2026 Year-End Planning Guide: Tax, Retirement, and Charitable Giving Opportunities

As 2026 comes to a close, now is a good time to review your tax, retirement, and charitable planning strategies. This year is especially important because several income tax planning rules have changed under the recent tax law commonly referred to as the One Big Beautiful Bill Act or OBBBA. These changes affect charitable giving, state and local tax deductions, and retirement contributions, among other things. This guide highlights some important year-end tax planning opportunities and identifies areas where you should coordinate with your tax, legal, and financial advisors.

Top 2026 Year-End Planning Priorities

What Changed in 2026?

For this year, several new rules deserve special attention.

New Limits on Charitable Deductions

Beginning in 2026, taxpayers who itemize deductions are subject to a new 0.5% AGI floor on charitable contributions. In practical terms, charitable gifts are deductible only to the extent they exceed 0.5% of adjusted gross income. Charitable deductions are also subject to a limitation that caps the maximum value of itemized deductions at the 35% tax bracket level, even though the highest federal tax bracket is currently 37%.

New Charitable Deductions for Non-Itemizers

Taxpayers who do not itemize may now claim a charitable deduction for certain cash gifts. The deduction is limited to $1,000 for single filers and $2,000 for married couples filing jointly. The contribution must be a cash gift to a qualified public charity. Gifts to donor-advised funds do not qualify for this non-itemizer deduction.

SALT Deduction Cap Increased, But With a Phaseout

For 2026, the state and local tax deduction cap increased from $10,000 to $40,400. However, the benefit phases down for taxpayers with income of $505,000 or more, eventually returning to a $10,000 cap.

Retirement Catch-Up Contributions Have a New Roth Rule

Beginning in 2026, certain higher-income workers age 50 or older must make catch-up contributions on a Roth basis if their wages from their current employer exceeded $145,000 in the prior tax year. This means the catch-up contribution will be made after tax rather than pre-tax.

Estate and Gift Tax Exemption Increased

The federal lifetime estate and gift tax exemption increased to $15 million per person, with inflation adjustments in later years. This creates significant planning flexibility, especially for families with state estate tax exposure or assets expected to appreciate meaningfully over time.

Planning for Charitable Giving

Charitable planning is one of the most important areas to revisit in light of the new deduction rules.

Consider Bunching Charitable Gifts

Because charitable deductions for itemizers are now subject to a 0.5% AGI floor, smaller annual charitable gifts may produce less tax benefit than they did previously. One planning strategy is to bunch several years of charitable giving into a single tax year. A common way to do this is by contributing appreciated securities to a donor-advised fund (DAF), taking the deduction in the year of the gift, and then recommending grants from the donor-advised fund to charities over time.

Give Appreciated Securities Instead of Cash

One of the most tax-efficient charitable strategies is to give appreciated securities to a qualified charity or DAF.  This can allow you to avoid capital gains tax on the built-in appreciation while potentially receiving a fair-market-value charitable deduction, subject to applicable AGI limits.  For gifts of appreciated stock to a public charity, the deduction is generally limited to 30% of AGI in a given year, with excess deductions potentially carried forward for up to five years.

Common Mistakes With Charitable Giving

• Making a donation late in the year and assuming it
  was completed before December 31
• Failing to obtain a contemporaneous written acknowledgment
• Giving cash when appreciated securities would have been more tax-efficient
• Assuming donor-advised fund gifts qualify for the new non-itemizer charitable deduction

Obtain Written Acknowledgements

The IRS continues to scrutinize charitable deductions. Taxpayers should obtain a contemporaneous written acknowledgment for charitable gifts where required. Without proper documentation, an otherwise valid charitable contribution may be disallowed. For more on properly documenting and substantiating charitable gifts, see our recent article, The Nuts and Bolts of the Charitable Income Tax Deduction: Safeguarding Your Deduction in 2026.

Qualified Charitable Distributions From IRAs

For individuals age 70½ or older, a Qualified Charitable Distribution (QCD), is one of the most powerful charitable planning tools available.  A QCD allows an IRA owner to transfer up to $111,000 directly from a traditional IRA to a qualified charity. A QCD may also satisfy part or all of the IRA owner’s required minimum distribution for the year. The IRA distribution is reported on Form 1099-R, but the QCD amount is excluded from taxable income.

Why QCDs Are Especially Valuable in 2026

A QCD reduces income above the line. As a result, it avoids the new 0.5% AGI floor for charitable deductions and also avoids the limitation that caps the value of itemized deductions at the 35% bracket level. In other words, for eligible IRA owners, a QCD may provide a better tax result than taking an IRA distribution, reporting taxable income, and then making a charitable contribution.

