5 year-end tax-planning actions to take before 2026

Passage of the One Big Beautiful Bill Act (OBBBA) changed the tax landscape, making permanent many of the tax cut provisions that had been scheduled to expire at the end of 2025, and creating new opportunities for planning.

With the end of the year now rapidly approaching, this is a good time to assess what, if anything, you can do to reduce your 2025 tax bill.

As a first step, we recommend asking your professional advisors for help estimating what you are likely to owe the government for this year—and which of the tax-planning strategies detailed below best fit your personal circumstances.¹

The sooner you begin this process, the more time you will have to ensure your plans are in place by December 31.

1. Develop a tax baseline

As a first step, ask your tax advisor to prepare a pro forma 2025 tax return. This information will help you understand your current tax situation—and how it might change if you realize more income or incur additional deductions this year.

As part of this process, ask your J.P. Morgan team for a tax summary, showing year-to-date activity in your J.P. Morgan accounts.²

With this snapshot in hand, you can better assess whether it makes sense to implement tax-planning strategies before year-end.

2. Consider these tax-smart strategies

Harvest tax losses

Financial markets have performed well this year, so you could have a steeper-than-expected tax bill if you realized gains. However, it may be possible to reduce what you owe by realizing any losses before year-end.

Tax-loss harvesting, [a classic strategy][an approach that is sometimes used in an effort] to reduce tax liabilities, entails selling an investment at a loss to offset either already-realized gains or embedded gains that can be realized now or in the future.³

Alternatively, if you still like the securities sold, you can buy them back—provided you are careful not to violate the wash sale rule. This rule prohibits you from taking a loss on the sale of a security in the current tax year if you buy a “substantially identical” security within 30 days either before or after the loss-trade date.

If you do not want to be out of the position for an entire month, you may want to consider doubling up on your position (i.e., buying the identical position at the current price, then waiting more than 30 days before selling the original loss position).

November 28—the day after Thanksgiving this year—is the last day you can implement this strategy and recognize the loss for 2025.

Keep in mind: Tax-loss harvesting isn’t limited to year-end planning: You can regularly review your portfolio for harvesting opportunities. Even when markets are up, dispersion creates an opportunity for tax-loss harvesting. Year-to-date through August 2025, for example, more than 400 stocks in the S&P 500 experienced a drawdown of at least 5%.⁴

Indeed, you might benefit from having an account that is designed to consistently look for losses, and realize them when appropriate. For more information, see How cutting edge technology can enhance your wealth with tax savings.

Deduct charitable contributions

Well-timed charitable donations can ensure the associated deductions are effective in an intended tax year. Depending on what you plan to donate, it could take time to complete the transfer. Confirm estimated transfer times with your financial institutions to determine whether your donations will be considered to have been made by the end of this year.

In 2025, consider front-loading your charitable deductions to maximize deductibility before new limitations on charitable deductions take effect. The OBBBA imposes new limits on charitable donations made on or after January 1, 2026:

• Total allowable charitable deductions are reduced by 0.5% of adjusted gross income (AGI) for those who itemize
• The overall value of itemized deductions (e.g., charitable contributions, mortgage interest, investment interest paid) is capped at 35% for taxpayers in the 37% tax bracket

What does this mean? All else being equal, the tax deduction for a charitable contribution made by a top-income-bracket taxpayer in 2025 would be more valuable than for the same contribution made in 2026.

If you’re unsure which charity you want to support, but would like to use the deduction this year, consider contributing to a donor-advised fund (DAF). Tax deductions for donations to DAFs are immediate, but the payout from the DAF to another charity can be made at a later date.

Minimize estimated payments

The U.S. tax system requires you to pay as you go, with most taxpayers meeting their tax obligation through regular withholding from their compensation. However, many high-income earners must pay quarterly estimated taxes (generally by April 15, June 15, September 15 and January 15) to avoid interest charges on those amounts, as well any balance that is due April 15 the following year.

The law allows estimated payments to be made on the basis of a lesser-of calculation; either:

• 110% of the actual tax liability for the preceding year, or
• 90% of the estimated tax liability for the current year⁵

In a higher interest rate environment, if you expect to owe much more in taxes for 2025 than you owed for 2024, consider paying estimated taxes based on the 2024 tax liability and investing the difference in 100% principal-protected, short-term fixed income investments. This may allow you to earn a return on the incremental amount you will owe for at least a few months.

