Tax Planning for 2026: Roth Conversions, Tax-Loss Harvesting, and Income Timing

Strategies

The fourth quarter is an important time to review your tax picture before year-end planning opportunities expire. Effective tax planning is not simply about preparing a return in April. It involves making thoughtful decisions throughout the year that may help manage taxes while supporting your broader financial goals.

As 2026 draws to a close, several strategies may be worth evaluating.

Roth Conversions

A Roth conversion moves eligible pre-tax retirement assets into a Roth account. The taxable portion of the conversion is generally treated as ordinary income in the year it occurs, but future growth and qualified withdrawals may be tax-free.

A conversion may be worth considering if you are in a lower tax bracket than you expect to be in later years. However, the additional income may affect your tax bracket, Medicare premiums, investment-related taxes, or eligibility for certain deductions and credits. Rather than converting an entire account at once, a partial conversion may help fill a targeted tax bracket without creating unnecessary tax consequences.

Tax-Loss Harvesting

Tax-loss harvesting involves selling investments in a taxable account that have declined in value and using those realized losses to offset realized capital gains. If losses exceed gains, up to $3,000 of net capital losses may generally be used to offset ordinary income—or $1,500 for married taxpayers filing separately. Remaining losses may generally be carried forward to future tax years.

This strategy should be coordinated with your investment plan. The wash-sale rule may prevent a loss from being deducted if you purchase the same or a substantially identical investment within 30 days before or after the sale. Any replacement investment should also remain consistent with your risk tolerance and long-term objectives.

Income & Deduction Timing

The timing of income and deductible expenses can influence your annual tax liability. Depending on your circumstances, you might consider accelerating income into 2026, deferring income until 2027, or timing deductible expenses to produce the greatest potential benefit.

The right approach depends on your expected income, current and future tax brackets, available deductions, and anticipated changes in tax law. Deferring income or accelerating deductions is not automatically advantageous, particularly if you expect to be in a higher tax bracket next year.

Year-end tax planning works best when investment, retirement, charitable-giving, and cash-flow decisions are considered together. Contact our team to discuss which strategies may align with your financial plan, and consult your tax professional before completing tax-related transactions.