October 22, 2026
Investors can manage sales of assets like securities at year-end to maximize tax benefits. But the rules are complex.
For starters, capital gains and losses offset each other. If you show an excess loss for the year, you can offset up to $3,000 of ordinary income and carry over any remainder to next year. Long-term capital gains from sales of securities owned longer than one year are taxed at a maximum rate of 15% (20% for high-income investors). Conversely, short-term capital gains are taxed at ordinary income rates reaching as high as 37%.
YEAR-END MOVE: Review your investment portfolio. Depending on your situation, you may decide to “harvest” capital losses to offset gains, especially high-taxed short-term gains, or realize capital gains that will be partially or wholly absorbed by losses.
Also, be aware that a 0% rate applies to taxpayers below certain income levels, such as young children. Plus, some taxpayers who ultimately pay ordinary income tax at higher rates due to their investments may qualify for the 0% tax rate on a portion of their long-term capital gains.
However, watch out for the “wash sale rule.” If you sell securities at a loss and reacquire substantially identical securities within 30 days of the sale, the tax loss is disallowed. One way to avoid this adverse result is to wait at least 31 days to reacquire substantially identical securities.
TIP: A disallowed loss increases your basis for the securities you acquire. Thus, it could reduce the amount of a taxable gain on a future sale.
Typically, you must begin taking “required minimum distributions” (RMDs) from IRAs and qualified retirement plans, like 401(k) plans, after a specified age. Under SECURE 2.0, the age threshold has been raised to 73 (scheduled to increase to 75 in 2033). The amount of the RMD is based on IRS life expectancy tables and your account balance at the end of last year.
YEAR-END MOVE: Review your situation and react accordingly. If you can postpone RMDs longer, you can continue to benefit from tax-deferred growth. Otherwise, make arrangements to receive RMDs before January 1, 2027, to avoid any penalties.
Conversely, if you are still working and do not own 5% or more of a business with a qualified plan, you can postpone RMDs from that specific plan until your retirement. This “still working” exception does not apply to RMDs from IRAs or qualified plans of other employers.
Previously, the penalty for failing to take timely RMDs was equal to 50% of the shortfall. But SECURE 2.0 cuts the penalty in half to 25% (10% if corrected in a timely fashion).
TIP: Beneficiaries of qualified plans and IRAs must also comply with RMD rules. If you are a non-spouse beneficiary, you are generally required to empty out the account over ten years.
Certain high-income investors must cope with the 3.8% “net investment income tax” (NIIT) in addition to their regular income tax responsibilities.
YEAR-END MOVE: Reduce potential NIIT exposure for 2026. The tax applies to the lesser of net investment income—including capital gains, dividends and interest—or MAGI above $200,000 for single filers and $250,000 for joint filers.
Several potential ideas for minimizing the impact of the NIIT at the end of the year are as follows:
Invest in tax-free municipal bonds or municipal bond funds.
Harvest capital losses to offset gains.
Focus on growth stocks instead of dividend-paying stocks that create current income.
Sell real estate on the installment basis (more on this below).
TIP: Unlike many comparable provisions, the NIIT thresholds of $200,000/$250,000 are NOT indexed for inflation. Thus, this often-overlooked tax may begin to affect you as your income rises.
If you sell real estate property at a gain, you must pay tax on the full amount of the capital gain in the year of the sale.
YEAR-END MOVE: Arrange to sell real estate (or other qualified property) on the installment basis. If you receive installment payments over two or more tax years, the tax is limited to a proportionate share of the gain that is paid over the years in which payments are actually received.
The tax benefits from installments sales may be two-fold for certain high-income real estate investors.
1. Some of the tax normally due on a real estate transaction is deferred.
2. Your overall tax liability may be reduced because you pay a greater portion of the tax due on a gain at the 15% capital gain rate rather than the 20% rate. This is because the tax liability is spread out over more years.
TIP: If it makes sense (e.g., you have a low tax year or you are carrying over losses), you can “elect out” of installment sale treatment on your 2026 return. Otherwise, the tax treatment is automatic.
About 25 years ago, the federal estate and gift tax exemption was a relatively low $1 million. But it was gradually increased until it reached $10 million, indexed annually for inflation. Now the OBBBA has permanently increased the exemption to $15 million, beginning in 2026, with future indexing. The exclusion amounts for this decade are shown below.
|
Tax year |
Estate tax exemption |
|
2021 |
$11.70 million |
|
2022 |
$12.06 million |
|
2023 |
$12.92 million |
|
2024 |
$13.61 million |
|
2025 |
$13.99 million |
|
2026 |
$15 million |
YEAR-END MOVE: Adjust your estate plan as needed. For instance, your plan may implement various techniques, including the use of trusts, to maximize the benefits of the estate tax exemption.
Furthermore, you can reduce the size of your taxable estate through lifetime gifts. Thanks to the annual gift tax exclusion, you can give each recipient up to $19,000 in 2026 without any gift tax liability. Thus, a couple can effectively give tax-exempt gifts up to $38,000 per recipient.
TIP: You may “double up” by giving gifts in both December and January that qualify for the annual gift tax exclusion for 2026 and 2027, respectively. The gift tax exclusion is expected to rise to $20,000 in 2027.
Fund retirement plan contributions. Contributions within generous limits to plans and IRAs compound tax-deferred until withdrawn. The maximum 401(k) deferral for 2026 is $24,500, but larger contributions are allowed for certain older workers.
If you rent out your vacation home, keep your personal use within the tax law limits. No loss deduction is allowed if your personal use exceeds the greater of 14 days or 10% of the rental period.
From a tax perspective, it is often beneficial to sell mutual fund shares before the fund declares dividends (the ex-dividend date) and buy shares after the date dividends are declared.
Consider a qualified charitable distribution (QCD). If you are age 70½ or older, you can transfer up to $111,000 of IRA funds directly to charity in 2026, free of tax (but not deductible). Plus, SECURE 2.0 authorizes a one-time transfer of up to $55,000 to a charitable remainder trust (CRT) or charitable gift annuity (CGA) as part of a QCD.
Weigh the benefits of a Roth IRA conversion, especially if this will be a low-tax year. Although the conversion is subject to current tax, you generally can receive tax-free distributions in retirement, unlike taxable distributions from a traditional IRA.
This 2026 Year-End Tax Letter is based on the prevailing federal tax laws, rules and regulations. Of course, it is subject to change, especially if additional tax legislation is enacted by Congress before the end of the year.
Finally, remember that this letter is intended to serve only as a general guideline. Your personal circumstances will likely require careful examination. Please call Larson & Company today at 801-313-1900 to schedule a meeting for assistance with all your tax-planning needs. Larson and Company has developed a suite of services specifically to serve the needs of individuals and companies in a wide range of industries.
For more insights, visit our page for practical guidance on the One Big Beautiful Bill Act (OBBBA), including summaries of the key tax provisions most relevant to you and your business.
Source: Elite Editorial Services, 2026 Year-End Tax Planning Letter, 10/22/2026
This year-end tax-planning letter is published for our clients, friends and professional associates. It is designed to provide accurate and authoritative information with respect to the subject matter covered. The information contained in this letter is not intended or written to be used for the purpose of avoiding any penalties that may be imposed under federal tax law and cannot be used by you or any other taxpayer for the purpose of avoiding such penalties. Before any action is taken based on this information, it is essential that competent, individual, professional advice be obtained.