2025 Year-End Planning & 2026 Tax Updates

As we head towards the end of the year, here's both a list of core reminders for this 2025 tax season and also an outline of major tax changes you can expect for 2026. I know sometimes this stuff can be tough to keep up with, so I'm getting it all to one place for you here.

Let's start with your key to-dos for 2025:

MUST complete by year-end December 31st, 2025

• Complete any Roth Conversions: Don't wait until the last minute on December 31st to do your conversion as your financial institution needs time to execute this task. Give yourself a couple of days before year-end to submit your request.

• Fulfill your donations if you plan to itemize your deductions: Whether you are contributing to a Donor-Advised Fund (DAF), donating appreciated stock, or cash, make sure to complete your donations by year-end 2025 to get your tax deduction. For more information on this, check out our FREE Giving Guide.

• Complete your Mega Backdoor Roth: The deadline for actually making "after-tax contributions" to a 401(k) is year-end 2025. You can convert those funds to a Roth 401(k) or Roth IRA after that date, but it will be reported on your 2026 tax return. Remember, this is a different deadline than your Traditional or Roth IRA contributions (see next section)

• Tax Gain or Tax Loss Harvesting: Remember to make sure tax gains don't push you into a higher tax bracket than expected. And don't forget the wash sale rule if you are tax loss harvesting.

• Spend any remaining funds in your Flexible Savings Account (FSA): If you have this account via your low-deductible healthcare plan, make sure to spend any remaining tax-free funds in it cause it’s use it or lose it. If you don’t have any more planned medical spend this year, you can shop for FSA eligible items like sunscreen or wart removers or whatever else. Note: Some plans may offer a grace period until March 15, or a carryover option.

• Complete your Backdoor Roth: If you are a high-income earner and unable to contribute to a Roth IRA directly, you should complete your Backdoor Roth and do all conversions before end of year to keep taxes simple.

To's Dos by April 15, 2026 (tax-filing deadline)

• Complete your Traditional or Roth IRA contributions: You have until April the following year to complete your IRA contributions for 2025 ($7,000 for individuals, additional $1,000 if you're 50 years or older). You can still do a Backdoor Roth for 2025 by April 2026, but the conversion will count towards your 2026 taxes and make things a little more complicated.

• Complete contributions to your Health Savings Account (HSA): Make sure you don’t surpass the yearly limit ($4,300 for self) for your HSA. Remember, this amount is prorated if you were only covered by a high-deductible plan for part of the year e.g. if you only had a high deductible plan for 9 months, you can only contribute a max of $3,225 ($4,300 × [9 mos/12 mos] = $3,225). If you have exceeded the limit, not to worry, you can fix this before filing. Call up your provider for the steps required to do this.

As for 2026 taxes, here's a quick summary:

Each year the IRS makes adjustments to tax brackets to account for increases in the cost of living in the U.S. Most people will likely see net tax cuts (aka you’ll owe less in taxes overall).

The standard deduction has been raised

For single filers, the new standard deduction is $16,100 (a $350 bump up from last year). For married couples, it is now $32,200 (up $700).

Since 9 out of 10 people use the standard deduction, most of you will benefit from this jump.

New tax brackets

Ordinary Income (and most short-term gains)

The IRS has adjusted all seven marginal tax brackets for 2026. The overall 2.7% adjustment reflects moderate inflation, which has remained steady after a few tough years during and following COVID. Below are marginal tax brackets for 2026, as compared to 2025. The marginal tax rates remain the same, the amounts per bracket have jumped.

Source: IRS

A friendly reminder: income tax brackets work as a tiered system, not a flat tax percentage on all your income. A marginal tax rate is the rate paid on the last dollar of your income, whereas an effective tax rate is the average rate you pay in taxes. In other words, if you make $70,000 after deductions, your marginal tax bracket is 22% (between $50,401 and $105,700) . But your effective tax rate will be an average across brackets.

To do the math:

• Your first $12,400 will be taxed at 10%

• Your next $37,999 will be taxed at 12%

• And your remaining $19,600 will be taxed at 22%.

Taking the weighted average across all three brackets, your effective tax rate is 14.5%

Long-term gains (and qualified dividends)

Account growth marginal tax bracket adjustments have jumped similar to ordinary income. This refers to your long-term capital gains and your qualified dividends. You can see just how favorable the tax brackets are for investors. It would be a rare event indeed for you to face a 20% cap gains tax!

Source: IRS

Higher contribution limits for tax-advantaged accounts

401(k)

If you have access to a 401(k) through work, you will be able to invest more this year. The new contribution limit is $24,500, up from $23,500 last year. If you are 50 years or older, you can make catch-up contributions up to $8,000, an increase from $7,500 last year.

One note: Starting in 2026, workers earning more than about $145,000 will have to make catch-up contributions to their 401(k) as Roth contributions (after-tax) only per the SECURE 2.0 Act.

IRA

You’ll be able to invest more into your IRA this year, as the limits have grown to $7,500, up $500 from last year. For those 50 years or older, the catch-up contribution limit is $1,100, up from $1,000 last year.

HSAs

For individual plans, you can now contribute a max of $4,400, up from $4,300 last year. For family plans, the contribution limit for next year has been raised to $8,750, up from $8,550 last year. The catch-up contribution (age 55+) remains at $1,000.

Charitable deductions are changing

Above the line charitable deductions

For the first time in a few years, taxpayers who take the standard deduction will be able to deduct cash contributions to qualified 501(c)(3) charities! The maximum deduction is $1,000 for single filers and $2,000 for those married filing jointly. Note: contributions made to donor-advised funds or private non-operating foundations are not eligible for this deduction

0.5% AGI floor

Starting in the 2026 tax year, a 0.5% floor applies to your charitable deductions. Only contributions greater than 0.5% of your Adjustable Gross Income (AGI) are deductible if you itemize. For example, if your AGI is $200,000, the first $1,000 of charitable gifts are not deductible if you itemize.

35% cap for high income earners

Previously, those in the top tax bracket (37%) could claim the full tax value of their charitable deductions against their income. But starting in the 2026 tax year, this will be capped at 35%. In other words, for those in the highest income tax bracket, for every dollar donated, the maximum tax savings will be 35 cents, rather than 37 cents. For reference, the 37% tax rate applies to single filers with an income of at least $640,600 in 2026 ($768,700 for married couples filing jointly). So this is truly for the ultra rich!

🤲 For more comprehensive overview of charitable tax deductions,

check out our FREE Giving Guide. 🤲

…

Happy investing,

Rebecca

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