December gets busy for everyone, even retirees. Holiday plans, year-end letters from your favorite charities, and your required minimum distribution deadline all land in the same few weeks. That makes December the last window for year-end tax planning for retirees, since most of the choices that shape your tax bill next April need to happen by December 31.
A few well-timed tax moves before December 31 can lower what you owe and help you avoid costly penalties. You also have extra reasons to plan ahead this year. New federal rules add a deduction for people 65 and older and change how you can deduct charitable gifts, and Michigan's retirement income deduction is fully phased in for the first time.
Why year-end tax planning for retirees looks different in 2026
If your 2026 year-end tax planning follows the same routine you’ve used for years, give it a fresh look. The federal tax law passed in July 2025 changed several rules that affect you directly as a retiree, and 2026 is the first full year for many of them.
Year-end tax planning for retirees works best when it accounts for both sets of changes. In each of the eight moves below, we’ll point out where the new federal and Michigan rules affect your decisions.
1. Estimate your 2026 income and tax picture
Before you make any of the other moves on this list, you need a rough idea of your 2026 income. Pull out your year-to-date statements and add up what’s come in so far from Social Security, your pension, IRA withdrawals, and any interest, dividends, or investment gains. Then estimate what you’ll receive for the rest of the year. Last year’s tax return makes a helpful comparison, especially if your income sources haven’t changed much.
This estimate is the foundation of retirement tax planning. It shows you which tax bracket you're likely to land in, how much room you have before you reach the next one, and whether you're close to an income limit that could raise your taxes or your Medicare premiums.
How Social Security fits in
Part of your Social Security can be taxable, depending on your other income. As that income rises, more of your benefits become taxable, up to 85%.
This is why one extra IRA withdrawal can raise your tax bill more than you’d expect. You pay tax on the withdrawal itself, and it can also pull more of your Social Security into taxable income.
What Michigan retirees should know
In 2026, Michigan retirees born after 1945 can generally deduct up to $67,610 in qualifying retirement and pension income, or $135,220 for married couples filing jointly. If you file jointly, your eligibility is based on the older spouse’s age. Michigan also doesn’t tax Social Security.
For many Michigan retirees, this means most pension and IRA income now avoids state tax. Any qualifying income above the limit is still taxed. If your pension and IRA income is higher than the deduction, include Michigan tax in your year-end estimate.
2. Take advantage of the new senior deduction
If you’re 65 or older, you can claim a new deduction of up to $6,000. If you’re married and you both qualify, the total is $12,000. The deduction is available for tax years 2025 through 2028, and it comes on top of the extra standard deduction that people 65 and older already receive.
You don’t have to itemize to claim the new deduction, but you must turn 65 by December 31 of the tax year, and married couples must file a joint return.
How much of the deduction you keep depends on your income. It starts to shrink once your modified adjusted gross income exceeds $75,000 for single filers or $150,000 for joint filers. Each eligible person’s deduction drops by 6% of the income above that threshold. That means a $60 reduction for every $1,000 of additional income, or $120 combined if both spouses qualify. You can calculate your deduction on Part V of IRS Schedule 1-A.
This is where your year-end decisions matter. The taxable portion of a Roth conversion or a large, realized capital gain in December can push your income past the limit and reduce the deduction. If your estimate from move 1 puts you near the threshold, keep this deduction in mind as you look at moves 5 and 6.
Allegiant Wealth Strategies’ experienced advisors would be happy to discuss your options with you. You can schedule a complimentary appointment here: schedule here or by calling 269-218-2100.
3. Complete your required minimum distributions
If you’re already taking required minimum distributions (RMDs), you need to withdraw this year’s full amount by December 31. For most people, RMDs start at age 73. Request your withdrawal early, since financial institutions get busy at year-end.
Try not to wait until the last week of December. Financial institutions get busy at year-end, and a late request can miss the deadline.
If you turned 73 this year
You’re required to take your first RMD the year you turn 73, but you have a bit of extra time because you can wait until April 1, 2027, to take it. The tradeoff is that your 2027 RMD is still due by December 31, 2027, so you’d have two distributions in the same tax year. That extra income can push you into a higher bracket and trigger the income limits in move 7. For many people, taking the first RMD in 2026 spreads the income more evenly.
If you inherited an IRA
Inherited IRA rules have changed in recent years, and many beneficiaries don’t realize they now owe annual withdrawals. If you inherited an IRA after 2019 from someone who had already started RMDs, you generally need to take a withdrawal every year and empty the account within 10 years. Spouses and certain other beneficiaries follow different rules, so ask your advisor if you’re unsure which ones apply to you.
What happens if you miss an RMD
Missing an RMD triggers a 25% penalty on the amount you should have taken. The penalty drops to 10% if you correct the mistake quickly, and the IRS can waive it for reasonable errors.
