How to use this checklist and why it matters
High earners face complex tax rules, tighter phaseouts, and unique traps (AMT, NIIT, SALT limits). Use this checklist to prioritize low-effort, high-impact moves before year-end and to identify items that require immediate adviser contact. In my 15+ years advising high-income clients, proactive December reviews routinely reduce effective tax rates and prevent underpayment penalties.
Year-end priorities (high-impact actions)
-
Adjust tax withholding and estimate payments: Reconcile year-to-date withholding, bonuses, and large capital events. If you expect underpayment, either increase payroll withholding or make an estimated tax payment (fourth-quarter estimated payments are typically due in mid-January; confirm the specific date on IRS.gov) to avoid penalties. See IRS estimated tax guidance: https://www.irs.gov/payments/estimated-taxes.
-
Maximize retirement deferrals and tax-advantaged accounts: Contribute to employer plans (401(k), 403(b)), IRAs, and HSAs where eligible. These deferrals lower taxable income and are especially valuable when you’re near phaseout thresholds. Contribution limits change annually — verify current limits on the IRS retirement and HSA pages before making decisions: https://www.irs.gov/retirement-plans and https://www.irs.gov/publications/p969.
-
Tax-loss harvesting: Review taxable investment accounts and realize losses to offset prior gains or to net against ordinary income (up to limits). Observe the wash-sale rule when repurchasing securities. For advanced strategies on lot selection and timing, see our article on using tax-loss harvesting beyond year-end: https://finhelp.io/glossary/using-tax-loss-harvesting-beyond-year-end/.
-
Evaluate Roth conversions carefully: A partial Roth conversion can be an effective multi-year move to smooth taxable income, especially in years with lower realized income. Model the tax consequences before year-end to avoid unexpected bracket creep and consider state tax impact.
-
Charitable strategies and bunching: Decide whether to bunch itemizable gifts into one year, use donor-advised funds (DAFs) to accelerate deductions, or donate appreciated securities to avoid capital gains. Keep contemporaneous written acknowledgments and receipts for gifts. Our guidance on donor recordkeeping may help: https://finhelp.io/glossary/recordkeeping-for-donors-receipts-valuations-and-substantiation/.
-
Review stock compensation and option exercises: Coordinate the timing of ISO exercises, restricted stock vesting, and NSO sales. Early exercise or deferral can dramatically change AMT exposure and ordinary income recognition. Work with payroll and your tax professional to model outcomes.
-
Manage required minimum distributions and QCDs (if applicable): If subject to RMDs, ensure timely withdrawals and consider qualified charitable distributions (QCDs) if they align with your goals; check current IRS eligibility and limits.
Checklist — practical items to complete before year-end
- Run a comprehensive income projection to year-end (include bonuses, consulting, investment sales, K-1s).
- Reconcile payroll withholding with projected tax liability; submit W-4 updates if needed.
- Make additional 401(k), HSA, or IRA contributions where permitted by plan rules and the IRS.
- Harvest tax losses in taxable accounts, watching the wash-sale rule and lot selection.
- Consider partial Roth conversions in low-income years; model federal and state tax effects.
- Bunch charitable giving and document donations; use DAFs for meterable giving.
- Review state residency or sourcing issues—high earners with multi-state exposure can reduce state tax by timing income or residency changes.
- Confirm estimated tax payments (make Q4 payment if necessary) to avoid underpayment penalties: https://finhelp.io/glossary/avoiding-underpayment-penalties-safe-harbors-and-calculation-strategies/.
- Prepare for AMT and NIIT triggers (see the AMT guide linked below).
- Inventory and organize tax documents (1099s, K-1s, brokerage statements) and share with your preparer by agreed deadlines.
Tax items that disproportionately affect high-income taxpayers
-
Alternative Minimum Tax (AMT): Certain preferences (incentive stock options, large tax-exempt interest, state tax deductions historically) can trigger AMT. Model AMT exposure before exercising options. For more detail, see our AMT-focused guide: Managing AMT and Its Triggers for High-Income Individuals: https://finhelp.io/glossary/managing-amt-and-its-triggers-for-high-income-individuals/.
