Year-End Tax Planning Checklist: 2026 Moves for High Income Earners

You’re in the top bracket with substantial investment income. The marginal rate on every dollar of income is roughly 50% (37% federal + 3.8% NIIT + 6.85% NY state + 3.876% NYC = ~52%). Year-end moves that defer or reduce income at this rate are extremely valuable.

Priority moves for your situation:

1. Make the most of all retirement contributions: – 401(k) full $24,500 (2026 limit) + $8,000 catch-up if 50+ = $32,500 – Check if your 401(k) plan allows after-tax contributions + in-plan Roth conversion (mega backdoor Roth). If yes, this can shelter another $40K+ – Backdoor Roth IRA: $7,500 personal + $7,500 spouse if MFJ = $15,000 (Roth growth tax-free) – HSA: $4,400 single / $8,750 family if you have HDHP

2. Defer income to next year if possible: – W-2 wages: typically not deferable (your employer pays when they pay) – Bonus: if your bonus is paid in January, push it to January 2027 instead of December 2026. Your marginal rate next year may be similar or lower – Business income (if self-employed or have business interests): defer billing/invoicing into January – Year-end vesting events: typically not controllable, but check

3. Charitable giving (highest marginal value at top bracket): – Donate appreciated stock to a Donor Advised Fund (DAF). For $200K of capital gains, donating, say, $50K-$100K of the appreciated position to DAF eliminates that gain from your return AND gives you full FMV deduction. – Marginal value: at 37% federal + 3.8% NIIT + state/city tax = ~50% effective. Plus avoiding capital gain on the donated portion = additional 24% (LTCG + NIIT + state). – Bunching strategy: donate 3-5 years of intended giving in one year, take standard deduction in following years.

4. Tax loss harvesting: – Sell positions with losses to offset some of the $200K capital gain. – Even if you don’t have unrealized losses in your portfolio, you might in your crypto holdings or speculative positions. – Loss harvesting saves marginal rate: $50K of losses harvested vs. paying tax on $50K of gain = $25K of tax saved.

5. Pre-pay deductible expenses: – State estimated taxes for Q4 due January 15. Pay in late December to claim the deduction in 2026 (the SALT cap is $40,400 for 2026, though it phases down for MAGI over $500K — at your income the cap is sharply reduced, and your NY/NYC income taxes blew past it long ago). – Mortgage interest: if you can prepay January mortgage payment in December, the interest portion may be deductible in 2026. – Property tax: if your municipality accepts pre-payment, paying ahead may help (but SALT cap may limit benefit).

6. Don’t do Roth conversion. At 37% top rate, converting $100K of traditional IRA costs $37K of federal tax. Roth conversion is generally a bad move in your top-bracket year. Save it for a low-income year if you can foresee one (sabbatical, retirement, business downturn).

7. Don’t realize more gains unless you have losses to offset. Your $200K of LTCG is locked in. Don’t add to it by selling other appreciated positions unless you have losses.

8. Equity comp planning if you have ISOs: – AMT exemption phase-out starts at $1,000,000 MFJ AMTI for 2026. You’re at $750K + $200K = $950K AGI; AMTI may be at this level. Within or near the AMT phase-out range. – ISO exercise this year could trigger meaningful AMT. Consider deferring large exercises if possible. – Smaller exercises that fit below the AMT crossover are OK.

9. NY state and NYC considerations: – NY state and NYC taxes on the income are inevitable. – NY PTET election if you have business income: pay state tax at entity level, federal deduction on the business return, NY personal return gets a credit for the PTET. Net: federal SALT deduction becomes available for the business state tax. – If you’re a partner in a partnership or S-corp with NY income, the PTET election (already done by the entity, usually) may save federal tax.

10. Estate planning if your wealth supports it: – Annual gift exclusion: $19K per donee in 2026. Use it. – Lifetime exemption: $15M per person for 2026 ($30M married), made permanent by the One Big Beautiful Bill Act — it did not drop to ~$7M. Large gifts still remove future appreciation from your estate, but there is no longer a deadline to beat a scheduled reduction.

Approximate value of these moves combined: – 401(k) max: $32.5K × 37% federal + state = ~$16K of tax savings – DAF $100K appreciated stock: $50K of federal/state tax savings (deduction) + $24K of capital gain avoided = $74K combined – Tax loss harvest $25K: $12K of tax savings (if you can find losses) – HSA + backdoor Roth: smaller direct savings, but tax-free growth – Total: $100K-$130K of value

Don’t overlook the indirect moves: – Document everything for filing – Pull together brokerage statements, business records – Schedule a CPA review meeting in January

Get a 30-minute planning conversation with your CPA in November or December. At the dollars involved here, the cost is trivial relative to the value of the year-end moves identified.

