Year-End Tax Planning for High-Income Households: Roth Conversions, Charitable Bunching, and Gain/Loss Management

Year-end tax planning is the process of coordinating your income, deductions, portfolio gains and losses, retirement accounts, charitable giving, and upcoming liquidity events before December 31.

Key takeaways

A Roth conversion, a charitable gift, and a stock sale can each change the tax result of the others, so they are best evaluated together.
New charitable-deduction rules take effect for the 2026 tax year and may change how giving strategies work.
Your financial advisor, CPA, and estate attorney each see a different part of the picture. Coordinating them before deadlines limit your options may help you avoid costly surprises.

For high-income households, tax planning is rarely about one isolated decision. A Roth conversion can affect your marginal tax bracket and future Medicare premiums. A charitable gift can influence whether itemizing makes sense. A business sale or equity-compensation event can change your entire tax picture.

Modeling these decisions together with your financial advisor, CPA, and estate attorney can help you make informed choices before year-end.

1. Begin with a complete year-end projection

Before deciding whether to convert, sell, donate, or rebalance, build a realistic estimate of your total household income. Your projection should include:

Wages, bonuses, and deferred compensation
Business income or planned business-sale proceeds
Restricted stock, stock options, and other equity compensation
Interest, dividends, and mutual fund distributions
Realized and unrealized capital gains and losses
Required minimum distributions (RMDs)
Social Security, pensions, and other retirement income
Charitable contributions and other potential deductions
Estimated tax payments and withholding

Also identify events that may occur after year-end, such as a liquidity event, a property sale, a large vesting schedule, or a relocation from Illinois to Nevada. A tax projection does not guarantee a result. It gives you a decision-making framework based on the information available today.

2. Evaluate Roth conversions carefully

A Roth conversion moves assets from a traditional IRA or other eligible pre-tax retirement account into a Roth account. The converted amount generally becomes taxable income in the year of conversion.

For some households, a conversion may reduce future taxable distributions, add tax flexibility in retirement, and move assets into an account with different distribution rules. However, a Roth conversion is not automatically beneficial.

When a conversion may be less attractive

A high-income year may make a conversion less appealing if:

You are already in a high marginal federal tax bracket.
A conversion would push additional income into a higher bracket.
The conversion would increase Medicare IRMAA premiums in a future year.
It would cause more long-term capital gains to be taxed at a higher rate.
You expect a substantially lower tax rate in retirement.
You would need to use retirement assets to pay the conversion tax.

For example, a household receiving a large business distribution, bonus, or equity-compensation payout may already have limited room in its preferred tax bracket. Adding a conversion on top of that income could produce an expensive result.

When a lower-income year may deserve attention

A lower-income year may create an opportunity to evaluate a partial conversion. This can occur after retirement but before RMDs begin, during a temporary business slowdown, or before Social Security starts.

RMDs begin at age 73 or 75, depending on your birth year. The years between retirement and that age may be a planning window, because future RMDs could substantially increase taxable income. A carefully modeled conversion during that period may help diversify the tax treatment of your retirement assets.

Every conversion should consider your projected lifetime tax rate, not only this year’s tax bill. Your advisor and CPA should also review the pro-rata rule, withholding, estimated taxes, and the effect on your broader retirement planning strategy.

3. Use charitable giving strategically

Charitable giving can express your values and also fit into year-end tax planning. The right approach depends on your income, assets, charitable intentions, age, and whether you itemize deductions.

What changes for the 2026 tax year

Under the One Big Beautiful Bill Act, several charitable-deduction rules change beginning with the 2026 tax year:

Itemizers: Only charitable contributions above 0.5% of adjusted gross income (AGI) are deductible.
Top-bracket taxpayers: The tax benefit of itemized deductions, including charitable gifts, is capped at 35 cents per dollar for those in the 37% bracket.
Non-itemizers: A new deduction of up to $1,000 ($2,000 for joint filers) is available for cash gifts to qualifying charities. It does not apply to donor-advised fund contributions.

These rules interact with your income and deductions, so your CPA should confirm how they apply to you.

