December is your last chance to make tax moves that count for 2026. Most of these take less than an hour, and the savings can be significant.
Here are 12 strategies, ordered from highest impact to easiest wins.
High Impact
1. Max Out Your 401(k)
The 2026 contribution limit is $23,500 ($31,000 if you're 50+). If you haven't maxed out, increasing your contribution for the remaining paychecks can reduce your taxable income dollar-for-dollar.
The math: An extra $5,000 in 401(k) contributions saves you $1,100-1,850 in taxes depending on your bracket.
2. Contribute to a Traditional IRA
If you're eligible for a deductible IRA contribution, you have until April 15 to contribute for 2026 — but doing it now means you won't forget. The limit is $7,000 ($8,000 if 50+).
3. Harvest Tax Losses
Review your taxable investment accounts for positions that are underwater. Selling losing investments can offset capital gains and up to $3,000 in ordinary income. You can immediately reinvest in a similar (but not identical) fund.
Example: You have $5,000 in capital gains and a stock that's down $3,000. Sell the loser, offset the gains, save ~$450-750 in taxes.
4. Convert to Roth (If It Makes Sense)
If your income is unusually low this year (job change, sabbatical, gap year), consider converting traditional IRA money to Roth. You'll pay taxes now at a lower rate and enjoy tax-free growth forever.
Medium Impact
5. Use Your FSA Balance
Flexible Spending Account money is use-it-or-lose-it (with a small grace period or carryover depending on your plan). Check your balance and spend it on eligible medical expenses before the deadline.
6. Bunch Charitable Donations
If your itemized deductions are close to the standard deduction ($15,700 single, $31,400 married), consider "bunching" — making two years of charitable donations in one year to push over the itemization threshold.
7. Fund a 529 Plan
If you have kids (or plan to), contributing to a 529 education savings plan may give you a state tax deduction. Thirty-four states offer some form of 529 tax benefit.
8. Review Your Withholding
Check your latest pay stub. If you're having too much withheld, you've been giving the government an interest-free loan. If too little, you may face an underpayment penalty. Adjust your W-4 for the last few pay periods.
Quick Wins
9. Donate Appreciated Stock
Instead of selling stock and donating cash (which triggers capital gains), donate the stock directly to charity. You get the full deduction and skip the tax on gains.
10. Make Your January Mortgage Payment Early
If you itemize, making your January mortgage payment before December 31 gives you an extra month of mortgage interest deduction in 2026.
11. Prepay State Taxes
If you're itemizing and not subject to the $10,000 SALT cap limitation, prepaying your Q4 state estimated tax can increase your 2026 deduction.
12. Organize Your Records Now
Not a deduction, but tax prep is faster and cheaper when your records are organized. Download your brokerage statements, gather receipts for deductible expenses, and note any major life changes (marriage, home purchase, new job) that affect your return.
The 80/20 Rule of Tax Planning
For most W-2 earners, the biggest levers are simple: max retirement contributions, harvest losses, and use your FSA. These three moves alone can save $2,000-5,000 in taxes.
Don't let perfect be the enemy of good. Even doing two or three things on this list puts you ahead of 90% of taxpayers.
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