Year-end tax planning is a beneficial process for individuals, business owners and investors aiming to optimize their financial standing and minimize overall tax liabilities. As the tax landscape continues to evolve, proactive planning before the conclusion of the calendar year allows taxpayers to take advantage of specific provisions, manage income brackets and maximize deductions and credits.

For the 2026 tax year, navigating the complexities of the tax code requires a highly structured approach due to the passage of the One Big Beautiful Bill Act (OBBBA). This legislation fundamentally changes the year-end playbook, introducing critical new provisions such as a State and Local Taxes (SALT) cap phase-down, a 0.5 percent charitable contribution floor, a 35 percent cap on itemized deduction value, AMT phase-out changes, the Roth catch-up mandate and the end of initial Opportunity Zone deferrals. By evaluating income sources, deduction opportunities, investment strategies and compliance obligations ahead of the December 31 deadline, taxpayers can position themselves advantageously for the upcoming filing season.

One of the fundamental pillars of effective year-end tax planning involves careful management and timing of income and high-earner tax thresholds. Depending on individual circumstances, taxpayers may benefit from either accelerating or deferring income into the next tax year. For individuals anticipating a higher tax bracket in the current year compared to the next, deferring bonuses, capital gains or self-employment income can result in tax savings. Conversely, if future tax rates are expected to increase or if income is projected to be higher in subsequent years, accelerating income might be advantageous. Business owners face similar decisions regarding invoicing clients before year-end or delaying billing to shift revenue recognition into the following fiscal period. Strategic timing may help position income to be taxed at more favorable marginal rates, while remaining attentive to novel income categories, such as the new exemptions for tips, overtime pay, car loan interest and enhanced senior deductions, along with specific adjusted gross income (AGI) phase-out limits established for 2026. High-income earners must remain vigilant regarding the Alternative Minimum Tax (AMT) and the 3.8 percent Net Investment Income Tax (NIIT) on investment earnings, actively managing modified adjusted gross income (MAGI) to prevent unnecessary exposure.

Equally important to income management is the strategic acceleration or deferral of deductible expenses and healthcare accounts. Taxpayers who itemize deductions can often benefit from “bunching” deductible expenses, such as medical costs, charitable contributions and state and local taxes, into a single tax year to surpass the standard deduction threshold. For 2026, the federal standard deductions are adjusted to $16,100 for single filers, $32,200 for married couples filing jointly and $24,150 for heads of household, alongside a temporary senior bonus deduction for adults aged sixty-five and older. Scheduling elective medical procedures, purchasing necessary business equipment or paying upcoming property taxes before the end of the year can successfully push taxpayers past these higher thresholds. Taxpayers should audit their medical Flexible Spending Accounts (FSAs) ahead of December 31 to avoid forfeiting funds under the use-it-or-lose-it rule, while maximizing contributions to Health Savings Accounts (HSAs) to leverage triple tax advantages and above-the-line deductions that reduce AGI.

Retirement account optimization and strict compliance with distribution rules remain important for robust year-end tax strategies. Contributing the maximum allowable amounts to employer-sponsored retirement plans can lower taxable income for the year. Retirees and inherited IRA beneficiaries should calculate and execute Required Minimum Distributions (RMDs) prior to December 31 to avoid excise taxes and penalties. Individuals should also evaluate whether a Roth conversion makes sense for their financial situation, converting traditional pre-tax retirement funds into a Roth account during a year with lower-than-average income to lock in a potentially lower tax rate, allowing future growth and qualified withdrawals to be tax-free. However, taxpayers should generally avoid executing Roth conversions during years with large liquidity events. A conversion in a year of abnormally high income exposes more dollars to AMT and NIIT pitfalls, which can negate the desired rate arbitrage. Because Roth conversions are treated as taxable income in the year they occur, careful calculation of tax brackets is necessary to avoid inadvertently pushing income into a higher marginal bracket or triggering additional surtaxes.

Investment portfolios may also be reviewed as the calendar year draws to a close. Tax-loss harvesting is a technique where investors sell underperforming assets at a loss to offset capital gains realized elsewhere in the portfolio. If capital losses exceed capital gains, up to a specified limit of ordinary income can be offset, providing an additional layer of tax relief. Investors should coordinate harvesting strategies closely with the 20 percent long-term capital gains and NIIT thresholds to maximize efficiency. Investors must also remain mindful of the wash-sale rule, which prohibits purchasing a substantially identical asset within thirty days before or after the sale to claim the loss.

Beyond loss harvesting, 2026 brings critical, time-sensitive deadlines for Opportunity Zones under OBBBA. Gains deferred under the original Qualified Opportunity Fund (QOF) program must be recognized on December 31, 2026, with tax due on the 2026 return, requiring affected clients to plan for liquidity and estimated payments now. Because OBBBA’s permanent Opportunity Zone program applies to investments made after December 31, 2026, gains realized late in 2026 may be eligible for reinvestment in a new-program QOF in 2027 within the standard 180-day window (subject to confirmation with tax counsel). Evaluating dividend distributions and capital gains distributions from mutual funds prior to year-end also helps prevent unexpected tax surprises during tax season.