QCD Decision Guide

Common QCD Mistakes

• Taking possession of IRA funds before giving them to charity
• Sending the distribution to a donor-advised fund or private foundation
• Waiting until the last days of December
• Assuming the custodian will automatically code the transaction correctly
• Failing to confirm that the charity received the funds before year-end
• Failing to get a contemporaneous written acknowledgment

State and Local Tax Deduction Planning

For 2026, the state and local tax deduction cap increased to $40,400. The increased cap begins to phase down for taxpayers with income of $505,000 or more, but it will not fall below $10,000.

In some states, business owners may be able to use pass-through entity tax elections to shift the deduction to the entity level, where it is not limited. Depending on state law and the taxpayer’s circumstances, this workaround allows the SALT deduction in effect to be taken by a business owner without a cap so long as the business is taxed as a pass-through, such as a partnership or S Corporation.

Planning Questions

• Will you itemize deductions in 2026?
• Will your income exceed the SALT phaseout threshold?
• Are you a business owner eligible for a pass-through entity tax election?
• Would accelerating or deferring state tax payments affect your overall tax result?

Retirement Account Planning

Required Minimum Distributions

IRA owners over the required age must generally take required minimum distributions (RMDs) by year-end. For 2026, an IRA owner must take an RMD by December 31 if he or she turned age 73 before January 1, 2026. If the owner turned 73 during 2026, the first RMD may be delayed until April 1, 2027.

The penalty for missing an RMD is generally 25% of the amount not withdrawn. The penalty may be reduced to 10% if corrected within a two-year period, and the required IRS paperwork is filed. A taxpayer may also request a penalty waiver if the missed RMD was due to a reasonable error.

Taxpayers should confirm their required amount, coordinate distributions across eligible IRAs and consider whether a QCD could satisfy some or all of the RMD.

Inherited IRAs: Review Carefully

Inherited IRA rules are complex, and many beneficiaries are still adjusting to the SECURE Act rules.  The IRS has ended prior relief for missed RMDs from certain inherited IRAs affected by the SECURE Act. Most non-spouse beneficiaries must fully withdraw the inherited IRA within 10 years of the original owner’s death. In many cases, if the original owner had already reached RMD age, the beneficiary must also take annual distributions during the 10-year period.  Roth IRAs do not have lifetime RMDs for the original owner, but inherited Roth IRAs may still be subject to the 10-year rule unless an exception applies.

Beneficiary Categories and 10-Year Rule Application

Common Mistakes

• Assuming the beneficiary can wait until year 10 to take all distributions
• Missing annual RMDs when required
• Failing to coordinate IRA distributions with the beneficiary’s tax bracket

IRA Contributions

For 2026, an eligible taxpayer may contribute up to $7,500 to an IRA, or $8,600 if age 50 or older. The contribution deadline for 2026 is April 15, 2027. Roth IRA eligibility depends on your Modified Adjusted Gross Income (MAGI). For 2026, the top income thresholds are $153,000 for single filers and $242,000 for married couples filing jointly. Above that, the contribution limit phases out quickly, reducing to zero.  Self-employed individuals may also consider contributing to a SEP IRA. For 2026, the contribution limit for a SEP is the lesser of 25% of compensation or $72,000, with special calculations for sole proprietors and freelancers.

Workplace 401(k) Plans

Employees should consider contributing enough to receive the full employer match, if available. For 2026, the regular pre-tax contribution limit for 401(k) and similar workplace plans is $24,500. Additional catch-up contributions are available for workers age 50 or older, and a larger super catch-up applies for workers ages 60 to 63.  In 2026, the overall contribution limit from all sources, including employee deferrals and employer contributions, is $72,000 (or $80,000 if you are age 50+, and $83,250 if age 60-63).

New Roth Catch-Up Rule for 401(k)s

Effective in 2026, if a worker age 50 or older had wages from the current employer above $150,000 in 2025, catch-up contributions to a 401(k) account must be made on a Roth basis. This means the catch-up amount will not reduce current taxable income, but qualified withdrawals in retirement may be tax-free.

Roth Conversion Planning

A Roth conversion involves transferring assets from a traditional IRA to a Roth IRA and paying income tax on the converted amount. In exchange, qualified Roth IRA withdrawals may be tax-free, and Roth IRAs are not subject to lifetime RMDs for the original owner. Roth conversions may be especially attractive when a taxpayer is in a lower tax bracket than expected in the future, has cash outside the IRA to pay the tax, and expects the converted assets to remain invested for a long period.

Roth conversions may be particularly attractive when a taxpayer is temporarily in a lower tax bracket, although the conversion amount should be coordinated with other income and deductions.

Roth Conversion Decision Guide

Higher-income taxpayers may also consider backdoor or “mega” backdoor Roth strategies. These approaches depend on existing IRA balances and, in the case of a mega backdoor Roth, the features permitted by an employer plan. The pro rata rule and other tax considerations should be reviewed carefully.

