Year-End Financial Review: A 2026 Checklist for High-Earning Families

By Kevin Luu, Co-Founder and Chief Learning Officer. Reviewed on 2026-09-30.

A year-end financial review is a short, structured check, done in November or early December, of what your household earned, what it will owe in tax, which decisions close on December 31, and what changed in the family this year. For a W-2 household earning $750,000 to $3 million in California or Washington, most of the value sits in five places: the tax gap left by RSU withholding, retirement contributions that run through payroll, benefits elections for next year, gifts to the kids, and the estate documents that name a guardian for them.

Budgeting rarely matters at this income. What costs these families money is a missed deadline or an April surprise. This guide gives the order to work in, a worked example for a $1 million California household, and a deadline table you can hand to your spouse or your CPA.

Why the review matters more at $750,000 and up

Three features of a high W-2 income make December decisions expensive to skip.

• Withholding is not the tax. Employers usually withhold federal tax on RSU vests and bonuses at the optional 22% flat supplemental rate (37% only on supplemental wages over $1,000,000 in the calendar year), according to IRS Publication 15 (2026). Your top federal bracket for 2026 is likely 35% or 37%. The difference shows up in April.
• Many limits reset on January 1. 401(k) deferrals, after-tax contributions and the gift tax annual exclusion do not carry over, and flexible spending elections must be made again each year. Unused room is gone.
• Kids under 12 raise the stakes on paperwork. A will without a named guardian, or a 401(k) beneficiary form that still lists a parent from before you married, is a bigger risk than any fund choice.

Step 1: Close the RSU withholding gap before December 31

Start with taxes, because the fix is easiest in December. Pull your latest paystubs and your RSU vest history, and estimate the full-year federal and state tax.

Worked example: a $1 million California household

Assumptions (illustrative, 2026, married filing jointly): Priya is a biotech scientist with a $300,000 salary and $450,000 of RSUs vesting this year. Daniel is a physician with a $250,000 salary. Total W-2 wages: $1,000,000. Both defer the full $24,500 into their 401(k)s. Assume $32,200 of deductions (the 2026 joint standard deduction). Their payroll withholding on salary roughly covers the tax on salary, and the RSUs were withheld at 22%.

• Taxable income: $1,000,000 minus $49,000 of deferrals minus $32,200 = $918,800.
• Without the RSUs, taxable income would be $468,800. The $450,000 of RSU income stacks on top of it, so it is taxed at 32% from $468,800 to $512,450, 35% from $512,450 to $768,700, and 37% above $768,700, using the 2026 brackets in Rev. Proc. 2025-32.
• Federal tax on the RSU layer: $13,968 (32% of $43,650) + $89,687.50 (35% of $256,250) + $55,537 (37% of $150,100) = $159,192.50.
• Federal tax withheld on the RSUs at 22%: $99,000.
• Federal shortfall: about $60,200.

There is a smaller second gap. The 0.9% Additional Medicare Tax applies to joint wages over $250,000, but each employer only starts withholding it once the wages it pays one person pass $200,000 (IRS Additional Medicare Tax Q&A). The couple owes 0.9% of $750,000, or $6,750. Priya’s employer withholds 0.9% of $550,000 ($4,950) and Daniel’s withholds 0.9% of $50,000 ($450). That leaves $1,350 more to pay.

How to fix it in December

The penalty for underpaying is avoided if withholding and estimated payments reach a safe harbor. For a household whose prior-year AGI was over $150,000, one safe harbor is paying 110% of last year’s tax (Form 1040-ES (2026)). If 2026 income jumped because a large grant started vesting, 110% of 2025 tax may be well below what you actually owe, so the safe harbor protects you from the penalty but not from the bill.

The practical fix is often to raise federal withholding on the last one or two paychecks of the year with a new Form W-4. Withholding is generally treated as paid evenly through the year, unless you choose otherwise (Instructions for Form 2210), so a December increase can cover earlier quarters. A fourth-quarter estimated payment, due January 15, 2027, is the other route. It is applied first to any earlier quarter that was underpaid, but it counts only from the date you pay it, so a penalty can still build up on those earlier quarters until then.

How the same family’s year-end looks in California versus Washington

Step 2: Finish payroll-based retirement contributions

These must run through payroll, so the deadline is your last paycheck of the year, not December 31 and not April.

• 401(k) or 403(b) deferrals: $24,500 for 2026, plus $8,000 at age 50 or older ($11,250 if you turn 60 to 63 in 2026), per IRS Notice 2025-67. If you front-loaded early in the year, check whether your plan still paid the full employer match (“true-up”).
• Mega backdoor Roth: if your plan allows after-tax contributions with in-plan conversion, total annual additions can reach $72,000 for 2026. Example: $72,000 minus $24,500 of deferrals minus an assumed $12,000 employer contribution leaves $35,500 of after-tax room.
• Catch-up as Roth: if your 2025 FICA wages from the employer were over $150,000, 2026 catch-up contributions must go in as Roth.

The backdoor Roth IRA ($7,500 per spouse for 2026) can be funded until the April 2027 filing deadline, but the conversion step has a year-end trap. Form 8606 uses the value of all your traditional, SEP and SIMPLE IRAs on December 31 to figure how much of a conversion is taxable (Instructions for Form 8606). An old rollover IRA with a balance on that date can make most of the conversion taxable. Rolling it into your 401(k) before year-end, if the plan accepts it, is a common fix. More detail sits on our retirement and employee benefits page.