Charitable giving and wealth transfer strategies offer avenues for philanthropy and tax reduction, though OBBBA introduces significant new parameters for 2026. The headline for year-end giving is the restructuring of charitable deductions. Itemized charitable deductions are now subject to a 0.5 percent of AGI floor, and for taxpayers in the 37 percent bracket, itemized deductions are reduced by 2/37, effectively capping the benefit at 35 percent. Non-itemizers can utilize a new $1,000 (single) or $2,000 (joint) cash deduction, though this cannot be used for gifts to Donor-Advised Funds (DAFs) or private foundations. Because the floor and cap continue in 2027, preventing rate arbitrage between years, the new 0.5 percent floor makes “bunching” several years of giving into a DAF in a single year highly attractive, as the floor is only absorbed once. Donating appreciated securities directly to qualified charitable organizations still allows donors to deduct the full current market value of the assets while entirely bypassing capital gains taxes that would have been incurred upon a direct sale.

For retirees subject to RMDs, utilizing Qualified Charitable Distributions (QCDs) offers a tax-efficient mechanism to fulfill distribution requirements directly from an IRA without increasing adjusted gross income. The 2026 QCD limit is $111,000 per IRA owner age 70½ or older, with a one-time split-interest QCD limit of $55,000. While the dollar amounts are capped, QCDs are exceptionally valuable under the new rules because they are excluded from income entirely, completely avoiding both the 0.5 percent floor and the 35 percent deduction cap. Note, however, that QCDs cannot be directed to a DAF or private foundation.

For estate and wealth planning, the 2026 annual gift tax exclusion remains set at $19,000 per recipient, meaning a married couple splitting gifts can transfer up to $38,000 per individual without incurring gift taxes or eating into lifetime limits. The federal lifetime estate and gift tax exemption stands at $15 million per individual, or $30 million for a married couple via portability or proper planning. Utilizing these exclusions before December 31 allows families to transfer assets and shield future asset appreciation from taxation.

Small business owners and self-employed individuals should pay special attention to year-end equipment purchases, state tax workarounds and depreciation rules. Expensing provisions under tax regulations allow businesses to deduct the full cost of qualifying equipment and software purchased and placed in service before the end of the year, providing a strong incentive to upgrade technology, machinery or infrastructure while lowering business taxable income. Crucially, the Pass-Through Entity (PTET) election survived OBBBA and is arguably more vital than ever, as high-income owners with a MAGI above approximately $606,000 are subject once again to a strict $10,000 SALT cap. Business owners must coordinate these PTE taxes where applicable to mitigate the federal cap on state and local tax deductions. Readers should be reminded that many states require the election and actual payment to be made by December 31 to secure a 2026 federal deduction, making this a critical year-end action item. Structuring owner compensation, evaluating qualified business income deductions and reviewing entity classifications with a qualified tax professional ensure that business structures remain optimized for tax efficiency.

Looking Ahead: 2027 Planning Considerations
While finalizing 2026 actions is the immediate priority, taxpayers should also maintain visibility into 2027. The sweeping provisions established by OBBBA, including the new charitable floors and deduction caps, will largely carry forward, meaning there is little cross-year rate arbitrage opportunity on deductions. However, key thresholds will undergo inflation adjustments, and strategic planning will require transitioning to the permanent Opportunity Zone rules taking effect in 2027, adapting to Roth catch-up mandates, and continually assessing state-level PTET workarounds.

Finally, proper management of estimated tax payments, comprehensive recordkeeping and professional consultation are important components of a successful tax strategy. Taxpayers should review their year-to-date withholdings and quarterly estimated payments against the safe harbor rules, paying at least 90 percent of the current year’s tax liability or 110 percent of the prior year’s liability, to avoid unexpected underpayment penalties in April. Tax laws are intricate and subject to legislative changes, making it important to stay informed about current 2026 thresholds, phase-outs and credit availability. Maintaining organized records of receipts, donation acknowledgments, investment transactions and business expenses simplifies the preparation process and ensures that all legitimate claims are substantiated.

Your Oxford team brings deep experience working with families and business owners on their overall planning goals and objectives. In coordination with your legal and tax advisors, we apply thoughtful, customized strategies to help ensure peace of mind and financial optimization as the year concludes.

Oxford Financial Group, Ltd. (“Oxford”) is a Registered Investment Advisor (“RIA”) with the U.S. Securities and Exchange Commission (“SEC”) and is headquartered in Carmel, Indiana. Registration with the SEC does not imply a certain level of skill or training. Additional information about Oxford, including our Form ADV and Privacy Policy, is available upon request by calling 800.722.2289 or emailing info@ofgltd.com. The content of this presentation is intended for educational and illustrative purposes only. It should not be construed as investment, tax, or legal advice, nor as a recommendation or offer to buy or sell any security or investment product. The strategies referenced above are illustrative in nature and may not be available, suitable or advisable for every individual, entity or transaction. No strategy discussed guarantees the achievement of any tax, estate planning or transaction objective. Investing involves risk, including possible loss of principal. Tax and legal counsel should be engaged before taking any action. This material has been prepared using original sources believed to be reliable, but no representation is made as to its accuracy or completeness. The views expressed are those of Oxford as of the date of the presentation and are subject to change based on market, regulatory or economic conditions, which may not occur as anticipated. For full disclosures and disclaimers, please visit https://ofgltd.com/home/disclaimers. OFG-2610-33