Five December Moves, Priced on the 2026 Returns of a $65,000 and a $185,000 Filer

An extra $5,000 of 401(k) deferral made before December 31 cuts the 2026 federal income tax of TaxMath's $65,000 single filer by $600 and of its $185,000 filer by $1,200. That is the first of five moves priced below, each against the same two returns for tax year 2026 (the return you file in early 2027), so the dollars can be compared move to move.

Each move below has a part that only December 31 can settle. A payroll deferral has to come out of a 2026 paycheck, a gift has to leave your account in 2026, and a sale counts in 2026 only if it trades in 2026.

The two returns before anything moves

Both personas take the standard deduction, which is $16,100 for a single filer in 2026, and both are taxed on the single schedule in Rev. Proc. 2025-32: 10% to $12,400 of taxable income, 12% to $50,400, 22% to $105,700, and 24% to $201,775.

The P1 filer's last dollar is taxed at 12% and the P3 filer's last ordinary dollar at 24%. Those two rates price most of what follows. P3's gain sits in the 15% band because the 15% rate begins at $49,450 of taxable income and P3's ordinary income alone is past it.

Move 1: raise the 401(k) or 403(b) deferral

The 2026 limit on elective deferrals is $24,500, up from $23,500, and the age-50 catch-up is $8,000 (Notice 2025-67). A filer who turns 60, 61, 62 or 63 in 2026 gets $11,250 instead.

Deferred wages leave box 1 of the W-2, so the saving is the deferral times the marginal rate:

• P1, $5,000 more: taxable income falls to $43,900 and tax to $1,240 + 12% × $31,500 = $5,020. Saved: $600.
• P3, $5,000 more: ordinary taxable income falls to $163,900 and tax to $31,934. Saved: $1,200. Deferring the full $24,500 saves $5,880 and still leaves P3 in the 24% band.

P3 meets one wrinkle new in 2026. Under §414(v)(7), catch-up contributions must go in as Roth when the prior year's FICA wages topped $150,000 (Notice 2025-67). A 55-year-old P3 who also earned $185,000 in 2025 can still add the $8,000, but it lowers 2026 tax by nothing.

The state half depends on the state's starting line. Illinois starts from federal adjusted gross income (35 ILCS 5/203(a)(1)), so P1's extra $5,000 also comes off Illinois income and saves $5,000 × 4.95% = $247.50 there. Pennsylvania lists contributions to a qualified deferred compensation plan as always-taxable compensation and says employee contributions to a Section 401 plan "are not excludable" (PA DOR, Gross Compensation). The same deferral saves nothing in Pennsylvania. Had Pennsylvania followed the federal exclusion, its 3.07% rate would have returned $153.50.

Move 2: route HSA money through payroll

A filer with self-only high-deductible coverage may put $4,400 into a health savings account for 2026; family coverage allows $8,750 (Rev. Proc. 2025-19). Where the money comes from changes the price.

Publication 969 treats a contribution made through an employer's cafeteria plan as an employer contribution, which is excluded from income and is not generally subject to employment taxes. A contribution you write yourself is deductible whether or not you itemize, but the Social Security and Medicare tax on those wages (6.2% and 1.45%) has already been withheld.

For P1, the full $4,400 through payroll saves $528 of income tax (12%) plus $336.60 of payroll tax (7.65%): $864.60. The same $4,400 sent directly to the HSA in March 2027 still saves the $528, because a direct contribution can wait until the April filing deadline (Publication 969). The $336.60 is the part with a December deadline: it exists only for an election that reaches a 2026 paycheck.

Move 3: give $1,000 in cash, without itemizing

For 2026 a filer who takes the standard deduction may also deduct up to $1,000 of cash gifts, $2,000 on a joint return (IRS Topic 506). The deduction lives in 26 U.S.C. §170(p), which excludes gifts to a §509(a)(3) supporting organization and gifts that fund a donor-advised fund, the vehicle most December giving runs through. Stock does not qualify either; the gift has to be cash.

For P1, a $1,000 check to a qualifying charity takes taxable income to $47,900 and tax to $5,500. Saved: $120, so the gift costs $880.

Itemizers get no allowance and face a new floor instead: under §170(b)(1)(I), only gifts above 0.5% of the contribution base count (§170). At P3's $200,000, the first $1,000 of giving deducts nothing. Whether P3 itemizes at all depends on the state and the house; the breakeven is worked here.

Move 4: harvest losses against the gain

Suppose P3 also holds positions sitting on $18,000 of losses. Sold in December, they cancel the $15,000 gain and leave a $3,000 net capital loss, which is the most a single filer may deduct against other income in one year (IRS Topic 409).

The harvest saves $2,970: $2,250 at 15% and $720 at 24%. Illinois takes the same $18,000 off its base and saves another $891 at 4.95%.

Two rules bound it. A sale on December 31 belongs to 2026 even though it settles in January, because the holding period and the year both end on the trade date (Publication 550). And the loss is disallowed under the wash-sale rule if you buy substantially identical securities within 30 days before or after the sale (Publication 550). Generally, replacement shares carry their lower purchase price as basis, so part of the saving returns as a larger gain when they are sold.

P3's modified AGI sits exactly at the $200,000 single threshold for the 3.8% net investment income tax, which reaches the lesser of investment income or modified AGI above that line (IRS). Any December gain that P3 takes without an offsetting loss is exposed to it.

Move 5: fill the 0% band with gains

The fifth move does not lower the 2026 bill. It spends room in that bill that expires on December 31. Long-term gains are taxed at 0% while taxable income stays at or below $49,450 (Rev. Proc. 2025-32), and P1's $48,900 leaves $550 of that room.

Move 1 widens it. After the extra $5,000 deferral, P1's taxable income is $43,900, and $5,550 of long-term gain on shares held more than a year (Topic 409) can be sold at a federal rate of zero. The wash-sale rule disallows losses, not gains (Publication 550), so the shares can be bought back the same day at a basis $5,550 higher.

Zero federal is not zero everywhere. Illinois and Pennsylvania tax the same gain at their flat rates:

Stack moves 1 and 5 and the state result splits three ways. In Illinois the deferral saves $247.50 and the harvest costs $274.73, a net $27.23. In Pennsylvania the deferral saves nothing and the harvest costs $170.39. In Texas both moves are federal-only and the harvest is free. Run your own state against the $43,900 starting point in the calculator; the sale has to trade by Thursday, December 31, 2026.

This article is for informational purposes only and does not constitute tax advice. Consult a qualified tax professional for guidance specific to your situation.