The 2026 Cliff is Real.
In normal years, December tax planning is about marginal gains. In 2025, it is about avoiding a regime change.
Starting January 1, 2026, the provisions of the new “One Big Beautiful Bill Act” (OBBBA) will activate. The headline for the Mass Affluent? Deductions are getting crushed.
- The New Floor: You can only deduct charitable gifts exceeding 0.5% of your AGI.
- The New Cap: The value of deductions is capped at 35% for the top bracket (down from 37%).
This means December 2025 is the last time you can play by the “Old Rules.” The window to move capital efficiently is closing in roughly 30 days.
Move #1: The “DAF Super-Funding” (The Bunching Strategy)
If you plan to donate to charity over the next 10 years, you need to donate that money now, not later.
The Strategy: Open a Donor Advised Fund (DAF) (via Fidelity Charitable, Schwab, or Vanguard). Instead of donating $20k/year for the next 5 years, donate $100k in December 2025.
- The Win: You take the full tax deduction this year (up to 60% of AGI for cash) under the favorable 2025 rules.
- The Flow: The money sits in the DAF growing tax-free, and you legally distribute it to charities over the next decade. You effectively “pre-pay” your decade of giving to lock in the tax break today.
Move #2: The “Roth Conversion” Window
The market was volatile in Q3, meaning you might be holding assets in your Traditional IRA that are depressed in value. This is not a loss; it is an opportunity.
Specifications
| Metric | Traditional IRA | Roth IRA | The December Move |
|---|---|---|---|
| Tax Status | Tax-Deferred (Pay later) | Tax-Free (Pay never) | Convert Now |
| The Logic | You pay tax on the current value. | Growth is tax-free forever. | Convert Now |
| Deadline | April 15, 2026 | April 15, 2026 | MUST convert by Dec 31, 2025 |
| OBBBA Impact | RMDs may increase. | No RMDs for lifetime. | Shelter assets from future rate hikes. |
The Play: Convert a portion of your Traditional IRA to Roth before Dec 31. You will owe income tax on the conversion amount in April, but all future growth (and withdrawals) will be 100% tax-free. If you expect tax rates to rise in the future (a safe bet), this is buying insurance at a discount.
Move #3: The “Tax Loss” Harvest (The Final Sweep)
You have until December 31 to sell losing positions to offset your winning ones.
- The Limit: You can offset unlimited capital gains.
- The Bonus: If you have more losses than gains, you can deduct up to $3,000 against your ordinary income (W-2).
- The Trap: Beware the Wash Sale Rule. If you sell Tesla (TSLA) at a loss, you cannot buy it (or a “substantially identical” asset) back for 30 days.
Apex Tip: Sell the individual stock and immediately buy a Sector ETF (e.g., Sell TSLA, Buy an EV ETF). You stay exposed to the industry trend but harvest the loss legally.
The Apex Verdict
This is not the year to “wait and see.” The legislative changes in 2026 are structural, not temporary.
The Assets (Pros)
Lock-In: “Bunching” DAF contributions locks in deductions before the 2026 caps/floors hit.
Tax-Free Growth: Roth conversions permanently remove assets from the IRS’s reach.
Clean Slate: Harvesting losses now cleans up your portfolio for the new year.
The Liabilities (Cons)
Liquidity Shock: DAF funding and Roth tax bills require significant cash now.
Irreversibility: You cannot “undo” a Roth conversion (the recharacterization rule is gone).
Complexity: You need a CPA to run the projections so you don’t bump yourself into a higher bracket.
The Buy Case: Execute the DAF Bunching strategy immediately if you are a High Earner ($500k+ AGI). The 2026 OBBBA limits will cost you thousands if you wait.
Final Thought: The IRS writes the rules, but you choose how to play the game. In 2025, the winner is the one who moves first.
Disclaimer: The views expressed in this article are for informational purposes only and do not constitute financial, legal, or professional advice. Please consult a qualified professional before making investment or purchase decisions.
Graham Sterling is an investment strategist focused on asset optimization and credit markets. With a background in private wealth management, he writes for the modern professional looking to leverage capital for maximum ROI. His work deconstructs complex financial tools from premium credit card ecosystems to alternative asset classes into actionable strategies.
