Last week’s checklist identified the full landscape of year-end planning decisions. This week goes deeper on the tax moves specifically — because they carry the most financial leverage, the hardest deadlines, and the most room for meaningful error in either direction: acting too aggressively, or not acting at all.
The window between now and December 31 is when the 2026 tax year can still be shaped. After that, the numbers are fixed and the only question is how accurately to report them. For a retiree with significant assets in pre-tax accounts, a taxable portfolio with unrealized gains and losses, and Social Security and pension income that sits below the top of a bracket, the moves made in these final weeks can save thousands of dollars in current-year taxes and tens of thousands in future years.
Step One: Know Your Current-Year Tax Position
Before executing any year-end tax move, you need a reasonably accurate picture of where your 2026 taxable income stands today. This means assembling your year-to-date income: pension and Social Security received, IRA and 401(k) distributions taken, capital gains and dividends recognized, interest earned, and any wages or self-employment income.
From that figure, calculate your estimated taxable income after the standard deduction (or itemized deductions, if that is more beneficial). The gap between that number and the top of your current federal bracket is your planning room — the amount of additional ordinary income you can take, via Roth conversion or additional IRA distribution, without moving into the next bracket. Knowing this number with reasonable precision is worth the hour of calculation it requires.
Your MAGI also needs to be assessed against the IRMAA thresholds. Additional income in 2026 affects Medicare premiums in 2028. The IRMAA bracket boundaries are specific enough that a $5,000 conversion that inadvertently pushes MAGI above a tier boundary can cost more in two years of IRMAA premiums than it saves in current-year bracket optimization. The threshold check takes 10 minutes and can prevent a costly and irreversible oversight.
The Roth Conversion Decision
If your taxable income projection shows meaningful room below your bracket ceiling and below the relevant IRMAA threshold, and you have pre-tax IRA balances that will eventually become forced RMD income, a year-end Roth conversion is worth executing.
The core calculus: the marginal tax rate on the conversion today, compared to the expected marginal rate on the same income as a future RMD. If today’s rate is lower — which it typically is during the window before RMDs and full Social Security income have phased in — the conversion produces a permanent and compounding tax saving. The larger the pre-tax balance, the longer the time horizon, and the lower today’s rate relative to the expected future rate, the more compelling the conversion.
For year-end conversions, timing matters practically. Conversions take a few business days to process, and custodian volume at year-end can add delays. Initiate no later than December 20 to ensure processing and settlement before December 31. A conversion initiated on December 28 may or may not settle in time — don’t rely on the last few days.
Tax-Loss Harvesting
Tax-loss harvesting — selling positions with unrealized losses to realize the loss for tax purposes — is only available in the year the loss is recognized. Unrealized losses do not carry forward. They must be harvested to have value.
The realized loss offsets capital gains dollar-for-dollar. If losses exceed gains, up to $3,000 per year of net capital losses can offset ordinary income, with any remaining losses carrying forward to future years. In a year when you have significant capital gains from a Roth conversion or appreciated asset sale, harvesting available losses to offset those gains reduces the net tax cost of the combined activity.
The wash-sale rule prohibits claiming a loss if you repurchase the same or substantially identical security within 30 days before or after the sale. You can avoid triggering the wash-sale rule by purchasing a similar — but not substantially identical — replacement security. For example, selling one S&P 500 index fund and immediately buying a total market index fund maintains your equity exposure while preserving the loss deduction.
Tax-Gain Harvesting at the 0% Rate
Less familiar than loss harvesting but equally valuable in the right circumstances: if your taxable income is below the 0% long-term capital gains threshold, you can realize appreciated positions in your taxable account at zero federal capital gains tax. The gain is recognized, the tax is zero, and the cost basis resets to the higher current value — permanently reducing the future capital gains exposure on the same asset.
For married couples filing jointly in 2026, the 0% long-term capital gains rate applies to taxable income up to approximately $94,050. If your income — including the gains you are realizing — stays below this threshold, every dollar of long-term capital gain recognized is federal-tax-free. Unlike tax-loss harvesting, there is no wash-sale constraint on gains — you can sell and immediately repurchase the same security at the higher basis.
This strategy is most valuable for positions held in taxable accounts with large unrealized gains that you intend to hold long-term. Resetting the basis now at 0% eliminates the deferred liability permanently.
The QCD: Executing Before Your Custodian’s Internal Deadline
Qualified Charitable Distributions must be completed — the check must be received by the charity — by December 31. Most custodians have internal processing deadlines of December 20 to 24 to guarantee year-end delivery. If you plan to use a QCD to satisfy all or part of your RMD, the QCD must be executed before the full RMD amount is taken: the tax rule specifies that the QCD keeps its tax exclusion only if executed before the RMD is otherwise satisfied. Taking the full RMD first and then doing a QCD does not produce the same favorable tax result.
The QCD limit is $105,000 per individual per year, indexed for inflation. For couples where both spouses have traditional IRAs, each can direct up to the limit, for a potential combined maximum of $210,000. The transfer must go directly from the IRA to the charity — the check must be payable to the charity, not to you. Confirm the mechanics with your IRA custodian in advance, as different institutions require different paperwork.
California-Specific Considerations
California taxes Roth conversions as ordinary income at state rates that reach 9.3% in the $68,350–$349,137 range (2026 estimates) and 13.3% at the highest income levels. This increases the combined effective cost of a Roth conversion and reduces — though rarely eliminates — its long-term benefit for California residents. A conversion that is clearly advantageous on the federal analysis remains advantageous in most cases when California tax is included, but the margin is narrower. When sizing conversions near a bracket or IRMAA boundary, use the combined federal-plus-California rate, not the federal rate alone.
California does not recognize preferential federal capital gains rates — long-term gains are taxed as ordinary income in California, up to 13.3% at the top. This eliminates the California-side benefit of the 0% federal gain realization strategy. The federal benefit is still real; the California tax on the same gain is not.
California does not tax Social Security benefits — a meaningful advantage in retirement income planning — and has a significantly lower standard deduction than the federal standard, which means more California taxpayers do itemize and do receive the California charitable deduction on cash gifts. This affects the relative benefit of QCDs versus cash giving for some California retirees and is worth comparing in your specific situation.
FAQ: Should I Worry About AMT on a Large Year-End Roth Conversion?
The Alternative Minimum Tax applies to far fewer taxpayers than it did before the 2017 Tax Cuts and Jobs Act significantly raised the AMT exemption amounts — $137,000 for married filing jointly in 2026, with a phase-out beginning at $1,237,450. For most retirees whose income is primarily ordinary income from Social Security, pension, IRA distributions, and investment income, AMT is unlikely to be triggered by a Roth conversion. The situations where AMT becomes relevant in retirement typically involve large amounts of tax preference items — significant incentive stock options, large accelerated depreciation, or certain tax-exempt bond interest. If you have any of these in your tax picture, run an AMT check before executing a large conversion. For the majority of retirees, it is not a constraint.
If you want to work through the specific numbers — your bracket position, IRMAA exposure, conversion capacity, and the tax-loss and tax-gain opportunities in your taxable accounts — November is the right time for that conversation, before December time pressure makes careful analysis harder.
Schedule a complimentary year-end tax strategy consultation with our office. We will build a current-year tax projection, identify every move available to you before December 31, and help you execute the ones that are worth acting on.
