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Year-End Tax Planning: Moves to Make Before December 31

April feels a long way off in October. But by the time your W-2 shows up in the mail, most of the decisions that actually change a tax return have already been made, and that return is essentially closed. This is why the stretch from October through December matters so much. Year-end tax planning gives you a few months to look at the year that has been, make some last minute course corrections, and walk into filing season with a lot less pain.

The goal here is never to dodge what is legitimately owed. It is to steward what God has entrusted to you without leaving money on the table through simple neglect.

 

Start by getting your records in order

The least glamorous part of year-end tax planning is also the most valuable. Track your charitable giving and keep the receipts. If you run a small business or have any self-employment income, get your income and expenses organized now rather than reconstructing twelve months of bank statements in April.

The further you get from a transaction, the less likely you are to remember what it was for or why it was a legitimate expense. Documenting now protects you later.

 

Good news for givers in 2026

Since the 2017 tax law changes, most generous families received no tax benefit at all for their charitable contributions because the standard deduction was simply too large to make itemizing worthwhile. That changes beginning with the 2026 tax year.

Taxpayers who take the standard deduction can now deduct up to $1,000 in cash gifts to charity, or up to $2,000 for married couples filing jointly. You do not have to itemize to claim it. That makes this a genuinely low hanging piece of fruit for anyone who gives regularly, and it makes getting receipts more important than it has been in years. If you have been giving anonymously, consider documenting at least that first $2,000. One note worth remembering is that this particular deduction applies to gifts made directly to charities, not to donor advised funds.

 

Check your withholding before the year closes

Most people enjoy a refund, but a large refund means you handed the government an interest free loan all year. Owing a surprise balance with penalties and interest attached is worse. Either way, the fix is the same. Take a look at your withholding now and file an updated W-4 with your employer, along with your state’s equivalent form, so the last few paychecks of the year can help correct the course.

If your health coverage comes through the marketplace or exchange, pay especially close attention. The advance premium tax credit you received is recalculated when you file. Families whose income came in higher than estimated often see that excess credit recaptured as added tax on the return, and it can be painful.

 

Some moves only work inside the calendar year

Certain decisions carry no benefit at all once January 1 arrives. Charitable gifts, Roth conversions, business equipment purchases, retirement plan contributions for employees, and health coverage elections all have to be completed before December 31 to count for this year.

This is a good moment to check your giving against your goals. If you planned to give ten percent and your income is tracking toward $100,000, that is $10,000. If you have given $5,000 so far, you have work to do and about two months to do it. Building up some cash now also puts you in position to fund an IRA or health savings account contribution, which you can still make right up until the filing deadline next April.

 

Roth conversions and filling up a bracket

Not all year-end tax planning is about reducing this year’s tax bill. Sometimes the smarter move is paying a little more now at a lower rate to avoid paying much more later at a higher one.

Proverbs 22:3 says the prudent man sees danger ahead and takes cover. If you are sitting on a large traditional IRA balance and know that required minimum distributions begin at 73, the tax is coming whether you plan for it or not. A Roth conversion lets you move money out of the traditional bucket at today’s rate, where it keeps growing, and take it out tax free later.

The nuance is real, though. Extra income can make more of your Social Security taxable, and it can push you over the Medicare premium threshold, which is a cliff rather than a gradual slope. A single dollar of income over the line can meaningfully reduce your monthly benefit. This is exactly the kind of decision worth modeling with a tax professional and your financial advisor working together.

To make that possible, they need to know where your income actually stands. The simplest place to start is your most recent pay stub. Look at the year to date column and pass that number along.

 

Business owners, do not buy something just for the deduction

Every December, accountants field the same call. Should I buy a new truck before the year ends so I can take the deduction?

The first question back is whether you actually need the truck. A deduction is never worth more than what you spent. If you are in the 22 percent bracket, spending a dollar you did not need to spend saves you 22 cents and costs you 78. Keeping the dollar and paying the 22 cents leaves you better off. Social media is full of confident advice to the contrary, and much of it is simply wrong.

Timing matters too. If you expect a significantly higher income next year, it may be worth waiting until January so the deduction lands in a higher bracket and saves you more.

