Tax Planning for High-Income Earners: Questions to Work Through Before the Year Closes

Short answer: For high-income taxpayers, year-end planning is a structured look at the tax year while it is still open: whether withholding and estimated payments match the year, which extra taxes may apply to wages and investment income, how capital gains and losses are lining up, how charitable gifts and retirement contributions are timed, and whether any passive activity rules affect losses. Each of these has IRS guidance behind it. What, if anything, to change depends on your facts and is decided with your CPA.

Year-end is a checkpoint, not a cutoff for everything. Some items only count for a year if they happen during that year; others, like many IRA contributions, can be made after the year ends. Knowing which is which is part of the planning.

Are withholding and estimated payments on track?

IRS Publication 505, Tax Withholding and Estimated Tax, explains how much you generally need to pay during the year through withholding and estimated tax. It has a specific rule for higher-income taxpayers: if your prior-year adjusted gross income was above the level Publication 505 sets, the prior-year safe-harbor amount is higher than the general rule. (Publication 505 notes that this higher-income rule doesn't apply if at least two-thirds of your gross income is from farming or fishing.) A year with a large bonus, a business sale or unusual investment income is a reason to check this with your CPA.

Which extra taxes may apply to wages and investment income?

• Net Investment Income Tax. According to the IRS, individuals may owe this tax on the lesser of their net investment income or the amount by which their modified adjusted gross income exceeds a statutory threshold based on filing status. Net investment income generally includes interest, dividends, capital gains, rental and royalty income, and non-qualified annuities. It is figured on Form 8960.
• Additional Medicare Tax. IRS Tax Topic 560 says this tax applies to Medicare wages, self-employment income and railroad retirement compensation above threshold amounts based on filing status. It is figured on Form 8959.

The IRS notes that the two taxes don't apply to the same type of income. Which one may apply, and on what, depends on your income mix.

How are capital gains and losses lining up?

IRS Tax Topic 409 explains that gains and losses are generally long-term if you held the asset for more than one year and short-term if you held it one year or less, and that net short-term gains are taxed as ordinary income. If capital losses exceed capital gains, the excess you can claim against other income in a year is limited, and the rest carries over to later years (Topic 409).

If you're considering selling securities at a loss, know the wash sale rule first. A wash sale occurs when you sell stock or securities at a loss and, within 30 days before or after the sale, buy or acquire substantially identical stock or securities (among other conditions). IRS Publication 550 says a wash sale loss can't be deducted when you sell. It's generally added to the basis of the replacement shares. Talk it through with your CPA and your financial advisor before trading.

Are charitable gifts timed and documented the way you intend?

IRS Publication 526 says you can deduct contributions only in the year you actually make them (or in a later carryover year). Starting with tax year 2026, taxpayers who don't itemize may also be able to deduct some cash gifts to qualifying charities (IRC §170(p), as amended by P.L. 119-21). Publication 526 also explains limits that may apply, the records you need, and the rules for gifts of property. For larger or non-cash gifts, the documentation rules matter as much as the timing.

What about retirement contributions?

Not every retirement contribution has to happen by December 31. IRS Publication 590-A says contributions to a traditional IRA for a year can be made at any time during the year or by the due date for filing your return for that year, not including extensions. Employer plans and self-employed plans have their own rules. Ask your CPA which accounts you can still contribute to for this year, and by when.

Do passive activity rules affect your losses?

If you own rental property or invest in businesses you don't actively run, IRS Publication 925 explains the passive activity rules. They apply to individuals (and to the owners of partnerships and S corporations), and they can limit when losses from passive activities can be used, with disallowed losses carried forward. Whether an activity is passive depends on your participation and the type of activity.

Is the alternative minimum tax a factor?

The Instructions for Form 6251 explain how the alternative minimum tax (AMT) is figured and which items are adjusted for it. Large deductions, certain stock option exercises and other items can bring AMT into the picture. Your CPA can run the numbers with and without the items you're considering.

