1. Fix the withholding gap before it becomes a penalty
Equity compensation is where most surprises start. Employers typically withhold RSU income at the flat supplemental rate, which is far below a top-bracket family's actual marginal rate — the gap becomes an April balance due plus, often, underpayment penalties. Before year-end: project total income including vests, check the safe harbor (generally 110% of last year's tax for higher-income taxpayers), and true up through payroll withholding or a Q4 estimate. Remember California runs its own estimate schedule, front-loaded at 30% / 40% / 0% / 30% — the zero third quarter trips people up every year.
2. Harvest the portfolio deliberately
- Loss harvesting: realize losses to absorb gains, minding the 30-day wash sale rule on both sides of the trade — and on "substantially identical" replacements across accounts, including IRAs.
- Gain harvesting: in unusually low-income years (sabbatical, between liquidity events), intentionally realizing long-term gains in the 0%/15% federal brackets can be the better trade. But note California taxes capital gains as ordinary income — there is no state preference, and the state's additional 1% surtax applies above $1M of taxable income.
- Concentrated positions: year-end is the natural checkpoint for 10b5-1 plan design, exchange funds, or charitable disposition of low-basis stock rather than cash.
3. Charitable giving: bunch, don't dribble
With a high standard deduction, alternating years of concentrated giving beats level annual giving. A donor-advised fund lets you take the deduction this year and grant over time; funding it with appreciated long-term stock deducts fair market value while the embedded gain never gets taxed. Over 70½, a qualified charitable distribution from an IRA satisfies RMDs without touching AGI.
4. Retirement and Roth moves with hard deadlines
- Roth conversions must be completed by December 31 — there is no recharacterization safety net anymore. Model the conversion against this year's bracket, IRMAA thresholds, and the CA rate before pulling the trigger.
- Employer plan deferrals (401(k), including mega-backdoor after-tax contributions where the plan allows) run on the payroll calendar — the last paycheck is the real deadline.
- Owner-operators: new solo 401(k) or cash balance plans generally need to be signed before year-end to count for the year, even if funded later. If a combo plan design is on your list, start in Q4 at the latest.
5. Family transfers and entity hygiene
- Use the annual gift exclusion (indexed each year, per donor per recipient) before it resets — it does not carry over. 529 plans allow five years of exclusions front-loaded at once.
- Review trust distributions with your fiduciary preparer: trusts hit the top federal bracket at a few thousand dollars of retained income, so distributing income to beneficiaries in lower brackets before year-end (or within the 65-day window) is often the single highest-rate arbitrage available.
- Confirm S corporation reasonable compensation ran through payroll before December 31 — it cannot be fixed retroactively.
6. The December meeting agenda
- Projected total income, all sources, both spouses — including K-1 estimates.
- Withholding vs. safe harbor; Q4 estimate amount (federal and CA separately).
- Realized/unrealized gains report; harvesting plan.
- Charitable plan: DAF funding, appreciated stock, QCDs.
- Roth conversion go/no-go with bracket model.
- Gifts, 529s, trust distribution review.
- Anything closing next year — sale, exercise window, move — that changes this year's answer.