Self-employed at $400K is exactly the income level where year-end moves can move six-figure dollars. Priority order:

1. Solo 401(k) maximization (~$50K-$72K deduction potential):

Solo 401(k) allows employee + employer contributions. As both employee and employer of your business: – Employee contribution: $24,500 (2026) + $8,000 catch-up if 50+ – Employer contribution: 20% of net SE earnings (after SE tax deduction half-back) up to $72K total combined

For $400K of self-employment income: – Net SE earnings: $400K – $17K (half SE tax) = $383K (approximately) – Employer contribution limit: 20% of $383K = $76,600, capped at the §415 limit of about $72K combined. – Employee $24,500 + Employer ~$47,500 = $72,000 total combined (the §415 cap).

Solo 401(k) must be established by December 31. Some custodians require longer setup time; start the process in November at the latest.

Tax savings: $72K deduction at 37% federal + NY state + NYC = ~$35K of tax savings.

2. Cash Balance Plan (additional $100K-$300K shelter for high-income self-employed):

If you’ve maxed out your solo 401(k) and still want more retirement deduction, a cash balance plan adds capacity: – Allows annual contributions sized by actuarial calculations – Can shelter $100K-$300K depending on age and target benefit – Stacks on top of solo 401(k) up to combined annual limit

Cash balance plans must be established by December 31. Actuary fees ~$2,000-$5,000 to set up. Annual administration ~$2,500.

For a 45-year-old freelancer: cash balance might add $50K-$150K of additional deduction. For a 55-year-old: $150K-$300K.

Tax savings: $100K-$200K of additional deduction at marginal rate = $50K-$100K of tax savings.

3. SEP-IRA (alternative to solo 401(k)):

Simpler than solo 401(k), but lower limits. 20% of net SE earnings up to $72K (2026 limit).

For $400K SE income: about $77K limit, capped at $72K.

If you don’t want to set up solo 401(k) and skip cash balance, SEP-IRA gets you to about $72K. If you’re going to layer cash balance on top, solo 401(k) is preferred (combines with cash balance better than SEP).

Deadline: October 15, 2027 (extended return due date) if you file extension. Don’t need to fund by December 31.

4. HSA contributions (~$4-9K):

If you have an HDHP-compatible health plan: $4,400 single / $8,750 family for 2026. Triple-tax-advantaged.

Deadline: April 15, 2027.

5. Section 199A QBI deduction planning:

As self-employed, your qualified business income (QBI) may be eligible for the 20% deduction under IRC §199A. For Specified Service Trade or Business (SSTB) — accountants, lawyers, doctors, consultants — phase-out begins at $201,750 single / $403,500 MFJ for 2026.

If you’re in an SSTB and your income is above the phase-out: – Reduce taxable income to stay in the QBI sweet spot. Retirement contributions, HSA, etc. all reduce taxable income.

If you’re in a non-SSTB business: less phase-out concern, but still subject to W-2 wage and qualified property limits at high income.

Maximum QBI deduction: 20% × $400K = $80K (subject to limits). At 37% federal = $30K of federal tax savings.

6. Defer business income into 2027:

Cash-basis self-employed: bill clients in late December but expect payment in January 2027. Income recognized when received. Push $20K-$50K into 2027.

Be careful: clients who pay invoices in cash-basis-year-end-Dec may push payment to Jan. Track which.

7. Accelerate business expenses into 2026:

Pre-pay deductible expenses in December for 2026 deduction: – January 2027 rent: prepay in December for partial 2026 deduction (cash-basis: deductible when paid, but Treas. Reg. §1.461-1(a)(1) limits prepayment of more than 12 months) – Subscriptions, memberships, professional dues – Equipment purchases (§179 + bonus depreciation)

8. Augusta Rule (S-corp owners only):

If you have an S-corp (not relevant if you’re a pure freelance with Schedule C): rent your personal residence to your S-corp for up to 14 days/year of legitimate business meetings. Income tax-free under §280A(g); deductible to S-corp.

9. Charitable giving:

If you itemize, charitable donations save 37% federal + state tax on each dollar. DAF contribution of appreciated stock (if you have any) is most efficient.

10. Q4 estimated tax payment:

Q4 2026 estimated tax due January 15, 2027. Pay before December 31 if you want the state portion to count for 2026 (NY estimated payments paid in 2026 count for 2026 federal SALT deduction — which is $40,400 for 2026, and with NY state and city tax on $400K you’ve already hit it).

