Top 9 Year-End Tax Tips
There are several strategies you can use to minimize your tax bill and avoid IRS penalties at the end of the year. Claiming the right deductions, contributing to retirement accounts, and offsetting capital gains can help you reduce your tax liability. If you want to save as much money as possible this tax season, check out these 9 end-of-year tax planning tips.
The One Big Beautiful Bill that passed includes permanently extending tax cuts from the Tax Cuts and Jobs Act, including increasing the cap on the amount of state and local or sales tax and property tax (SALT) that you can deduct, makes cuts to energy credits passed under the Inflation Reduction Act, makes changes to taxes on tips and overtime for certain workers, reforms Medicaid, increases the Debt ceiling, and reforms Pell Grants and student loans. Updates to this article are in process. Check our One Big Beautiful Bill article for more information.
When a significant natural disaster hits – such as a hurricane, earthquake, tornado, flood, wildfire, blizzard, or the like – the IRS will extend upcoming federal tax deadlines for affected taxpayers if a federal disaster is declared. The extended due dates apply to most federal tax returns and payments, including those for income taxes (including estimated tax payments), payroll taxes, and excise taxes. If you’re impacted by a natural disaster, check our IRS Disaster Relief page to see if you qualify for an automatic tax filing or payment extension.
Key Takeaways
- To avoid paying taxes in the near term on certain income—bonuses, self-employment billings, or capital gains—defer taking them until the end of the tax year, if you can.
- If you expect to be in a higher tax bracket next year, don’t defer income. If possible, you should accelerate it so you can pay tax on it in a lower bracket.
- To lower your tax bill, you can accelerate deductions by paying deductible expenses or making contributions to tax-deferred retirement accounts or charities by the end of the tax year.
- You can sell losing investments before the end of the year to offset any taxable gains you have realized during the year—a strategy known as "tax loss harvesting." If your losses exceed your gains, you can use up to $3,000 of excess loss to wipe out other taxable income.
Act before December 31 to increase your tax breaks and avoid penalties
Whether you are having a good year, rebounding from recent losses, or still struggling to get off the ground, you may be able to save a bundle on your taxes for 2026 if you make the right moves before the end of the year.
1. Defer your income
Income is taxed in the year it is received—but why pay tax today if you can pay it tomorrow instead?
It's tough for employees to postpone wage and salary income, but you may be able to defer a year-end bonus into next year—as long as it is standard practice in your company to pay year-end bonuses the following year.
If you're self-employed or do freelance or consulting work, you have more leeway. Delaying billings until late December, for example, can ensure that you won't receive payment until the next year.
Whether you're an employee or self-employed, you can also defer income by taking capital gains in 2027 instead of in 2026.
Of course, it only makes sense to defer income from 2026 to 2027 if you think you'll be in the same or a lower tax bracket next year. You don't want to be hit with a bigger tax bill next year if additional income could push you into a higher tax bracket. If that's likely, you may want to accelerate income into 2026 so you can pay tax on it in a lower bracket sooner, rather than in a higher bracket later.
2. Take some last-minute tax deductions
Just as you may want to defer income into next year, you may want to lower your tax bill by accelerating deductions this year.
For example, contributing to charity is a great way to get a deduction. And you control the timing.
Starting with the 2026 tax year, people who take the Standard Deduction can deduct up to $1,000 of cash donations to charity (up to $2,000 for married couples filing a joint return). Expect for special COVID-era exceptions for the 2020 and 2021 tax years, you could only deduct charitable contributions before 2026 if you claimed itemized deductions instead of the Standard Deduction on your return (you can either itemize or take the Standard Deduction—but not both).
And if you itemize, you can supercharge the itemized deduction for charitable contributions by donating appreciated stock or property instead than cash. Better yet, as long as you've owned the asset for more than one year, you get a double tax benefit from the donation—you can deduct the property’s market value on the date of the gift and you avoid paying capital gains tax on the built-up appreciation.
Other deductible expenses you can accelerate include:
- an estimated state income tax bill due in January
- a property tax bill due early next year
- a doctor or hospital bill
But speeding up deductions could be a blunder if you're subject to the alternative minimum tax, as discussed below.
Also, don’t miss out on valuable tax deductions if you can itemize instead of claiming the Standard Deduction. About 90% of taxpayers take the Standard Deduction, but they could be missing out on valuable tax deductions if they can itemize.
If your qualifying expenses exceed the Standard Deduction—which, for the 2026 tax year, is generally $16,100 if you're single, or $32,200 if you’re married and filing jointly—then you likely should maximize your deductions and itemize.
Here's a tip: You don’t necessarily have to worry about whether you should itemize or take the Standard Deduction, because TurboTax will figure it out for you based on your answers to simple questions about your deductible expenses.
If you're on the itemize-or-not fence, it might help if your year-end strategy focuses on "bunching." This is the practice of timing expenses to produce "lean" and "fat" years. For instance, in one year, you cram in as many deductible expenses as possible, using the tactics outlined above. In this case, the goal is to maximize itemized deductions (for a "fat" year) so they surpass the Standard Deduction amount—in which case you'll want to itemize.
In another year, you would skimp on expenses that qualify for itemized deductions to hold them below the Standard Deduction amount—in which case you would claim the Standard Deduction. In these "lean" years, year-end planning stresses pushing as many deductible expenses as possible into the following year when they'll have more value.
TurboTax Tip:
Remember that contributions to flexible spending accounts must be used by the end of the tax year or else you will forfeit the excess.
