Fall Tax Planning: A Few Things Worth Reviewing Before Year-End
Fall is a good time to take a closer look at your tax picture while there is still time to make adjustments before December 31. By this point in the year, you generally have a better idea of your income, investment activity, charitable giving, and other moving pieces—and a few proactive decisions now can help avoid surprises when your tax return is prepared next spring.
Want a more comprehensive list? Our End-of-Year Planning Issues Checklist covers additional items worth reviewing before December 31. Below, we're taking a closer look at several of the year-end planning issues that come up most often in our work with clients.
Take a Closer Look at Employer Stock Compensation
If part of your compensation comes from restricted stock units (RSUs), stock options, or other employer stock awards, don't assume the taxes withheld when shares vest or are exercised will necessarily cover your actual tax liability.
With RSUs, for example, the value of the shares at vesting is generally treated as compensation income. But the withholding applied to that income may not match your actual marginal tax bracket, particularly if you're a higher-income taxpayer. A large vesting event, bonus, stock sale, or combination of the three can leave you with significantly more income than your regular paycheck suggests.
Fall is a good time to look at what's already vested or been exercised, what's expected before December 31, and how much federal and state tax has actually been withheld. The goal is to understand the whole-year tax picture, not simply whether taxes were withheld from a particular transaction.
Does Your Withholding Match Your Tax Situation?
Even without employer stock compensation, withholding deserves a year-end checkup. A raise, bonus, investment gain, Roth conversion, business income, second job, or change in a spouse's income can all affect your ultimate tax liability.
The IRS describes federal income taxes as "pay as you go," meaning you generally need to pay tax throughout the year through withholding, estimated tax payments, or a combination of the two. If you haven't paid enough, you can potentially owe an underpayment penalty even if you pay the balance with your tax return.
For many taxpayers, avoiding the federal estimated-tax penalty generally means paying at least 90% of the current year's tax or 100% of the prior year's tax, whichever is lower. For higher-income taxpayers—generally those whose prior-year adjusted gross income exceeded $150,000, or $75,000 if married filing separately—the prior-year safe harbor increases to 110%. Individual circumstances can alter these rules, so this is an area where we like to run the numbers rather than assume withholding is sufficient.
Think About Charitable Giving Before December
If charitable giving is already part of your plan, fall gives you time to think about how you make those gifts rather than simply how much you give.
For someone who regularly gives to charity and owns appreciated investments, contributing appreciated securities to a charitable organization or donor-advised fund (DAF) may be worth considering. A DAF can allow you to make a charitable contribution in the current year and recommend grants to charities over time. It can also be a useful way to bunch several years of charitable contributions into one tax year when that makes sense.
Charitable planning is particularly important in 2026 because the rules have changed. Taxpayers who don't itemize can now receive a charitable deduction of up to $1,000 for single filers and $2,000 for married couples filing jointly for qualifying cash contributions. For taxpayers who do itemize, however, the new rules generally limit the charitable deduction to contributions exceeding 0.5% of adjusted gross income.
The tax rules shouldn't drive whether you support an organization you care about, but they can influence when and how you give.
If You're Eligible for QCDs, Don't Forget About Them
For IRA owners age 70½ or older, a Qualified Charitable Distribution (QCD) can be another useful way to give. A QCD sends money directly from an IRA to an eligible charity rather than having you take the distribution personally and then make a donation.
For someone who is also subject to required minimum distributions, a QCD can count toward the year's RMD while keeping the qualifying distribution out of adjusted gross income. That can make QCDs particularly valuable for people who already give to charity but don't receive much—or any—additional tax benefit from itemizing charitable contributions.
Timing matters. If you're planning to use QCDs to satisfy some or all of an RMD, don't wait until the final days of December to start the process.
Make Sure Your RMD Is Covered
If you're subject to required minimum distributions (RMDs), check what's already been distributed from your retirement accounts and what's still required before year-end. This becomes especially important when you have multiple IRAs, inherited retirement accounts, or accounts held at different custodians.
The rules around inherited retirement accounts have also become more complicated in recent years, so don't assume that because an inherited IRA falls under the 10-year rule there is no annual distribution requirement. The answer depends on the circumstances.
If you're already taking distributions for living expenses or making QCDs, those amounts may have satisfied some or all of your RMD. The important thing is to confirm rather than discover a shortfall after December 31.
Are You on Track to Maximize Retirement Contributions?
There are still several pay periods left in the year, which makes fall a good time to check your year-to-date retirement plan contributions.
For 2026, the employee contribution limit for 401(k), 403(b), and most governmental 457 plans is $24,500. The catch-up contribution for most participants age 50 and older is another $8,000, while participants ages 60 through 63 can make a larger catch-up contribution of $11,250, assuming their plan permits it.
Also consider how changing your contribution percentage late in the year could affect your employer match. Depending on how your plan calculates matching contributions and whether it provides a year-end true-up, reaching the annual limit too early could potentially affect the match you receive.
Don't Forget the HSA
If you're eligible to contribute to a Health Savings Account, check your contributions there as well. For 2026, the HSA contribution limit is $4,400 for self-only coverage and $8,750 for family coverage.
HSAs can be particularly valuable because they combine a potential tax deduction for eligible contributions, tax-deferred growth, and tax-free distributions when the money is used for qualified medical expenses. If you have the cash flow to contribute more and haven't yet reached the annual limit, this is another account worth reviewing before year-end.
Consider Funding 529 Plans
Fall is also a natural time to revisit education funding, particularly if helping children or grandchildren with future education costs is one of your goals. If you intend to contribute to a 529 plan, consider whether you have made the contribution you planned for the year and whether any applicable state tax benefits factor into the timing.
There is another year-end issue for families already using 529 money to pay college expenses: make sure the timing of the 529 distributions lines up with the qualified higher education expenses.
For example, suppose you pay a student's spring 2027 tuition bill in December 2026. If you plan to use 529 money for that expense, the corresponding 529 distribution generally should also occur in 2026. Taking the distribution in January 2027 creates a mismatch—the qualified expense was paid in one tax year and the 529 distribution occurred in another.
This is easy to overlook when a tuition bill and semester fall in different calendar years, so December and January payments deserve particular attention.
Check for an Underpayment Penalty Before It's Too Late
Finally, bring all of these pieces together and estimate your tax liability for the year. Don't simply look at whether you expect to owe money with your return. Owing tax and owing an underpayment penalty are two different things.
You could owe a substantial amount in April without an underpayment penalty if you've satisfied one of the applicable safe harbors. Conversely, you could have a relatively manageable tax bill and still have an underpayment issue because too little was paid during the year. The IRS generally requires individuals to make estimated payments if they expect to owe at least $1,000 after withholding and credits and haven't otherwise met an applicable safe harbor.
This is especially worth checking after a year with large capital gains, employer stock compensation, Roth conversions, business income, or other income that didn't have sufficient tax withheld.
How Birch Street Can Help
Year-end tax planning usually isn't about finding one big tax-saving move in December. It's about looking at all the pieces together—income, withholding, employer stock compensation, retirement contributions, RMDs, charitable giving, education funding, and investment activity—to see whether anything should be adjusted while there's still time.
At Birch Street, tax planning is part of the financial planning we do throughout the year. As fall approaches, we can update tax projections, review whether withholding and estimated payments are on track, look for charitable giving opportunities, coordinate retirement and HSA contributions, and consider how decisions made today could affect both this year's tax return and the longer-term financial plan.
The goal is to be proactive before December 31, rather than discovering opportunities—or surprises—when the tax return is prepared months later.
