Your Financial Countdown: Key Moves Before 2026 Tax Rules Hit

CHICAGO, IL – December 18, 2025 – As the year draws to a close amidst strong but volatile market performance, individuals and families face a critical window to optimize their financial standing. The urgency is amplified by significant tax law changes set to take effect on January 1, 2026, which will reshape strategies for charitable giving and wealth management. In a recent segment on WGN's "Your Money Matters," Mesirow Wealth Advisor Jennifer Gartenberg, a Certified Financial Planner (CFP®), outlined a timely checklist to help navigate this complex landscape.

Her advice centers on three pivotal areas: maximizing the impact of charitable donations, strategically rebalancing investment portfolios, and leveraging college savings plans as a powerful gifting tool. With just weeks left in 2025, acting on these strategies can secure substantial tax benefits and fortify long-term financial health.

Navigating the New Landscape of Charitable Giving

For many, year-end generosity is a tradition, but in 2025, it’s also a significant financial strategy. Gartenberg emphasized that donors have several effective options, including donating cash, giving appreciated stock, or making a Qualified Charitable Distribution (QCD) from an IRA.

Donating appreciated stock held for more than a year offers a powerful double tax advantage: the donor can typically deduct the full fair market value of the stock while simultaneously avoiding the capital gains tax that would be due if they sold it. For individuals aged 70½ or older, a QCD allows a direct transfer of up to $100,000 annually from an IRA to a qualified charity. This distribution counts toward their Required Minimum Distribution (RMD) but isn't included in their taxable income, providing a direct tax benefit regardless of whether they itemize.

The real urgency, however, stems from impending tax code revisions. Starting in 2026, a new rule will establish a 0.5% Adjusted Gross Income (AGI) floor for charitable deductions. This means for taxpayers who itemize, only the portion of their donations exceeding 0.5% of their AGI will be deductible. For an individual with an AGI of $200,000, the first $1,000 of their charitable gifts will no longer provide a tax benefit. To counteract this for smaller donors, a new rule will allow non-itemizers to take an "above-the-line" deduction of up to $1,000 ($2,000 for married couples), though this benefit excludes gifts to donor-advised funds.

These changes make 2025 a pivotal year for philanthropic planning. Financial experts suggest that donors, particularly those who itemize, may want to consider "bunching" several years' worth of charitable contributions into 2025 to maximize their deductions under the current, more favorable rules. Utilizing a Donor-Advised Fund (DAF) is a popular strategy for this, allowing a large, tax-deductible contribution this year while distributing the funds to charities over time.

Rebalancing Your Portfolio After a Volatile Year

The market's performance in 2025, characterized by strong gains in some sectors like technology and stagnation in others, has likely caused many investment portfolios to drift from their intended asset allocation. Gartenberg warned that a portfolio designed for an 80% stock and 20% bond mix could have easily shifted to a riskier 90/10 split due to equity growth. This unintentional shift exposes investors to more risk than they may be comfortable with.

She advises a thorough review of all investment accounts—including 401(k)s, IRAs, and brokerage accounts—to assess current allocations against long-term goals and risk tolerance. The process of rebalancing involves selling some of the outperforming assets and reinvesting the proceeds into underperforming ones to return to the target mix. This disciplined approach is not about timing the market but about managing risk.

Rebalancing within tax-advantaged retirement accounts like an IRA or 401(k) is ideal, as transactions do not trigger capital gains taxes. For taxable brokerage accounts, the decision is more nuanced. Realizing gains before year-end means the tax will be due in April, while waiting until January defers the tax liability for another year. However, delaying also means bearing the risk of adverse market movements in the interim.

This year-end review also presents an opportunity for tax-loss harvesting. This strategy involves selling investments that have decreased in value to realize a loss. These capital losses can then be used to offset capital gains elsewhere in the portfolio. Up to $3,000 in net capital losses can be used to offset ordinary income annually, with any excess carried forward to future years. Investors must be mindful of the IRS "wash-sale" rule, which prohibits claiming a loss if a substantially identical security is purchased within 30 days before or after the sale.

A Smarter Gift: The Enduring Value of 529 Plans

As families gather for the holidays, Gartenberg suggests a gift that invests in the future: a contribution to a 529 college savings plan. Friends and family can easily contribute, making it a meaningful alternative to traditional presents. For Illinois residents, contributions to the state's Bright Directions or Bright Start plans also come with a state income tax deduction, adding an immediate financial incentive.

The benefits of 529 plans extend far beyond state tax breaks. Investment growth within the account is tax-deferred, and withdrawals are federally tax-free when used for qualified education expenses. Illinois' direct-sold Bright Start plan has been lauded by research firm Morningstar as a "Gold Medalist" for its low fees and high-quality investment options, placing it among the nation's elite plans alongside those from states like Utah and Pennsylvania.

A recent legislative change has made these plans even more flexible. The SECURE 2.0 Act, effective in 2024, introduced a provision that allows for tax- and penalty-free rollovers from a 529 plan to a Roth IRA for the beneficiary. This helps alleviate the common fear of over-funding an account. Subject to certain conditions, including a 15-year holding period for the 529 account, up to a lifetime maximum of $35,000 can be moved, effectively converting unused college savings into a valuable retirement nest egg.

This collection of year-end strategies highlights the increasing complexity of personal finance. While the checklist provides a powerful starting point, Gartenberg encourages individuals to seek professional guidance. Working with an advisor at a firm like Mesirow, which has been recognized by Barron's as a Top 100 RIA firm for five consecutive years, allows for the creation of a personalized plan that aligns these tactical moves with broader, lifelong financial goals. Navigating tax law changes and market volatility requires a comprehensive strategy, ensuring that families can not only maximize their benefits today but also build a secure foundation for generations to come.