You Don’t Pay Tax on What You Earn. You Pay Tax on What’s Left
It’s early November. The open-enrollment email from HR is sitting in your inbox, the holidays are coming, and somewhere in the back of your mind is a nagging question: Is there anything I should be doing before the year ends?
If you’re still working and you’ve been saving consistently, the answer is probably yes. Not because you’ve done anything wrong, but because the last two months of the year are the last chance to make several moves that only count for this tax year. After December 31, they’re gone.
Before the list of moves, one idea that makes all of them click.
Your tax bill starts with taxable income, not your paycheck
Most people think of taxes as something that happens to their paycheck. It’s closer to say taxes happen to whatever is left after certain things are set aside. Put money into a 401(k) or an HSA, and it isn’t counted as income for the year. You’re taxed on the smaller number.
Here’s why that matters. Your income is taxed in layers, and the top layer is taxed at the highest rate. When you pull dollars off the top, you save at your highest rate, not your average one. For someone in the 24% federal bracket, plus Oregon’s state tax, that can be close to 30 cents on every dollar.
Here’s what that looks like. Say you earn $150,000 and add $7,500 to your 401(k) before year end. Only $142,500 of your pay gets taxed. At about 30 cents on the dollar, that’s roughly $2,250 in tax savings.
This isn’t a loophole, and it isn’t free. You’re deferring the tax, not erasing it, and you’ll owe it when you withdraw. The trade often works well, because you may be in a lower bracket later and the money grows in between. But it depends on your situation, which is why it’s worth looking at before December 31.
Same idea, four places to use it
Once you see taxes this way, most year-end planning is the same move in different accounts. Each one either shrinks the income that gets taxed or keeps a gain from being taxed at all.
Your workplace plan. For 2026 you can put up to $24,500 into a 401(k) or 403(b), plus an extra $8,000 if you’re 50 or older ($11,250 if you’re 60 to 63). Check your year-to-date total on your last pay stub, and give payroll a few weeks to process any change, since elective deferrals have to come from 2026 compensation. (Note: starting in 2026, higher earners whose prior-year FICA wages exceeded $150,000 generally must make catch-up contributions as Roth.)
A health savings account. If you have a high-deductible health plan, you can contribute $4,400 for self-only coverage or $8,750 for family coverage in 2026, plus $1,000 if you’re 55 or older. Contributions go in pre-tax, growth is tax-free, and qualified medical withdrawals are tax-free. Unlike 401(k) deferrals, HSA contributions can generally be made until the tax-filing deadline, so you have a little more runway.
Your investments. If you hold investments outside retirement accounts, losses can offset gains, and up to $3,000 a year can offset ordinary income. Avoid buying the same investment back within 30 days (the wash-sale rule), and check for year-end fund distributions before you buy into a fund. Tax-loss harvesting is most useful when you already have realized gains or want that $3,000 ordinary-income offset.
Your giving. New for 2026, you can deduct up to $1,000 of cash gifts ($2,000 if married filing jointly) even if you don’t itemize. (This applies only to cash gifts to public charities, so it does not include gifts to donor-advised funds or supporting organizations.) If you itemize, your giving only starts to count once it passes 0.5% of your income. Giving appreciated shares directly to a charity, instead of cash, can also keep the gain from being taxed at all.
Where to start
You don’t need to do all of these. Pick the one that fits your situation, put a date on your calendar this week, and handle it before the holidays take over.
This article is for general educational purposes and is not tax, legal, or investment advice. Tax rules change and every situation is different, so please talk with a qualified professional before acting. Contribution limits and deduction rules are for tax year 2026.
Sources: 2026 401(k) and IRA limits · 2026 HSA limits · 2026 tax law changes (SALT cap, charitable giving)
Securities offered through LPL, Member FINRA/SIPC. Tallus Capital Management is another business name for Independent Advisor Alliance, LLC. Investment advice offered through Independent Advisor Alliance, LLC, a registered investment advisor and separate entity from LPL Financial.
