Year-End Tax Planning for Individuals: 7 Items to Review Before December 31, 2026

2026 is the first year in which nearly all of the One Big Beautiful Bill Act (OBBBA) is in effect. For individuals, that means a higher standard deduction and SALT cap, new limits on charitable deductions, and for anyone who invested in a qualified opportunity zone fund, a deferred gain that comes due on December 31, 2026. The decisions you make in the next few weeks can meaningfully change your 2026 tax bill.

Be certain to review the following seven items before December 31, 2026.

1. Know the 2026 numbers

Item	2026 Amount
Standard deduction	$32,200 joint; $24,150 head of household; $16,100 single
Additional standard deduction (65+ or blind)	$1,650 married; $2,050 unmarried
Senior deduction (age 65+, 2025-2028)	$6,000 per person ($12,000 if both spouses qualify); phases out above $75,000 AGI single / $150,000 joint
SALT deduction cap	$40,400 ($20,200 married filing separately); reduced above $04,000 of MAGI, but not below $10,000
0% long-term capital gains rate	Taxable income up to $98,900 joint; $49,450 single
401(k)/403(b)/457(b) deferral	$24,500; catch-up $8,000 (age 50+); up to $11,250 (ages 60-63)
HSA contribution	$4,400 self-only; $8,750 family; $1,000 catch-up (age 55+)
IRA qualified charitable distribution (QCD)	Up to $111,000 (age 70 1/2 +)

2. Charitable giving: New rules change the math

The 2025 law made three changes to charitable deductions that take effect in 2026. Together, they reward giving that is planned rather than routine.

• A new deduction for non-itemizers. If you take the standard deduction, you can now deduct up to $1,000 ($2,000 for joint filers) of cash gifts to qualified public charities, on top of the standard deduction. Gifts to donor-advised funds and most private foundations do not qualify, and the deduction cannot come from a prior-year carryover.

• A 0.5% floor for itemizers. If you itemize, only the portion of your total charitable gifts that exceeds 0.5% of your adjusted gross income (AGI) is deductible. The floor applies to every type of gift and charity.
  • For example, a donor with $500,000 of AGI who gives $20,000 in cash deducts $17,500. The first $2,500 produces no deduction. Importantly, amounts lost to the floor generally do not carry forward. They can be carried to a later year only as part of a carryover created because the donor exceeded an AGI percentage limit that same year; otherwise they are permanently lost.
• A cap on the value of deductions for top-bracket taxpayers. Taxpayers in the 37% bracket now have itemized deductions reduced by 2/37 of the lesser of their itemized deductions or the amount by which income exceeds the start of the 37% bracket ($768,700 joint; $640,600 single for 2026). In effect, charitable and other itemized deductions save tax at about 35% rather than 37%. For example, a single donor with $1,000,000 of AGI and no other itemized deductions who gives $100,000 first loses $5,000 to the 0.5% floor and then about $5,135 to the 2/37 reduction, for a deduction of roughly $89,865.

Charitable Giving Strategies to Consider Before Year End

• Bunch gifts. Giving two or more years of donations in one year clears the 0.5% floor once instead of every year and lets you take the standard deduction (plus the new non-itemizer deduction) in off years.
• Give appreciated stock. Donating long-term appreciated securities instead of cash avoids capital gains tax on the appreciation while still generating a deduction, subject to AGI limits.
• Use IRA qualified charitable distributions. If you are 70½ or older, you can transfer up to $111,000 in 2026 directly from your IRA to a qualified public charity. The distribution is excluded from income, counts toward your required minimum distribution, and is not subject to the 0.5% floor or the itemized deduction limit because it is never deducted. QCDs cannot go to a donor-advised fund or private foundation.
• Consider timing for high earners. Because the 0.5% floor and the 2/37 limit both started in 2026, the value of a dollar of giving is now lower for many donors than it was in 2025. Large planned gifts, charitable remainder trusts and gifts that coincide with high-income years deserve modeling before you commit.

3. Qualified opportunity zone gains come due December 31, 2026

If you deferred a capital gain by investing in a qualified opportunity fund (QOF) under the original opportunity zone rules, that deferral ends this year. The deferred gain is included in income on the earlier of the date you sell or exchange the QOF investment or December 31, 2026 — even if you still own the investment and receive no cash.

How much is taxed. The amount included is the lesser of the deferred gain or the fair market value of the investment on December 31, 2026, reduced by your basis in the investment. Investors who held their QOF interest for five years by the end of 2026 (invested by December 31, 2021) receive a basis increase equal to 10% of the deferred gain; those who held for seven years (invested by December 31, 2019) receive 15%. The gain keeps its original character, so a deferred short-term gain is taxed as short-term.

