Year-End Tax Moves 2026

Why December 31 Matters

The tax code runs on a calendar year. Contributions to a workplace 401(k), most FSA spending, charitable gifts, and investment gains and losses all count toward 2026 only if they happen by December 31. Miss the date and the opportunity does not roll over — next year you get a fresh set of limits, but this year's unused room is gone forever.

The fourth quarter is also when you know your real income for the year. That makes it the last reliable moment to fill retirement accounts, harvest losses, and adjust withholding before the numbers are final.

1. Max Your 401(k): $24,500

The IRS raised the 2026 employee 401(k) and 403(b) contribution limit to $24,500 (IR-2025-111). If you are 50 or older, you can add an $8,000 catch-up; if you are 60–63, SECURE 2.0 gives you a larger $11,250 catch-up. Traditional contributions come out of your paycheck pre-tax, which cuts this year's federal and (in almost every state) state income tax.

What is a full contribution actually worth? For a single filer earning $100,000:

Read that table the right way: putting $24,500 into a traditional 401(k) costs a Californian only about $16,870 of take-home pay — the other $7,630 was money that would have gone to taxes anyway. In the 22% federal bracket plus a 9.3% California bracket, every 401(k) dollar is roughly a 31-cent instant return.

If you are behind, raise your deferral percentage now — contributions must come out of 2026 paychecks, and payroll departments need lead time to process changes before the final pay runs.

2. Top Off Your HSA

If you are on a high-deductible health plan, the 2026 HSA limit is $4,400 for self-only coverage and $8,750 for family coverage (plus $1,000 if you are 55+). The HSA is the only triple-tax-advantaged account: deductible going in, tax-free growth, tax-free out for medical costs. Payroll HSA contributions also dodge FICA.

Example: a single Californian at $100,000 who routes $4,400 through payroll loses only about $2,686 of take-home — the contribution saves roughly $1,714 across federal tax, FICA, and California tax. Unlike the 401(k), you have until the April 2027 filing deadline to make 2026 HSA contributions directly, but payroll contributions get the extra FICA break, so year-end payroll top-ups are the better route.

3. Spend Down Your FSA

Health care FSAs are largely use-it-or-lose-it. Check your balance this month and book the dental work, glasses, or prescriptions you have been postponing. Many plans allow a small carryover or a grace period into early 2027, but the default rule is simple: money left in the account after the deadline is forfeited. Dependent-care FSAs follow the same logic.

4. IRA: $7,500, and the Roth Question

The 2026 IRA limit rose to $7,500 (catch-up $1,100 at 50+). You have until the April 2027 filing deadline to contribute for 2026, but deciding now matters for a different reason: if your income will be unusually low this year, a Roth conversion locks in today's bracket on money that would otherwise be taxed later. Conversions are taxable in the year they happen, so they are a December 31 decision, not an April one.

5. Claim the New 2026 Deductions

The One Big Beautiful Bill Act created several new above-the-line deductions for 2026, and year-end is when you make sure you can document them:

• Overtime: deduct the premium portion of FLSA overtime pay, up to $12,500 ($25,000 joint). Keep pay stubs showing the overtime breakdown.
• Tips: deduct up to $25,000 of qualified tips in Treasury-listed occupations. Make sure tips are properly reported on your W-2.
• Seniors 65+: an additional $6,000 deduction per qualifying person.
• Car loan interest: up to $10,000 of interest on a loan for a new, U.S.-assembled personal vehicle.

Each phases out at higher incomes (starting at $150,000 MAGI for singles, $300,000 joint), so if you are near the threshold, the retirement moves above have a double effect: they cut tax directly and lower MAGI enough to preserve these new deductions.

6. Harvest Investment Losses

Sold winners in a taxable brokerage account this year? Realized losses offset those gains dollar for dollar, and up to $3,000 of net loss offsets ordinary income. Trades must settle in 2026, and the wash-sale rule disallows the loss if you rebuy the same security within 30 days — so act by late November, not the last week of December.

7. Fix Your Withholding Now

Overtime, a bonus, or a mid-year job change can leave you under-withheld — and the IRS charges an underpayment penalty if you owe more than $1,000 without meeting a safe harbor. Run your numbers in October: if you are short, file a new W-4 with extra withholding on your remaining paychecks. Withholding is treated as paid evenly through the year, so a year-end bump can retroactively fix earlier underpayment in a way estimated payments cannot.

Frequently Asked Questions