

The final few months of the year can bring a multitude of year-end tasks to check off your list. While it may seem like you can put off your tax planning closer to tax season, it’s important to treat it like a year-round sport. While a once-a-year approach may feel more manageable, it could cost you real money. Much like many other sports, the fourth quarter is where the game is often won or lost.

By the time you bring your previous year’s return to an accountant, most of the opportunities to influence the outcome have already closed. The window to adjust withholding, harvest losses, bunch deductions, or rebalance a portfolio with tax efficiency with current tax legislation in mind is limited, but the last quarter of the year is a great time to course correct.

Important Moves to Consider in Q4

 Nearly every meaningful tax lever has a deadline tied to December 31. Miss it, and the opportunity disappears.

• Adjust withholdings. Use your previous year’s tax return as an indicator for what you may owe or get back. You want to be as close to even as possible. Because withholding is treated as if it were paid evenly throughout the year, a Q4 adjustment can retroactively smooth out an entire year’s shortfall.
• Bunch charitable giving. Consider bunching your charitable giving into a single tax year to maximize both your donation and the tax advantages.
• Establish any time-bound retirement plans. Certain qualified retirement plans must be established by year-end to claim a deduction for that tax year, even if the actual contribution isn’t made until the filing deadline.
• Harvest tax losses. To offset investment gains, consult with your financial advisor about harvesting tax losses. This decision requires looking at your entire portfolio and making a decision before year-end, not just at tax time.

Good tax planning shouldn’t revolve around chasing a smaller number or an inflated refund. Getting a large refund simply means too much was withheld throughout the year and giving an interest-free loan to the government. Often, the better goal is staying close to even by paying what’s owed.

The Year-Round Benefit of Tax Planning

That means asking a different question that requires maintenance throughout the year. Instead of “What do I owe this year?”, the better question is “What can I still influence before the window closes?” This year-round mentality separates taxpayers who feel like tax season happens to them from those who feel in control of the outcome.

This is particularly true for:

• High W-2 earners, who often have fewer natural levers to pull and benefit from proactive withholding adjustments and retirement contribution strategies.
• Business owners, who have Q4 decisions available from retirement plan funding to timing contributions that directly reduce current-year liability.
• Anyone who experienced a major life change this year from a major move to a new job, or a home sale. Each of these can shift a tax situation in ways that aren’t obvious until it’s too late to address it.

Throughout the year, it’s also important to keep track of what’s happened and how it could impact your tax situation. The events from the year before can be easy to forget and you could pay a direct price for not taking everything into consideration. (That includes having kids. Don’t forget the kids.)

Important Tax Planning Considerations

The Working Families Tax Cuts legislation introduced changes that touch nearly every corner of the tax code, from family credits to charitable giving. With it, includes several areas that are important to consider before the end of the year.

• Charitable giving changes – For non-itemizers, individuals in 2026 can deduct up to $1,000 or $2,000 for married couples filing jointly in cash contributions to eligible charities, a benefit that didn’t exist before. At the same time, a new 0.5% Adjusted Gross Income floor applies to itemized charitable deductions, which means managing your gifting strategy is more than ever.
  
• Family-related credits – The Child and Dependent Care Credit and Adoption Credit have meaningful changes for qualifying expenses which create opportunities to revisit dependent care and family planning decisions.
  
• Retirement contribution limits – Contribution ceilings continue to rise for IRAs and HSAs alike, meaning taxpayers who haven’t recently revisited their contribution strategy are very likely leaving tax-advantaged savings on the table.

Reactive filing is a losing strategy. Your return serves as a book report of the previous year, simply a document of the decisions that were made. A good tax plan starts now, while fourth-quarter deadlines and decisions can still be made instead of just reported. However, the window to act closes with every week that passes.

The specifics of your situation determine which of these moves matter. It’s a decision that you shouldn’t make alone or make in a rush next April. Start the conversation with an advisor to begin building a tax-smart plan that works for you all year long, not just at filing time.