Consider charitable bunching

If your annual donations do not consistently exceed the standard deduction, giving every year may produce limited federal tax benefit. Charitable bunching combines several years of planned giving into one tax year. That may allow you to itemize in the contribution year and use the standard deduction in other years. With the new AGI floor, grouping gifts may also help more of your giving clear the threshold.

A donor-advised fund can be one way to implement this approach. You contribute cash or securities to the fund, generally receive a charitable deduction if you itemize, and recommend grants to qualified charities over time.

Donate appreciated securities

If you hold appreciated stock in a taxable account, donating shares instead of selling them may be worth evaluating. A properly structured gift of securities held longer than one year may allow you to support a charity while avoiding capital-gains recognition on the donated appreciation, subject to applicable rules and AGI limitations.

This can be useful when you already plan to reduce a concentrated stock position. Rather than selling all the shares and donating cash, you may be able to contribute some appreciated shares directly and use cash for other needs.

Review qualified charitable distributions

If you are at least age 70½ and have an eligible IRA, a qualified charitable distribution (QCD) may allow you to give directly from the IRA, subject to an annual limit that is adjusted for inflation. For individuals subject to RMDs, a QCD may count toward the RMD when completed properly. QCDs generally cannot be made to a donor-advised fund. Your CPA should confirm eligibility, limits, and reporting.

4. Manage gains, losses, and portfolio concentration

Year-end portfolio planning should address both taxes and investment risk. Before selling an appreciated investment, consider:

Whether the gain is short-term or long-term
How the sale affects your federal and state tax picture
Whether it increases exposure to the net investment income tax
Whether you have losses that can offset gains
Whether you need the proceeds for a planned expense or liquidity event
Whether the position creates concentration risk

Our overview of capital gains strategies covers additional background.

If you own a large position in one company, tax considerations should not prevent you from addressing a risk that could affect your broader financial plan. You can evaluate a gradual sale, charitable gifting, a tax-managed transition, or another diversification strategy.

Evaluate tax-loss harvesting without letting taxes drive the portfolio

Tax-loss harvesting may allow you to realize losses that offset capital gains and, within limits, a portion of ordinary income. It can also create wash-sale concerns, alter your asset allocation, and reduce the cost basis of replacement investments. It should support your investment plan, not replace it. For more on common implementation problems, see our article on tax-loss harvesting mistakes.

Rebalance with tax awareness

A portfolio that has drifted because of strong gains may no longer match your intended risk level. Rebalancing can matter most when you are approaching retirement, preparing for a business sale, or relying on portfolio withdrawals. Your advisor may evaluate asset location, charitable transfers, strategic sales, and new contributions before selling appreciated positions. These strategies may be appropriate depending on your circumstances, but none guarantees tax savings or investment results. All investing involves risk, including the possible loss of principal.

5. Account for RMDs, estimated taxes, and equity compensation

RMDs should be part of your year-end projection, not an afterthought. If you are subject to one, confirm the amount, the deadline, and whether a QCD could be appropriate.

If you are considering a Roth conversion, an RMD generally must be satisfied first, and the RMD itself typically cannot be converted.

Revisit estimated taxes after any major income event. A Roth conversion, concentrated-stock sale, business transaction, or large bonus may create an underpayment risk if withholding and quarterly payments are not adjusted.

For executives and business owners, equity compensation adds complexity. Restricted stock vesting, nonqualified stock options, incentive stock options (which may trigger the alternative minimum tax), and 83(b) elections carry different tax and liquidity considerations. A year-end review should identify upcoming vesting dates and exercise decisions before the calendar year closes.

For a broader look at multi-year planning, see our guide to multi-year tax strategy for high earners.

6. Plan ahead for a potential Illinois-to-Nevada move

If you are considering relocating from Illinois to Nevada, including to the Lake Tahoe area, the timing of income and investment events deserves careful review.

Nevada does not impose a broad individual state income tax, while Illinois has its own rules for income, residency, retirement distributions, and business activity. State treatment of a Roth conversion, capital gain, business income, or trust distribution can depend on the nature and timing of the income.