-
Net Investment Income Tax (NIIT) and Medicare surtax: Investment income and high earned income can trigger an additional 3.8% NIIT and a 0.9% Medicare payroll surtax. Reduce exposure by shifting timing of gains, maximizing retirement deferrals, or harvesting losses.
-
State and local tax (SALT) limits and state residency: The federal SALT deduction cap can significantly affect deducible state tax for high earners. Consider state-specific planning (e.g., timing deductions, evaluating residency) with a state tax advisor.
Specifics: retirement accounts, HSAs, and charitable moves
-
Employer retirement plans: If your plan allows, max out elective deferrals before year-end. Also confirm if your plan permits employer after-tax contributions or an in-plan Roth conversion (“mega backdoor Roth”) — those moves often require coordination with plan administration.
-
IRAs and backdoor Roths: High-income taxpayers who exceed Roth income limits can use a backdoor Roth strategy. If you have pre-tax IRA balances, consider the pro-rata rule’s implications and model the tax cost of conversions.
-
HSAs: Contributions provide triple tax benefits when used for qualified medical expenses. Confirm your eligibility (high-deductible health plan rules) and contribution limits for the tax year via IRS guidance.
-
Charitable contributions: Donating appreciated securities to charity often provides better tax efficiency than cash. For recurring donors, donor-advised funds (DAFs) let you bunch deductions and time distributions to charities later.
Stock compensation and liquidity planning
High-income clients frequently hold concentrated positions or receive equity compensation. Key steps:
- Run scenario analyses for ISO exercises vs. holding for long-term capital gains.
- For RSUs, project the income recognition dates and tax withholding shortfalls (often insufficient for large grants).
- If selling shares to cover tax, plan trades to minimize short-term gains and preserve tax lots.
Practical recordkeeping and documentation
- Maintain contemporaneous documentation for charitable gifts (appraisals for non-cash property >$5,000 and written acknowledgments for gifts >$250). The IRS provides substantiation rules; keep records organized for your preparer: https://www.irs.gov/charities-non-profits/charitable-contribution-deductions.
- Keep a simple tracker of tax lots, wash-sale adjustments, and realized gains/losses through the year. Many brokerages provide gain/loss reports — reconcile these before sharing with your CPA.
Common year-end mistakes to avoid
- Waiting until January to review withholding and then missing the Q4 estimated payment deadline.
- Exercising ISOs without modeling AMT consequences.
- Overlooking state tax exposure from remote work or multi-state income.
- Assuming charitable receipts are sufficient without properly documenting non-cash gifts.
Timing and coordination with advisors
- Schedule a year-end tax call with your CPA or tax advisor in early December — this gives time to implement withholding changes, move assets, or make donations by year-end.
- Coordinate with financial planners about Roth conversion sizing; with estate attorneys about large charitable gifts or donor-advised fund funding; and with investment managers about tax-loss harvesting windows.
Sample timeline (December)
Week 1: Prepare an income projection and list pending transactions.
Week 2: Decide on Roth conversions and retirement deferrals; initiate DAF contributions if bunching.
Week 3: Execute tax-loss harvesting trades; confirm any ISO exercises or RSU sales.
Week 4: Finalize charitable gifts, update W-4 or make estimated payment, and send documents to your preparer.
Resources and authoritative references
- IRS — Estimated Taxes and Safe Harbors: https://www.irs.gov/payments/estimated-taxes
- IRS — Retirement Plan Contribution Limits and Rules: https://www.irs.gov/retirement-plans
- IRS — Health Savings Accounts (Publication 969): https://www.irs.gov/publications/p969
Additional FinHelp resources:
- Year-end tax planning: https://finhelp.io/glossary/year-end-tax-planning/
- Managing AMT and its triggers: https://finhelp.io/glossary/managing-amt-and-its-triggers-for-high-income-individuals/
- Avoiding underpayment penalties: https://finhelp.io/glossary/avoiding-underpayment-penalties-safe-harbors-and-calculation-strategies/
Final notes and disclaimer
This checklist is an educational roadmap, not individualized tax advice. Tax rules change annually, and effective moves depend on your full financial picture. In my practice I routinely run multi-scenario models for clients before year-end moves; replicate that approach with your CPA or tax advisor. For confirmation of current contribution limits, deadlines, and detailed rules, consult the IRS links above or a qualified tax professional.