State estimated payment if not yet paid: don’t rush it. Federal SALT cap is already binding, so timing doesn’t help federal. NYC and state taxes have separate deadlines.

Approximate value of priority moves for $400K freelancer: – Solo 401(k) $72K: ~$35K of federal+state tax savings – Cash balance plan $100K: ~$50K of federal+state tax savings (if you can afford the cash outlay) – HSA $9K: ~$4K of tax savings – QBI deduction protection: protect ~$80K of deduction = $30K of federal tax – Charitable bunching $50K: ~$25K of federal+state tax savings – Income deferral: $30K deferred at ~50% combined rate = ~$15K of tax savings (deferred to next year) – Total: $150K-$200K of immediate tax savings

Get your CPA on the phone in November or early December. The cash balance plan setup particularly needs lead time.

Three good options. The best depends on your tax bracket today vs. expected future bracket, and your future need for backdoor Roth contributions.

Option A: Roll over to your Traditional IRA, then do a Roth conversion of all $50K

Mechanics: – Roll the $50K from former employer 401(k) to your traditional IRA (direct rollover, no tax) – Convert the $50K from traditional IRA to Roth IRA (taxable as ordinary income in conversion year)

Tax cost: $50K × your marginal tax rate. At 22% federal bracket: $11,000 federal tax + ~$5,000 NY state + NYC = ~$16,000 combined tax. At 32% federal: $16K + state/city = $24K combined.

Benefit: $50K in Roth grows tax-free forever. No RMDs. Tax-free distributions in retirement.

Good timing: a low-income year (sabbatical, early retirement transition, business downturn) where your marginal rate is lower than your future rate.

Option B: Roll over to your Traditional IRA, leave it pre-tax

Mechanics: – Direct rollover from former employer 401(k) to your traditional IRA – No tax event in the rollover year – Future RMDs at 73+ on the IRA balance

Good for: keeping pre-tax dollars pre-tax for future flexible conversion timing. You decide when (and if) to convert.

!! Critical caveat: if you’re a high earner who uses the backdoor Roth strategy (non-deductible traditional IRA contribution + conversion), rolling pre-tax money into your traditional IRA destroys the backdoor Roth strategy under the pro-rata rule of §408(d)(2).

The pro-rata rule: when you convert from a traditional IRA, the IRS treats the conversion as proportionally from your pre-tax and after-tax balances. If you have $50K of pre-tax from the rollover + $7.5K of after-tax from a non-deductible contribution = $57.5K total. When you convert $7.5K, only $7.5K × ($7.5K/$57.5K) = $978 is from the after-tax (basis); the rest ($6,522) is from the pre-tax balance and is taxable.

Result: the $7.5K conversion produces about $6,522 of taxable income. The ‘backdoor Roth’ strategy is largely defeated by the pro-rata rule.

Option C: Roll over to your current employer’s 401(k) (if allowed)

Mechanics: – Direct rollover from former employer 401(k) to current employer 401(k) – 401(k) balances don’t count in the §408 pro-rata calculation for backdoor Roth – No tax event in the rollover year

Good for: high earners who want to continue using backdoor Roth strategy. Keeps the pre-tax balance in a 401(k) (excluded from pro-rata) while keeping the traditional IRA empty for clean backdoor Roth conversions.

Requires your current employer’s 401(k) to accept rollovers (most do, but check).

Option D: Leave it in former employer 401(k)

Mechanics: just don’t touch it. The 401(k) stays at the prior plan administrator.

Downsides: limited investment options (typically), possible administrative fees, you have to remember where the account is, complications when changing addresses, etc.

Generally not recommended unless the former employer 401(k) has unusually good investment options or low fees.

Decision tree for your situation:

Are you a high earner (combined income > $250K MFJ or > $150K single) who currently does backdoor Roth annual contributions? – Yes: choose Option C (roll to current employer 401(k)) to preserve backdoor Roth. – No: consider Options A and B based on bracket analysis.

Is this year a particularly low-income year for you? – Yes: Option A (roll to IRA + immediate Roth conversion). The conversion costs you less at low marginal rate. – No: Option B (roll to IRA, defer conversion) or Option C (roll to 401k, preserve backdoor Roth).

Will your expected future tax bracket be higher than current? – Yes (you’re early-career with expected income growth): Option A to lock in current low rate. – No (you’re at peak earning year and expect drop in retirement): Option B to defer conversion to lower-bracket years.

Are you about to retire and want to keep flexibility? – Yes: Option B (traditional IRA gives you maximum flexibility for partial Roth conversions in retirement transition years).