3. Optimize compensation and benefits

Fund retirement accounts

If you can contribute to a retirement account, it generally makes sense to do so up to the full dollar amount permissible before year-end. In 2025, the maximum contribution amounts are:

• IRAs—$7,000. (For those 50 years of age or older, it’s $8,000.)
• 401(k)s/403(b)s—$23,500. (Those 50 and older can contribute up to $31,000.) Taxpayers who turned, or will turn, age 60, 61, 62 or 63 during 2025 can contribute up to $34,750⁶

Converting assets from a traditional IRA to a Roth IRA may be a smart move if you:

• Think your future income tax rates may be higher
• Can afford to pay the taxes with cash from other sources
• Do not plan to leave IRA assets to charity
• Expect the funds to remain in the IRA for a long period of time

Take required minimum distributions

Be sure to take your required minimum distributions (RMDs) by year-end to avoid steep penalties. If you own a retirement account and have reached age 73, generally you will need to take an annual RMD each year by December 31.⁷

If you have significant philanthropic objectives, remember you can make a qualified charitable distribution (QCD) from an IRA directly to a public charity (though not to a DAF). The amount given will go toward satisfying your RMD.⁸ However, depending on your circumstances, it might be more tax efficient to gift appreciated securities held for more than one year. For more information, see Are qualified charitable distributions always the best tax-saving move?

If you inherited an IRA after 2019, final regulations issued in July 2024 require—beginning in 2025—certain beneficiaries to take annual distributions over the 10-year period following the year of the account owner’s death. Depending on the ages of the original owner and the beneficiary, among other factors, in many cases the RMD in the first nine years would be relatively modest, with a large terminating distribution made at the end of the 10th year.

The rules are highly nuanced, so it’s critical to consult your tax advisor to confirm your RMD requirements if you are the beneficiary of an inherited IRA. Your advisor can help you settle on a long-range plan to minimize taxes to an extent consistent with your overall financial goals.⁹

Defer compensation

If your employer allows you to defer compensation, you must elect to defer your 2026 fixed salary and other non-performance-based compensation by December 31, 2025, if not earlier (as specified by your employer).

With a deferral, there is no income tax liability on either the compensation or its growth until you receive it, at which time the payment will be taxed at the ordinary rates then in effect. One tradeoff for electing this deferral is you assume risk as a general creditor of the employer.

This decision, too, requires careful consideration of your expected current and future income tax rates.

Exercise stock options

If you are an executive, you may want to exercise some of your stock options in 2025. The important question is: Which to choose? Good candidates generally include options that are:

• Deep in the money (i.e., the strike price is substantially less than the current fair market value)
• On high-dividend-paying stocks
• Near their expiry

Your J.P. Morgan team can provide an options breakeven analysis to help with your deliberations.

4. Make tax-wise gifts to your children

Use your lifetime exclusion amount now

Currently, an individual can transfer up to $13.99 million free of gift and estate taxes; for married couples, the tax-free transfer amount is $27.98 million.

Under the OBBBA, these amounts will increase to $15 million ($30 million for married couples) beginning in 2026.

If you have a taxable estate, as well as the capacity and desire to gift, and all or part of your current lifetime gift and estate tax exclusion remains unused, think about acting soon to lock in the extra gifting potential.

Using our proprietary Wealth Plan Plus technology, your J.P. Morgan team can help quantify the amount of assets you can transfer without jeopardizing your own future financial security.

Put annual tax-free gifts to good use

Every year, U.S. taxpayers can take advantage of the annual gift tax exclusion, and give to as many individuals as they choose for any present use. In 2025, individual taxpayers are permitted to give up to $19,000 to each donee free of gift taxes. Married couples can give tax free up to $38,000 per donee.

The annual gift tax exclusion is a use-it-or-lose-it opportunity. If you do not make a gift this year, you cannot double up next year and treat half the gift as having been made in 2025.

Parents and grandparents often use their annual gift tax exclusions to fund 529 educational savings accounts, where the funds grow free of U.S. income and capital gains taxes. As long as the money is used for the account beneficiary’s qualified education expenses, no U.S. income or gift tax will be due upon distribution.

5. Get professional tax-planning advice

There are many ways to strengthen your financial health before year-end, especially if you get started now.

Speak with your tax advisor about which actions may be right for you. Your J.P. Morgan team can work with you and your tax advisor to help identify tax-planning actions that are best suited to your personal circumstances and long-term financial goals.

For more on year-end tax planning, see our comprehensive checklist, “Your 2025 Tax Guide.”