4. Plan charitable gifts carefully
Give directly from your IRA
Once you reach age 70½, you can make a qualified charitable distribution (QCD). A QCD sends money straight from your traditional IRA to a qualified charity. The gift counts toward your RMD, and it stays out of your taxable income. In 2026, you can give up to $111,000 this way. Married couples can give up to $222,000 if each spouse gives from their own IRA.
Because a QCD never shows up in your income, it won’t push you toward the senior deduction limit, pull more of your Social Security into taxable income, or raise your Medicare premiums. That makes QCDs one of the most useful retiree tax strategies available. The money must go directly from your IRA to the charity, and you can’t make QCDs to donor-advised funds. To count for 2026, you must complete the distribution by December 31, so contact your IRA provider early.
New charitable rules for 2026
If you take the standard deduction, you can now deduct up to $1,000 in cash gifts to charity, or $2,000 if you're married filing jointly. You can take this deduction even if you don’t itemize. Gifts to donor-advised funds don’t qualify.
If you itemize, a new limit applies this year. You can deduct only the part of your total giving that’s above 0.5% of your adjusted gross income. With an AGI of $100,000, for example, the first $500 you give doesn’t count toward your deduction.
Bunching gifts if you itemize
Consider combining two or three years of planned giving into one year so your deductions are large enough to itemize, then take the standard deduction in the years between. A donor-advised fund makes this easier, since you take the deduction when you contribute and recommend grants to charities in later years.
5. Evaluate a Roth conversion
A Roth conversion moves money from a traditional IRA to a Roth IRA. You pay income tax on the amount you convert now. In return, the money can grow tax-free, and qualified withdrawals later are tax-free too. Roth IRAs don’t require RMDs during your lifetime, which gives you more control over your future taxable income. To count for 2026, you must complete your conversion by December 31. Once you make a conversion, you can't undo it.
A conversion often makes the most sense in a year when your income is lower than usual. For many people, that’s the period between retirement and the start of Social Security or RMDs. Converting then lets you pay tax at a lower rate than you’d likely face later.
The converted amount counts as income for the year, so check the income limits in move 7 before you convert. If you live in Michigan, the state’s retirement income deduction lowers or removes state tax on a conversion for many retirees, but income above the deduction limit is still taxed.
6. Review investment gains and losses
If you have investments in a taxable brokerage account, December is a good time to look at which holdings have gained or lost value. Selling the right ones before December 31 could lower your tax bill this year or in future years, which makes this one of the more flexible year-end tax strategies for retirees. These moves apply only to taxable accounts. Buying and selling inside an IRA doesn’t create a taxable gain or loss.
Take gains at a 0% tax rate
Many retirees don’t realize they can sell some investments and pay no federal tax on the profit. In 2026, long-term capital gains are taxed at 0% if your taxable income stays at or below $49,450 for single filers or $98,900 for joint filers. Long-term gains come from investments you’ve held for more than a year. Taxable income is what’s left after your deductions, so your total income can be higher than these amounts and still qualify.
If you have room under the limit, you can sell appreciated investments, pay no federal tax on the gain, and buy them back right away. This resets your cost basis to the higher price, which means a smaller taxable gain when you sell later. Those gains still count toward the income limits in move 7.
Use losses to offset gains
Selling investments that have lost value is called tax-loss harvesting. Your losses first offset any gains you've taken during the year. If your losses are larger than your gains, you can use up to $3,000 of the difference to reduce other taxable income, such as pension or IRA income. Any remaining loss carries forward to future years.
Watch the wash sale rule
If you sell an investment at a loss and buy the same or a substantially identical investment within 30 days before or after the sale, you can’t claim the loss that year. The rule applies only to losses, which is why you can buy an investment back right after taking a gain.
If you’d like guidance on any of these strategies, the Allegiant Wealth Strategies team is happy to help. You can make an appointment by calling 269-218-2100 or by visiting our site.
7. Watch the income thresholds that cost you money
Several parts of the tax code and Medicare work like trip wires. Once your income crosses a certain line, you lose a benefit or pay more. Knowing where those lines are is one of the biggest reasons year-end tax planning for retirees pays off, because a well-timed decision in December can keep you on the right side of them.
Medicare premiums are the most common surprise. If your income is above a set limit, you pay an extra charge on top of your standard Part B and Part D premiums, known as IRMAA. Medicare bases this charge on your tax return from two years earlier, so it generally uses your 2026 income to set your premiums for 2028.
IRMAA works in tiers. If your income goes just past the limit for a tier, you pay that tier’s full surcharge. For 2026 premiums, the surcharge starts when modified adjusted gross income is above $109,000 for individual filers or $218,000 for married couples filing jointly. Medicare usually raises these limits each year to keep up with inflation, so the 2028 limits will likely be higher.