Is the $50K large or small relative to your other retirement balance? – Small ($50K out of $500K total retirement): Option A is simpler. Convert and forget. – Large ($50K out of $100K total): bigger impact; more careful analysis warranted.

My general recommendation for a high-income NYC professional with backdoor Roth strategy: – Option C: roll to current employer 401(k). Preserves backdoor Roth. Keeps pre-tax balance pre-tax for future flexibility. – If current employer 401(k) doesn’t accept rollovers: Option D (leave it where it is) is acceptable as backup. The $50K stays separated from your IRA, preserving backdoor Roth.

If you’re not a backdoor Roth user (already in low bracket or doing direct Roth contributions): – Option A or B based on current bracket.

Whatever you choose, do it as a direct rollover (trustee-to-trustee). Never take the money personally and deposit yourself — 20% mandatory federal withholding applies, and you’d have to make up the 20% from other funds to complete the full rollover.

Deadline: 401(k) rollover decisions don’t have a December 31 deadline. You can do this anytime in 2026 or 2027. But if you do a Roth conversion (Option A), the conversion must be completed by December 31 to count for the year.

At $190,000 of joint income you are not actually in the Roth phase-out yet. For 2026 the Roth IRA contribution phase-out for married couples filing jointly runs from $242,000 to $252,000 of modified adjusted gross income. Your $190,000 sits well below the start, so each spouse can make a full direct Roth contribution of $7,500, or $8,600 at age 50 or older.

The phase-out you are probably thinking of is the traditional IRA deduction. When you are covered by a workplace plan, that deduction for a married couple phases out between $129,000 and $149,000 for 2026. At $190,000 you are above that range, so a traditional IRA contribution would not be deductible. That is a separate question from whether you can fund a Roth, and on the Roth side the answer is yes, in full.

Direct Roth and backdoor Roth both count against the same $7,500 per person limit, so there is no stacking the two to reach $15,000. The backdoor route only matters once income climbs above $252,000 and direct Roth contributions close off. For your situation at $190,000, skip the backdoor and just make the direct Roth contributions before the filing deadline.

Now, what about additional Roth opportunities?

Mega backdoor Roth in 401(k): if your employer’s 401(k) allows after-tax non-Roth contributions AND in-plan Roth conversions, you can contribute up to the §415 limit ($72K total for 2026) including: – $24,500 employee pre-tax/Roth – Employer match (typical $5-15K) – After-tax non-Roth contributions: filling the gap up to the §415 limit – Then convert the after-tax portion to Roth in-plan or as in-service distribution

For 2026 §415 limit of ~$72K: if you contribute $24,500 employee + $7,500 employer match, the gap up to $72K is $40K of potential after-tax/mega-Roth contribution.

This is the largest Roth contribution available. $40K of Roth growth tax-free forever, on top of your direct Roth IRA contributions.

Not all employer 401(k)s offer this feature. Check your plan’s Summary Plan Description for ‘after-tax contributions’ or ‘mega backdoor Roth’ provisions.

529 plans (if you have or expect children): NY 529 plan provides state tax deduction for contributions (up to $10K MFJ NY deduction). 529 isn’t Roth, but tax-free growth and tax-free withdrawals for qualified education expenses provides similar benefit.

HSA (if HDHP eligible): $8,750 family limit for 2026. Triple-tax-advantaged. Deductible for contribution, tax-free growth, tax-free for medical expenses. Essentially a ‘Roth IRA on steroids’ for medical/health-related expenses.

Backdoor Roth becomes essential when income crosses $252K MFJ. Make sure your retirement accounts are ‘clean’ (no pre-tax IRA balances) so the backdoor strategy works without pro-rata complications.

If you currently have pre-tax traditional IRA balances from rollovers, consider: – Rolling them into your employer 401(k) (if allowed) to clear the IRA balance – This preserves the backdoor Roth strategy for future use when income exceeds the Roth phase-out

This ‘IRA cleanup’ is a multi-year planning move. If your income is likely to keep growing, prepare now.

For your specific situation at $190K MFJ: 1. Direct Roth contributions: $7.5K each spouse = $15K (or $8.6K each if 50+ = $17.2K) 2. Make the most of 401(k) employee contribution: $24,500 each spouse (if both have 401(k)s) 3. Mega backdoor Roth in 401(k): if plan allows, add $30K-$50K of Roth annually 4. HSA: $8,750 family if eligible 5. 529 for kids if applicable

No backdoor Roth needed yet. Reassess in years where your income approaches $242K MFJ.