Trap for the Unwary: IRMAA Surcharges

A large Roth conversion can increase adjusted gross income and may result in higher Medicare Part B and Part D premiums in a later year.

Common Mistakes: Roth Conversions

• Ignoring the “pro-rata rule”
• Failing to factor in the “5-year rule” for earnings in a Roth IRA
• Paying the conversion tax with the IRA funds (through withholding, e.g.)
• Accidentally triggering IRMAA surcharges, which increases Medicare costs
• Mismanaging the timing of backdoor Roths

Tax-Loss Harvesting

Tax-loss harvesting involves selling investments at a loss to offset realized capital gains. Losses may help reduce taxable gains, including gains subject to the top federal long-term capital gains rate and the 3.8% net investment income tax that may apply above certain income thresholds.

Watch out for the Wash Sale Rule

The wash sale rule disallows a tax loss if you sell a security at a loss and buy the same or a substantially identical security within 30 days before or after the sale.

Wash Sale Planning Alternatives

If you still want market exposure, you may consider buying a similar but not substantially identical ETF during the wash sale period. Another approach may be to double up on a position, wait more than 30 days, and then sell the original loss position.

Common Mistakes: Wash Sales

• Repurchasing the same security too soon
• Buying the replacement security in an IRA
• Having a spouse buy the same security
• Leaving dividend reinvestment turned on
• Selling a mutual fund or ETF without checking reinvestment settings
• Assuming the rule applies only within one account

529 College Savings Plans

A 529 plan can be a useful education and estate planning vehicle. Tax-free withdrawals may be used for qualified education expenses, including college tuition, room and board, books, materials, and up to $10,000 per year of K-12 tuition expenses.

A special rule allows a donor to contribute up to five times the annual exclusion amount to a 529 plan in one year, provided the donor elects on a gift tax return to spread the gift over five years. Contributions may also qualify for state tax benefits, depending on state law. The beneficiary of a 529 account may generally be changed, allowing the funds to be used for another eligible family member. Beginning in 2024, certain excess 529 funds may be rolled over to a Roth IRA, subject to conditions and a $35,000 lifetime cap.

To preserve tax-free treatment, withdrawals should align with qualified education expenses paid during the same calendar year. Families should also coordinate withdrawals with available education tax credits and retain appropriate documentation.

Common Mistakes: 529 Plans

• Overlooking the “same calendar year” rule
• Double-dipping with tax credits (such as the American Opportunity Tax Credit)
• Paying for non-qualified expenses
• Overpaying for off-campus room and board
• Accidentally triggering gift tax issues by not correctly filing a gift tax return
• Ignoring the Roth IRA rollover opportunity and rules

Annual Exclusion Gifts

In 2026, the annual gift tax exclusion is $19,000 per recipient, or $38,000 if a married couple makes a qualifying joint gift. Annual exclusion gifts can transfer wealth without using the donor’s lifetime gift tax exemption and may be made outright, through custodial accounts or through certain qualifying trusts.

Gifts must be completed by December 31, and unused exclusions do not carry forward. Donors should exercise care when transferring highly appreciated assets, making gifts to trusts or electing to split gifts with a spouse.

What Should You Do Before Year-End?

You should consider speaking with your financial, tax, and legal advisors before year-end if you:

• Are age 70½ or older and make charitable gifts
• Must take an RMD
• Recently inherited an IRA
• Are considering a Roth conversion
• Plan to make charitable gifts of appreciated securities
• Have large unrealized capital gains or losses
• Are selling a business or concentrated stock position
• Wish to make year-end gifts or fund a trust

Final Thoughts

Year-end planning may create meaningful opportunities for taxpayers who are charitably inclined, approaching retirement, managing inherited accounts or considering wealth transfers. Because many strategies must be completed before year-end, decisions should be coordinated with your tax, legal and financial advisors. At 1919, we welcome your questions about the topics covered in this guide.

Disclosures
The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of 1919 Investment Counsel, LLC (“1919”). This material contains statements of opinion and belief. Any views expressed herein are those of 1919 as of the date indicated, are based on information available to 1919 as of such date, and are subject to change, without notice, based on market and other conditions. There is no guarantee that the trends discussed herein will continue, or that forward-looking statements and forecasts will materialize. This material has not been reviewed or endorsed by regulatory agencies. Third party information contained herein has been obtained from sources believed to be reliable, but not guaranteed. 1919 does not provide tax advice. Circular 230 disclaimer. Must rely on an accountant or an attorney for tax advice.

1919 Investment Counsel, LLC is a registered investment advisor with the U.S. Securities and Exchange Commission. 1919 Investment Counsel, LLC, a subsidiary of Stifel Financial Corp., is a trademark in the United States. 1919 Investment Counsel, LLC, One South Street, Suite 2500, Baltimore, MD 21202. ©2026, 1919 Investment Counsel, LLC. MM-00002745

Published: October 2026