Year-End Planning: Your Portfolio and Your Tax Return Belong in the Same Conversation
Good wealth management and good tax planning aren't two separate conversations. They're one. That's never more obvious than in the fourth quarter, when a handful of quiet deadlines end up deciding what the April tax bill looks like. Here's what's worth working through before December 31.
Portfolio housekeeping
Get your year-to-date gains and income to your accountant now, not in April. A tax preparer can only plan with what they can see. A year-to-date summary of realized capital gains, dividends, and interest lets them project where the year will land, confirm the 4th quarter estimated payment due January 15, and confirm a safe harbor has been met.
Be mindful of year-end mutual fund distributions. Most fund companies publish estimates in late October and November and pay out in December. After a strong year in the market those distributions can be surprisingly large, and they're taxable whether they're taken in cash or reinvested, and whether or not the position itself is showing a gain.
When RSUs vest, confirm the withholding was actually enough. Most employers withhold on vesting RSUs at the flat supplemental rate of 22% on the first $1 million of supplemental wages. For someone in a higher tax bracket that leaves a real gap. It's worth checking while there's still time to close the gap, through a 4th quarter estimated tax payment or extra withholding from the year's remaining paychecks.
Tax moves worth considering before December 31
Tax-loss harvesting: turning market movement into an advantage. This is something we're already doing on an ongoing basis within the accounts we manage. If you hold other taxable investment accounts, that same opportunity may be sitting there too. It doesn't have to mean drifting from a long-term allocation: moving into a similar-but-not-identical replacement security keeps the money invested while banking the tax benefit, and any losses beyond your realized capital gains can offset up to $3,000 of ordinary income each year, with the rest carried forward to offset gains in future tax years until fully depleted.
Revisit your 401(k)-contribution rate while there's still time to move it. Every pre-tax dollar deferred is a dollar this year's tax bill isn't calculated on. The 2026 limit is $24,500, with an $8,000 catch-up at age 50 or older, or an enhanced $11,250 catch-up for ages 60–63.
Charitable gifting: more than writing a check. How you give can matter as much as how much:
1. Donate appreciated securities instead of cash. The capital gains tax is avoided entirely, and the full fair-market value still counts toward the deduction, as long as the position has been held for more than a year. For assets we manage, we can assist with the transfer to the charity of your choice or your donor-advised fund; the same logic applies to appreciated shares held elsewhere.
2. Bunch several years of giving into one high-deduction year through a donor-advised fund, then distribute the money to the charities you care about on your own schedule, independent of when the deduction was taken.
Qualified Charitable Distributions “QCD”: a smarter way to meet a Required Minimum Distribution “RMD”. At 70½ or older with an IRA, a QCD counts toward your RMD, and is not counted towards your taxable income, as long as the funds move straight from the custodian to the charity. For IRAs we manage, we can help coordinate this on your behalf. One note on the sequencing: the QCD has to be distributed before you reach your RMD for the tax year. If the QCD is distributed after you have already met your full RMD for the year, your RMD will still be taxable. QCD’s require planning early in the year and it isn't a last-week-of-December decision.
Annual exclusion gifts don't carry forward. The 2026 annual gift tax exclusion is $19,000 per recipient ($38,000 for a married couple electing to split gifts), with no gift tax return required, and it does not reduce your lifetime tax exemption. Whatever goes unused disappears on January 1st. With charitable giving, appreciated securities are often the most tax efficient way of gifting, rather than handing over cash.
What matters most
These strategies work best when investment decisions and the tax return are planned together, not reconciled after the year has already closed. The right combination depends entirely on the details: the income, the account types, the equity compensation, and the giving.
As you think through these, we're glad to help; please don't hesitate to reach out with questions.
Elmwood Wealth Management
DISCLAIMER: Past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this newsletter (article), will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Due to various factors, including changing market conditions, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this (article) serves as the receipt of, or as a substitute for, personalized investment advice from Elmwood Wealth Management. A copy of our current written disclosure statement discussing our advisory services and fees is available for review upon request.