Tax-loss harvesting can be done anytime during the year, but most people focus on year-end because that’s when they reconcile their realized gains and losses for the tax year. Let me explain when and why.

What is tax-loss harvesting?

Selling securities at a loss to offset realized capital gains and up to $3,000 of ordinary income per year ($1,500 MFS). Excess losses carry forward indefinitely.

Why do it at year-end vs. earlier?

1. Visibility into your gains. By November or December, you can see most of your year’s realized gains from selling stocks, mutual fund distributions, capital gain distributions from mutual funds, etc. Harvesting losses against these known gains is straightforward.

2. Wash sale rule timing. The wash sale rule under §1091 disallows a loss if you buy substantially identical securities within 30 days before or after the loss sale. Year-end harvesting requires that you wait 30 days before re-establishing the position. If you sell at a loss on December 20 and want to maintain similar exposure, you can buy a different (non-substantially-identical) fund right away. To buy back the same security, you’d wait until January 19.

3. End-of-year mutual fund distributions. Mutual funds and ETFs typically distribute realized gains to shareholders in December (capital gain distributions). These distributions can push you into higher tax brackets and increase your realized gain total. Loss harvesting late in the year, after distributions are known, lets you size the harvest accurately.

Why do it during the year (not just at year-end)?

1. Market opportunities. When a stock you own drops significantly, harvesting the loss while available is better than waiting for the price to recover. Once the price recovers, the loss disappears.

2. Volume of harvesting. Year-end is busy. If you have many positions with potential losses, harvesting throughout the year (when each becomes available) is more manageable than batching at year-end.

3. Diversification. Harvesting throughout the year creates an opportunity to redeploy proceeds into different (non-substantially-identical) positions. This can help portfolio diversification.

4. Crypto specifically. Crypto markets can drop 30-50% in short periods. Harvesting losses immediately captures the loss; waiting for recovery may eliminate it.

Mechanics of tax-loss harvesting:

1. Identify positions with losses. Look at your unrealized gain/loss in each holding. Negative unrealized = potential loss to harvest.

2. Decide what to sell. Pick losses to harvest based on: – Loss amount (sell larger losses for bigger tax benefit) – Position you no longer want (don’t artificially keep losers) – Position you can replace with similar but not identical security

3. Sell the losing position. The trade execution creates a realized loss.

4. Avoid wash sale: don’t buy ‘substantially identical’ securities within 30 days before or after the sale. Substantially identical means the same security (you can’t sell SPY and buy SPY back within 30 days). Different funds in the same index family (SPY vs. VOO, both S&P 500) generally aren’t substantially identical, but the IRS has not given full clarity. To be safe, swap between funds with explicitly different indices (S&P 500 fund vs. Russell 1000 fund).

5. Report on Form 8949 and Schedule D at tax time.

Time windows to remember:

– October-November: harvest losses as opportunities arise. Major market declines (like Q4 2022 or early 2020) created huge opportunities.

– December 15-20: assess year-to-date gains. Identify needed loss harvest amount. Execute trades by December 31 to count for the current year.

– Don’t wait until December 30 to harvest — the queue at brokerages can delay trade execution. Place orders by Dec 26-27 for safe completion.

Things to remember:

1. Loss harvesting works on capital losses, not other losses. Specifically realized losses from selling securities.

2. Short-term vs. long-term losses are netted separately. Short-term losses offset short-term gains first; long-term losses offset long-term gains first. Then any net loss of one type can offset the other type. Then up to $3K of net loss can offset ordinary income; excess carries forward.

3. Wash sale on losses, not gains. You can sell at a gain and immediately rebuy (no wash sale rule for gains). Only losses are subject to wash sale.

4. Crypto wash sale: as of 2026, no explicit wash sale rule for crypto. You can sell crypto at a loss, immediately rebuy, and claim the loss. (Congress has discussed extending wash sale to crypto; check current law.)

5. Don’t harvest losses on positions you want to keep long-term. The wash sale rule forces you out of the position for 30+ days, during which you could miss appreciation. Don’t harvest if you’d just rebuy in 31 days anyway.

6. Carryforward: if you harvest more losses than you can use (more than $3K above realized gains), the excess carries forward. Indefinitely. Use them in future years.

For a high earner with significant capital gains, year-end loss harvesting saves real money. A $50K loss harvest, with $50K of offsetting gain, eliminates $50K × 23.8% federal (LTCG + NIIT) + state/city = $30K of combined federal/state tax. Worth a few hours of attention each November/December.

For crypto specifically, intra-year harvesting of major drops can capture losses that would otherwise disappear. Don’t wait for year-end if a major decline is happening.