If you retired before 65 and buy health insurance through the marketplace, your premium tax credit also depends on your income. A large IRA withdrawal, Roth conversion, or capital gain can reduce that credit. If you received more credit during the year than you qualify for, you must repay some or all of it when you file your return.
Before you take a withdrawal, convert to a Roth IRA, or sell investments this December, check where your income stands against each limit.
8. Check withholding and estimated payments
Withholding is an easy part of retirement tax planning to overlook, since you no longer have an employer handling it for you. If you pay too little tax during the year, the IRS can charge an underpayment penalty, even if you pay the full balance when you file.
Use an IRA withdrawal to catch up
If you’re behind, increasing federal tax withholding from an IRA distribution may help you catch up. Tax withheld from an IRA distribution is treated as if you paid it evenly throughout the year, even when the withdrawal happens in December. You can take your RMD late in the year, have extra tax withheld, and cover a shortfall from earlier months.
Review your Michigan withholding
Michigan’s retirement income deduction is fully phased in for 2026, which means your state tax bill on pension and IRA income could be lower than your withholding suggests. Compare what’s being withheld so far this year with what you expect to owe. If the gap is large, filing an updated MI W-4P with your pension or IRA administrator lets you lower or stop that withholding. Just keep your other taxable income in mind so a smaller withholding amount doesn’t leave you with a balance due in April.
Your year-end tax checklist for retirees
Here’s a quick recap of the deadlines that matter most for year-end tax planning for retirees.
By December 31, 2026:
· Take your full RMD, including annual withdrawals from an inherited IRA if they apply to you.
· Complete QCDs and Roth conversions by this date.
· Make any cash gifts or donor-advised fund contributions you want to deduct this year.
· Sell investments to harvest gains or losses, and watch the 30-day wash sale rule.
· Before you finalize anything, compare your income to the Medicare, senior deduction, and Social Security limits in move 7.
By January 15, 2027:
Send your fourth-quarter estimated payment if you make them.
By April 1, 2027:
Take your first RMD if you turned 73 in 2026 and chose to wait.
Get help with year-end tax planning for retirees
Each move affects the others. A Roth conversion, for example, can shrink your senior deduction and raise your Medicare premiums two years later, while a QCD can help keep both in check. Looking at your choices together, and not one at a time, is what makes year-end tax planning for retirees work.
At Allegiant Wealth Strategies, we help you see the full picture before December 31. We review your income, withdrawals, and investments alongside your long-term plan, and we can coordinate with your tax professional, so you know where you stand when it’s time to file. To talk through your year-end moves, schedule a complimentary conversation with our team online or call us at 269-218-2100.
This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to ensure our information is accurate and useful, we recommend that you consult a tax preparer, professional tax advisor, or lawyer.
Cetera Wealth Services LLC exclusively provides investment products and services through its representatives. Although Cetera does not provide tax or legal advice, or supervise tax, accounting or legal services, Cetera representatives may offer these services through their independent outside business. This information is not intended as tax or legal advice. Some IRAs have contribution limitations and tax consequences for early withdrawals. For complete details, consult your tax advisor or attorney. Distributions from traditional IRA’s and employer sponsored retirement plans are taxed as ordinary income and, if taken prior to reaching age 59 ½, may be subject to an additional 10% IRS tax penalty. Converting from a traditional IRA to a Roth IRA is a taxable event. A Roth IRA offers tax free withdrawals on taxable contributions. To qualify for the tax-free and penalty-free withdrawal or earnings, a Roth IRA must be in place for at least five tax years, and the distribution must take place after age 59 ½ or due to death, disability, or a first time home purchase (up to a $10,000 lifetime maximum). Depending on state law, Roth IRA distributions may be subject to state taxes. Qualified Charitable Distributions are available to IRA owners age 70½ or older and are subject to IRS rules and annual limits. Not all charities qualify. QCDs may satisfy Required Minimum Distributions if applicable but are excluded from taxable income rather than deducted. Generally, a donor advised fund is a separately identified fund or account that is maintained and operated by a Section 501(c)(3) organization, which is called a sponsoring organization. Each account is composed of contributions made by individual donors. Once the donor makes the contribution, the organization has legal control over it. However, the donor, or the donor's representative, retains advisory privileges with respect to the distribution of funds and the investment of assets in the account. Donors take a tax deduction for all contributions at the time they are made, even though the money may not be dispersed to a charity until much later.
Allegiant Wealth Strategies offers securities through Cetera Wealth Services, LLC, member FINRA/SIPC. Advisory services offered through Cetera Investment Advisers LLC, a Registered Investment Adviser. Cetera is under separate ownership from any other named entity. Allegiant Wealth Strategies has offices in Battle Creek and Portage, Michigan, from which we serve Calhoun County, Kalamazoo County, and Kent County (Grand Rapids). The Allegiant Wealth Strategies team offers no-obligation financial planning consultations; call 269-218-2100.