EXAMPLE:

$2,000,000 long-term gain deferred in 2019	AMOUNT
Deferred gain	$2,000,000
Less 15% basis step-up (seven-year hold)	($300,000)
Gain recognized in 2026	$1,700,000
If the investment is worth only $1,500,000 on 12/31/2026: $1,500,000 less $300,000	$1,200,000

What to do now:

• Quantify the gain. Confirm the deferred gain, your basis and any step-up with the fund sponsor. If you are relying on a fair market value below the deferred gain, support it with a qualified appraisal.
• Plan for the cash. QOF investments are often illiquid, so the tax must usually be paid from other sources. Model federal capital gains tax, the 3.8% net investment income tax and state tax, and increase your fourth-quarter estimated payment or withholding to avoid penalties.
• Offset where possible. Harvesting capital losses in other investments and timing charitable gifts of appreciated stock into 2026 can reduce the impact.
• Check your state. Some states, including California and New York, did not conform to the federal deferral, so state treatment may differ.
• Keep holding if it makes sense. If you hold the investment for at least 10 years, you can still elect to exclude appreciation after the deferred gain is recognized. Note that gain recognized in 2026 under the original program cannot be reinvested into a new opportunity fund for another deferral under the new rules.

4. Manage capital gains and losses

By year-end, your gains and losses for the year are largely known. Consider realizing losses to offset gains taxed at 15% or 20% (and the 3.8% net investment income tax); excess losses offset up to $3,000 of ordinary income.

If your taxable income will fall within the 0% bracket, consider realizing long-term gains up to the threshold instead. Watch the wash-sale rules when repurchasing securities sold at a loss.

5. Itemize or take the standard deduction and bunch

With a $32,200 standard deduction for joint filers, many households will itemize only in some years. Bunching deductible expenses such as charitable gifts, elective medical expenses above 7.5% of AGI, and state and local taxes that have already been assessed into a single year can produce an itemized deduction that year and the standard deduction in the next. Higher-income taxpayers should model the SALT cap phase-down: above $505,000 of MAGI, the $40,400 cap is reduced by 30% of the excess, but not below $10,000.

6. Retirement and savings accounts

• Maximize workplace plans. For 2026, you can defer up to $24,500 to a 401(k), 403(b) or 457(b), plus $8,000 if age 50 or older, or up to $11,250 if age 60 to 63. Employees with prior-year wages above $150,000 must make catch-up contributions as Roth contributions.
• Consider a Roth conversion. A lower-income year may be a good time to convert part of a traditional IRA to a Roth IRA. The conversion is taxable, so coordinate it with the QOZ gain, capital gains and the 3.8% net investment income tax threshold. A required minimum distribution cannot be converted.
• Take required minimum distributions. RMDs generally begin at age 73. Taxpayers who delay the first RMD until April 1 of the following year will take two distributions in that year.
• Fund an HSA. If you are covered by a high-deductible health plan, you can contribute $4,400 (self-only) or $8,750 (family), plus $1,000 if 55 or older.
• Open a Trump account for children. Contributions to these new children’s accounts began July 6, 2026, with a $5,000 annual limit on contributions from parents, relatives or employers. Eligible children born in 2025 through 2028 receive a $1,000 federal pilot contribution.

7. Confirm new deductions are documented

Several new deductions run through 2028 and depend on records you or your employer provide including:

• the deduction for qualified tips (up to $25,000)
• the deduction for qualified overtime (up to $12,500)
• interest on loans for new U.S. assembled vehicles (up to $10,000), and
• the $6,000 senior deduction.

Review your final pay stubs and loan statements, and expect tip and overtime amounts to appear in Box 12 of your 2026 Form W-2.

Year-end Checklist for Individuals

Action	Timing
Project 2026 income, marginal bracket and estimated tax safe harbor	November
Decide whether to bunch charitable gifts or fund a donor-advised fund	By December 31, 2026
Mark IRA qualified charitable distributions (age 70 1/2 +)	By December 31, 2026
Quantify QOZ deferred gain; confirm basis step-up and FMV	Now
Increase fourth-quarter estimate or withholding for QOZ gain	By the fourth-quarter estimate due date
Harvest capital losses to reduce gains	By December 31, 2026
Maximize 401(k) deferrals; complete Roth conversions and RMDs	By December 31, 2026
Make IRA and HSA contributions for 2026	By April 2027 filing deadline

Every situation is different, and these rules interact.

If you have questions on this or other matters affecting you, please call 215.675.8364 or email us to schedule a year-end planning meeting and run your 2026 projection.

DISCLAIMER: All communications by Wouch, Maloney & Co., LLP intend to provide general information, as of the date of the communication, and may reference information from reputable sources. Although our firm has made every reasonable effort to ensure that the information provided is accurate, we make no warranties, expressed or implied, on the information provided. Please be aware that this is not a comprehensive analysis of the subject matter covered and is not intended to provide specific recommendations to you or your business with respect to the matters addressed.