Before moving, coordinate with a CPA who understands both states. Review:

Your actual residency and domicile timeline
The timing of large capital-gain transactions
Business-sale or private-company liquidity events
Roth conversions and retirement distributions
Equity-compensation vesting or exercise dates
Real-estate transactions and business activity
Estate-planning documents and trustee responsibilities

Changing your address alone does not necessarily establish residency for tax purposes. Your professional team should review the facts and documentation before you schedule a major transaction around a move.

7. Use the final 60–90 days intentionally

A practical year-end process may look like this:

Sixty to ninety days before year-end

Gather income, withholding, investment, and retirement-account information.
Ask your CPA for a preliminary tax projection.
Identify expected bonuses, vesting events, business income, and capital gains.
Review charitable goals and possible donor-advised fund contributions.
Identify concentrated positions and portfolio drift.

Thirty to sixty days before year-end

Model Roth conversion amounts at different tax brackets.
Review RMD requirements and possible QCDs.
Analyze appreciated securities for charitable gifts or planned sales.
Assess tax-loss harvesting opportunities.
Revisit estimated-tax payments and withholding.
Coordinate any Illinois-to-Nevada relocation decisions.

Final weeks before December 31

Complete eligible Roth conversions in time for your custodian’s processing deadlines.
Finalize charitable gifts and securities transfers.
Complete RMDs and QCDs where appropriate.
Execute approved portfolio trades.
Confirm estimated taxes with your CPA.
Document decisions for your tax preparer and estate attorney.

How Virtue Asset Management helps coordinate year-end planning

Year-end tax planning becomes more useful when it is integrated with your investment and financial plan.

Virtue Asset Management is a fee-only fiduciary firm serving families in the Chicago area, including Barrington, Oak Park, and Glenview. Our team, led by a CFA® charterholder, evaluates portfolio decisions with tax and risk considerations in mind through our investment management services.

We do not prepare tax returns or provide legal advice. Instead, we coordinate with your CPA and estate attorney so your investment decisions, retirement-income strategy, charitable intentions, and estate plan can work together. You can learn more about our tax and insurance planning and fee-only financial planning approach, or review our Client Relationship Summary.

If you would like to discuss how your year-end decisions fit into your broader financial plan, contact Virtue Asset Management.

Frequently asked questions

Is year-end tax planning only for people who expect a large tax bill?

No. It can help you identify opportunities and risks regardless of your expected tax bill. It may involve coordinating charitable giving, reviewing portfolio risk, confirming RMDs, or preparing for future income.

Should a high-income household always avoid Roth conversions?

No. A high-income year may make a conversion less attractive, but the answer depends on your current and projected tax rates, RMDs, retirement-income needs, estate goals, and the funds available to pay the tax.

Can I combine a donor-advised fund contribution with a Roth conversion?

Potentially. A charitable contribution may affect your itemized deductions and overall tax projection, but the interaction depends on your income, deduction limits, charitable assets, and other circumstances. Your CPA should model the combined strategy.

How do the 2026 charitable-deduction changes affect bunching?

For 2026, itemizers can deduct only contributions above 0.5% of AGI, and the benefit is capped at 35 cents per dollar in the top bracket. Bunching may help more of your giving count, but the result depends on your income and whether you itemize. Your CPA should confirm the effect.

Is it better to realize gains or losses before December 31?

Not necessarily. The decision depends on your tax position, investment objectives, concentration risk, cash needs, and future plans. Selling solely for tax reasons can create unintended investment consequences.

Who should lead the year-end planning process?

Your CPA, estate attorney, and financial advisor each address different parts of the plan. A fiduciary financial advisor can help coordinate the portfolio, retirement, cash-flow, and investment decisions with your outside professionals.

Important disclosure

This material is provided for informational purposes only and is not intended to provide tax, legal, accounting, or investment advice. Tax laws and regulations are complex, subject to change, and may vary based on your individual circumstances. Strategies discussed may not be suitable for every investor and do not guarantee tax savings, investment results, or protection from loss. You should consult with your qualified tax and legal professionals before implementing any strategy. Virtue Asset Management LLC is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. For additional information, including Virtue Asset Management’s Form ADV Part 2A (view the current SEC filing), visit the SEC Investment Adviser Public Disclosure website.