Step 3: Use open enrollment for next year’s benefits

Open enrollment usually falls in November. For 2026 the limits were:

• Dependent care FSA: $7,500 per household, up from $5,000, under the 2025 tax law (P.L. 119-21), if your employer adopted the higher limit. With preschool, after-school care or a nanny, this is easy to use in full. At this income the dependent care FSA is usually more valuable than the child care credit.
• HSA: $8,750 for family coverage on a qualifying high-deductible plan (Rev. Proc. 2025-19).
• Health FSA: $3,400 of salary reduction, with up to $680 of carryover if the plan allows.

Check your plan’s 2027 figures before you elect. Also confirm whether your employer offers a deferred compensation plan with a December election deadline for next year’s pay.

Step 4: Review the portfolio and concentration in company stock

Look at how much of your net worth is in your employer’s stock, counting unvested RSUs. Then decide what to sell, and when, with tax in view.

• Tax-loss harvesting: realized losses offset realized gains, and up to $3,000 of net loss a year can offset other income, with the rest carried forward (IRS Topic 409). Buying the same or a substantially identical security within 30 days before or after the sale triggers the wash sale rule (IRS Publication 550). Watch RSU vests and ESPP purchases in the same stock, which can count as acquisitions under the rule.
• ISOs: if you exercised and held incentive stock options this year, run an AMT projection. For 2026 the joint AMT exemption of $140,200 starts phasing out at $1,000,000 of AMT income, at 50 cents per dollar.
• ESPP: the right to buy is capped at $25,000 of stock per calendar year, valued at grant-date fair market value.

Our tax management page explains how these decisions fit together across the year.

Step 5: Make gifts to the kids before the annual exclusion resets

The 2026 gift tax annual exclusion is $19,000 per giver per recipient, so two parents can give $38,000 to each child without using any lifetime exemption. With two children, that is $76,000 for 2026, and it does not roll over. A 529 plan can take five years of exclusions at once: up to $95,000 per parent per child, or $190,000 from a couple, with a Form 709 election (Instructions for Form 709).

California gives no state deduction for 529 contributions, so for California families the reason to fund one is tax-free growth for school, not a deduction. If the kids own a UTMA account, check its income: for 2026, a child’s unearned income over $2,700 is taxed at the parents’ rate (Form 8615 instructions).

Step 6: Confirm the guardian, beneficiaries and estate documents

Once a year, check four things:

1. Your wills name a guardian for each minor child, and that person is still willing.
2. Beneficiary forms on 401(k)s, IRAs and life insurance match your current plan, and do not leave money outright to a child under 18.
3. Your trust holds the house and taxable brokerage accounts you meant to put in it.
4. Your term life and disability cover still fit your income. Group disability policies often cap covered salary and may not count RSU income.

The federal estate and gift exemption is $15,000,000 per person for 2026 (IRS). Washington has its own estate tax with a $3,000,000 exclusion for deaths from July 1, 2026 (WA DOR), so a Seattle family with a house and retirement accounts can be in scope. See our estate planning page.

Year-end deadline table for 2026

Common mistakes in a high-income year-end review

• Assuming a refund because the paystub shows large withholding. With RSUs at 22%, a large balance due is common.
• Selling losers and buying them back a week later, or letting an RSU vest inside the 30-day window.
• Leaving a rollover IRA in place and converting the backdoor contribution anyway.
• Electing the old $5,000 dependent care limit out of habit.
• Treating Washington as permanently free of income tax when the 2028 tax applies to AGI over $1,000,000.

Write down why you made each decision

The review produces decisions: sell some company stock, fund the 529, change a guardian. Your children will see the results years from now, but not the reasoning. Spend ten minutes recording each choice in one page: what you decided, the numbers you looked at, and what you would do differently. As Kevin Luu puts it: “Your kids don’t need to inherit your portfolio. They need to inherit your decision-making process.” Our family governance work and the FamilyKnowledge® System are built around that record.

Questions families ask about the year-end review

When should we do a year-end financial review?

Aim for early to mid November. That leaves time to submit a new W-4 before the last paychecks, make benefits elections during open enrollment, and place trades or gifts before December 31. A second, shorter check in early January catches anything that has to be paid by the January 15 estimated tax date.

What documents do we need?

Your latest paystubs for both spouses, RSU and ESPP vest and sale reports, brokerage realized gain and loss reports, last year’s tax return, your benefits enrollment guide, 529 and UTMA statements, and copies of your wills, trust and beneficiary forms. With those, most of the review can be finished in one sitting.

Do we still need this if a CPA files our return?

Yes. A CPA usually sees your numbers in February or March, after the December 31 deadlines have passed. The year-end review is about the decisions that must be made before then. Sharing a projection with your CPA in November often makes the April return simpler.

Next step: block one evening in November, pull the documents above, and work through Steps 1 to 6 in order. If you would like a second set of eyes, our Tax & Wealth Assessment covers the same ground for your numbers. This article is general education, and the right move depends on your family’s full picture.

Written by

Kevin Luu

Co-Founder and Chief Learning Officer, Bright Advisers

Kevin has advised high-income W-2 tech and biotech families since 2015, and leads the education-first Age Five Family Office from Brea, California.

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