What to have in hand for a year-end review

• Year-to-date pay stubs (with withholding) and any bonus or equity compensation statements.
• Estimated tax payments made this year, and last year's return.
• Year-to-date brokerage statements showing realized gains and losses, and any loss carryovers.
• A list of charitable gifts made or planned, with receipts or acknowledgments.
• Retirement account contribution records, and K-1s or rental statements for passive investments.

Where DeepYield fits

DeepYield is a second set of eyes, not a replacement for your CPA. We go looking for what's missing. In a free two-year look-back, we do a review of your last two years of returns, done for you, including how wages, business and investment income were reported, carryovers, giving and retirement contributions, and we share the questions we see with you and your CPA. We look for every legitimate deduction and credit you qualify for, not just the obvious ones. Whether any of it applies to this year is something you and your CPA decide.

Related: RSUs, Stock Options and ESPP Shares: How They're Taxed and What to Check on Your Return · The SALT Cap After the 2025 Tax Law: What Changed for High Earners and Landowners · Charitable Giving Under the 2026 Rules: Bunching, Donor-Advised Funds and Gifts of Stock

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Frequently asked questions

What should high-income earners review before year-end?

Common IRS topics include whether withholding and estimated payments match the year (Publication 505), whether the Net Investment Income Tax or Additional Medicare Tax may apply, how capital gains and losses are lining up (Topic 409), the timing and records for charitable gifts (Publication 526), retirement contributions (Publication 590-A), and passive activity rules (Publication 925). Which ones matter depends on your facts.

What is the Net Investment Income Tax?

According to the IRS, individuals may owe it on the lesser of their net investment income or the amount by which their modified adjusted gross income exceeds a statutory threshold based on filing status. Net investment income generally includes interest, dividends, capital gains, rental and royalty income, and non-qualified annuities. It is figured on Form 8960.

Do I have to make IRA contributions by December 31?

Not for a traditional IRA. IRS Publication 590-A says contributions for a year can be made during the year or by the due date for filing that year's return, not including extensions. Other plan types have their own rules.

Can I deduct a loss if I sell a stock and buy it back?

Not when you sell, if it's a wash sale. A wash sale occurs when you sell stock or securities at a loss and buy or acquire substantially identical stock or securities within 30 days before or after the sale, among other conditions. IRS Publication 550 says the loss can't be deducted when you sell. It's generally added to the basis of the replacement shares.

When are charitable contributions deductible?

IRS Publication 526 says you can deduct contributions only in the year you actually make them, or in a later carryover year. Starting with tax year 2026, taxpayers who don't itemize may also be able to deduct some cash gifts to qualifying charities (IRC §170(p), as amended by P.L. 119-21). Limits and recordkeeping rules may apply.

Does year-end planning replace my CPA?

No. DeepYield is a second set of eyes, not a replacement for your CPA. Any question we raise is for you and your CPA to consider together.

Sources

• IRS Publication 505, Tax Withholding and Estimated Tax (general rule; higher income taxpayers): https://www.irs.gov/publications/p505
• IRS, Net Investment Income Tax: https://www.irs.gov/individuals/net-investment-income-tax
• About Form 8960, Net Investment Income Tax—Individuals, Estates, and Trusts: https://www.irs.gov/forms-pubs/about-form-8960
• IRS Tax Topic 560, Additional Medicare Tax: https://www.irs.gov/taxtopics/tc560
• IRS Tax Topic 409, Capital gains and losses: https://www.irs.gov/taxtopics/tc409
• IRS Publication 550, Investment Income and Expenses (Wash Sales): https://www.irs.gov/publications/p550
• IRS Publication 526, Charitable Contributions (When To Deduct): https://www.irs.gov/publications/p526
• IRS Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs) (When Can Contributions Be Made?): https://www.irs.gov/publications/p590a
• IRS Publication 925, Passive Activity and At-Risk Rules: https://www.irs.gov/publications/p925
• Instructions for Form 6251, Alternative Minimum Tax—Individuals: https://www.irs.gov/instructions/i6251

Results depend on your specific facts. No outcome is guaranteed. This is general information, not tax advice; advice is provided only under a signed engagement.

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