3. Beware of the Alternative Minimum Tax
Sometimes accelerating tax deductions can cost you money…if you're already in the alternative minimum tax (AMT) or if you inadvertently trigger it.
Originally designed to make sure wealthy people could not use legal deductions to drive down their tax bill, the AMT is now increasingly affecting the middle class.
The AMT is figured separately from your regular tax liability and with different rules. You have to pay whichever tax bill is higher.
This is a year-end issue because certain expenses that are deductible under the regular rules—and therefore candidates for accelerated payments—are not deductible under the AMT. For example, state and local income taxes and property taxes are not deductible under the AMT. So, if you expect to be subject to the AMT for the 2026 tax year, don’t pay the installments that are due in January 2027 in December 2026.
4. Sell loser investments to offset gains
A key year-end strategy is called “tax loss harvesting”—selling investments such as stocks and mutual funds to realize losses. You can then use those losses to offset any taxable gains you have realized during the year. Losses generally offset gains dollar for dollar.
And if your losses are more than your gains, you can use up to $3,000 of excess loss to wipe out other income.
If you have more than $3,000 in excess loss, it can be carried over to the next year. You can then use it to offset any gains for that year, and maybe up to $3,000 of other income. You can carry over excess losses year after year until they're used up.
5. Contribute the maximum to retirement accounts
There may be no better investment than tax-deferred retirement accounts. They can grow to a substantial sum because they compound over time free of taxes.
Company-sponsored 401(k) plans may be the best deal because employers often match contributions.
Try to increase your 401(k) contribution so that you are putting in the maximum amount of money allowed ($24,500 for 2026 if you're 49 years old or younger, $32,500 if you're age 50 to 59 or over 64, and $35,750 for those age 60 through 63). If you can’t afford that much, try to contribute at least the amount that will be matched by employer contributions.
Also consider contributing to an IRA. In addition to the tax-deferred growth, making deductible contributions to a traditional IRA also reduces your taxable income for the year. You can contribute a maximum of $7,500 to IRAs for the 2026 tax year, plus an extra $1,100 if you're 50 or older. You have until the April 15 filing deadline to make IRA contributions for the tax year, but the sooner you get your money into the account, the sooner it has the potential to start to grow tax-deferred.
If you are self-employed, a good retirement plan might be a Keogh plan. These plans must be established by December 31, but contributions may still be made until the tax filing deadline (including extensions) for your 2026 return. The amount you can contribute depends on the type of Keogh plan you choose.
6. Avoid the kiddie tax
Congress created the "kiddie tax" rules to prevent families from shifting the tax bill on investment income from Mom and Dad's high tax bracket to junior's low bracket.
For instance, a child's investment income above $2,700 for the 2026 tax year is taxed at the same rates as the parents. If the child is a full-time student who provides less than half of their own support, the tax usually applies until the year the child turns age 24.
So be careful if you plan to give a child stock to sell to pay college expenses due before the end of the year. If the gain is too large and the child’s 2026 unearned income exceeds $2,700, the child could end up paying taxes at the same rates that you do.
7. Check IRA distributions
You typically have to start making regular minimum distributions from your traditional IRA by April 1 of the year following year in which you turn 73 (age 75 if you were born after 1959). After that, mandatory withdrawals—called required minimum distributions, or RMDs for short—must be made each year by December 31.
Failing to take out enough by the due date triggers one of the most draconian of all IRS penalties—a 25% excise tax (possibly 10% if corrected within two years) on the amount you should have withdrawn based on your age, your life expectancy, and the amount in the account at the beginning of the year.
When you make withdrawals, consider asking the IRA custodian to withhold tax from the payment. Withholding is voluntary, and you set the amount, but opting for withholding lets you avoid the hassle of making quarterly estimated tax payments.
Important note: One of the advantages of Roth IRAs is that the original owner is never required to withdraw money from the accounts. RMDs only apply to traditional IRAs.
8. Watch your flexible spending accounts
Flexible spending accounts, also called flex plans, are fringe benefits which many companies offer that let employees steer part of their pay into a special account which can then be tapped to pay childcare or medical bills.
The advantage is that money that goes into the account avoids both income and Social Security taxes. The catch is the notorious "use it or lose it" rule. You have to decide at the beginning of the year how much to contribute to the plan and, if you don't use it all by the end of the year, you forfeit the excess.
With year-end approaching, check to see if your employer has adopted a grace period permitted by the IRS, allowing employees to spend 2026 set-aside money as late as March 15, 2027. If not, you can do what employees have always done and make a last-minute trip to the drug store, dentist, or optometrist to use up the funds in your account.
9. Check you paycheck withholding
With just a few pay periods left in the year, it's a good idea to check your paycheck withholding to make sure your employer is holding back the right amount of federal income tax—not too much, not too little.
If too much income tax is being withheld from your paychecks, it’s like you're giving the federal government an interest-free loan. On the other hand, if not enough taxes are withheld, you could wind up with an unexpected tax bill and perhaps an IRS penalty when you file your return.
It's especially important to check your withholding if your tax situation changes during the year—for example, if you had a life changing event, such as getting married (or divorced), having a baby, or buying a home. Other reason for checking your withholding include:
- getting a large tax refund on your return for the previous tax year
- paying a large tax bill on your return for the previous tax year
- starting a side job as a freelancer
- receiving a significant amount of money that's not subject to withholding, such as from selling stock
- qualifying for new tax deductions or credits
It's easy to change your withholding. You just need to submit a new W-4 form to your employer. TurboTax's handy W-4 Calculator can help you fill out the form and accurately adjust your withholding.
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