 

Strategies for lower income households

If your income is modest, there are still meaningful opportunities. A health savings account is one of the best, offering tax free contributions, tax free growth, and tax free withdrawals for qualified medical expenses. There is also no deadline for reimbursing yourself, so if you pay medical costs out of pocket and save the receipts, you can draw that money out years down the road.

The Saver’s Credit is the one most people have never heard of. Officially the Retirement Savings Contributions Credit, it returns 10, 20, or 50 percent of your retirement contributions, up to $2,000 per person. For 2026, a married couple can qualify with adjusted gross income up to $80,500, so this reaches further up the income scale than most people assume. Because IRA contributions can be made until the filing deadline, your tax preparer may be able to tell you in March that putting $1,000 into an IRA will bring back a sizable chunk of it as a credit.

Retirees with very low taxable income have a related opportunity. Between the standard deduction and the additional senior deduction, many seniors wipe out nearly all of their taxable income. That creates room for a Roth conversion at little or no tax cost, which is a missed opportunity every time it goes unused.

 

A windfall year calls for a plan

If you sold a property or a business, or had some other one time event, a donor advised fund can be a powerful tool. You can make a large contribution in the high income year, take the deduction while it is worth the most, and then direct grants to your church and other ministries over the following years.

The more advanced version is donating the asset itself rather than selling it first. Appreciated stock, real estate, business interests, and crypto can all be given directly, which means you take the deduction and avoid the capital gain on the donated portion. A donor advised fund is usually a better home for these gifts than a small church, simply because the sponsoring organization has the staff to handle complex assets.

 

Seniors, consider Qualified Charitable Distributions

If you are 70 and a half or older, you can give directly from a traditional IRA to your church or another charity through a qualified charitable distribution. That money never shows up as taxable income, which can also reduce how much of your Social Security gets taxed. You do not have to wait for required minimum distributions at 73 to start.

Corey and his wife have stopped writing checks to their church entirely. They give from their IRA instead and keep the cash they have already paid tax on for other purposes. They have also named their church and other ministries as beneficiaries on those accounts.

That last piece is worth sitting with. Inherited IRAs are fully taxable to your children, and the balance has to be emptied within ten years of your death. A million dollar IRA becomes a million dollars of taxable income for your kids in a compressed window. Leaving the taxable assets to charity and the tax free assets, such as home equity, bank accounts, and investments held outside retirement plans, to your family is one of the most elegant stewardship moves available. Just note that a qualified charitable distribution has to go to the end charity, not to a donor advised fund.

 

The most common mistake

The absence of any forward thinking at all. Most people are not overpaying because their return was prepared incorrectly. They are overpaying because nobody looked ahead.

Do not accept cookie cutter answers. Your situation has variables that a generic response will miss entirely. How old are your children, and when does the oldest finish high school. What are the college plans. Are you buying a home or moving. Are your parents moving into a care facility. A good tax professional knows which questions to ask and walks through them with you, because sometimes the answer is not something you act on today but something you apply the year your child turns 17.

 

Where to go from here

Do your year-end tax planning. Get your documents organized, track your income and expenses, check your giving against your goals, and set aside cash so you can act when an opportunity appears. Then sit down with your financial planner to look at investment related tax strategies, and bring your tax preparer into that conversation. There is a real art to this alongside the science, and you want the artists working together.

If you do not currently have a tax professional you trust, we would encourage you to reach out to the team at MinistryCPA. They work with individuals, families, business owners, churches, and missionaries across the country and around the world, and they bring a genuine stewardship mindset to the work. They are not sponsoring this content and receive nothing for being mentioned here. We simply love what they do and are glad to point you toward good people. You can learn more and get in touch at https://ministrycpa.org/.

 

 

Next Steps

 

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The topics discussed in this podcast are for general information only and are not intended to provide specific investment advice or recommendations.  Investing and investment strategies involve risk including the potential loss of principal. Past performance is not a guarantee of future results.

This article is general education, not personal tax advice. Your situation has details this post cannot account for, so please consult a qualified tax professional before acting.

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