Tis the Season to be Tax Savvy

As 2025 draws to a close, it’s the perfect time to review your financial situation and optimize your 2026 tax strategy. Proactive planning can help you minimize your tax bill and set the stage for a financially secure new year. Here are key steps to take before December 31 to ensure you’re prepared for the upcoming tax season.

Review Capital Gains and Losses:

If you’ve realized gains from selling investments this past year, consider offsetting them by selling your underperforming assets. Known as tax-loss harvesting, this strategy can reduce the amount of taxable gains and potentially help you save more. Be sure to remember the wash-sale rule, which will prevent you from repurchasing the same asset within 30 days.

Maximize Contributions to Retirement Accounts:

Take full advantage of tax-deferred retirement accounts like 401(k)s and IRAs. For 2026, the contribution limits are:

• 401(k): $24,500 (with a $7,500 catch-up contribution if you’re age 50+).
• Traditional and Roth IRAs: $7,500 (or $8,600 for those 50+).
  • The IRA catch‑up contribution limit for those 50+ was amended under the SECURE 2.0 Act to include an annual cost‑of‑living adjustment, which increased the amount to $1,100, up from $1,000 for 2025.

Contributions to a traditional IRA may be tax-deductible, depending on your income and whether you’re covered by an employer-sponsored plan. Read more about 2026 401(K) contribution changes here.

Use Flexible Spending Account (FSA) Funds:

If you have an FSA through your employer, check the balance, as any unused amount may be forfeited. Some plans may offer a grace period or allow a limited carryover, but it’s better to spend the funds on eligible expenses before the deadline.

Make Charitable Contributions:

Donating to qualified charities supports causes you are passionate about and provides a potential tax deduction. If you are itemizing your deductions, charitable contributions are subject to a 0.5% of adjusted gross income (AGI) floor beginning in 2026. This means that only the portion of your total contributions exceeding 0.5% of your AGI is deductible. 

For example, if your AGI is $200,000, the first $1,000 of contributions would not be deductible. Cash donations to qualified charities are generally deductible up to 60% of AGI, while donations of appreciated assets (such as long‑held stocks) can be deducted at fair market value and are limited to 30% of AGI. Donating appreciated assets directly to a charity also allows you to avoid capital gains taxes on the appreciation. Even if you do not itemize, you may still claim a universal charitable deduction: up to $1,000 for single filers or $2,000 for joint filers for cash contributions to qualified charities.

Review Required Minimum Distributions (RMDs):

If you’re 73 or older, you must take required minimum distributions from your retirement accounts. Missing the deadline can result in a hefty penalty—up to 25% of the amount not withdrawn. The deadline for your first RMD is April 1 of the year after you reach 73, while subsequent distributions must be taken by December 31 each year to avoid penalties. However, you may be able to reduce the penalty to 10% if you take the distribution within two years and file Form 5329. For retirees who don’t need the income, an IRA Qualified Charitable Distribution (QCD) made by account holders aged 70 ½ or older can satisfy an RMD up to $108,000 in 2025 (this is estimated to be $115,000 for 2026). 

Annual Gift Tax Exclusion:

Under the One Big Beautiful Bill Act (OBBBA), the federal lifetime estate and gift tax exemption will permanently increase to $15 million per person beginning in 2026. For 2025 and 2026, the annual gift tax exclusion remains at $19,000 per recipient ($38,000 for married couples through gift‑splitting). Gifts above the annual exclusion may require filing IRS Form 709 and could count toward your lifetime exemption. Remember to be aware of your state level estate and gift taxes, as these may vary significantly based on location. Read more about the OBBBA tax changes here.

Consult a Tax Professional:

Every financial situation is unique, and year-end tax planning can be complex. An Oppenheimer Financial Professional can help identify strategies tailored to your needs and ensure compliance with current regulations. Click here to find one in your area.

The final months of the year are critical for optimizing your tax position. By following these steps, you’ll not only reduce your 2026 tax bill and set yourself up for financial success for years to come. Don’t wait until the last minute—start planning now to make the most of this year’s tax-saving opportunities.

Speak with an Oppenheimer Financial Professional today to learn more.