Year-End Tax Checklist 2026: What to Do Before December 31 in Michigan

Your 2026 year-end tax checklist comes down to moves that have to happen by December 31. Finish your 401(k) or 403(b) contributions (up to $24,500), spend down your FSA, fund Michigan's 529 or first-time homebuyer account for up to a $10,000 state deduction, harvest investment losses, and check your withholding. IRA and HSA contributions can wait until April 15, 2027.

Every January someone tells me about a tax move they wish they'd made back in November. Usually it's small, like an FSA balance that expired or a state deduction they'd never heard of. But a few hundred dollars here and a few hundred there adds up, and none of it can be fixed once the calendar flips.

This year-end tax checklist is built for young professionals in Michigan with W-2 income, maybe some RSUs or a brokerage account, and maybe a house on the horizon. It runs in the order I'd work through it myself, starting with the deadlines you can't get back.

Start your year-end tax checklist with your workplace accounts

Your 401(k), 403(b) or 457(b) contributions only count for 2026 if they come out of a 2026 paycheck. The employee limit for 2026 is $24,500. If you work for a hospital, university or public employer that offers both a 403(b) and a 457(b), each plan has its own $24,500 limit.

Want to catch up before your last paycheck? Change your contribution percentage now. Payroll changes often take a cycle or two to kick in, so waiting until mid-December can leave you with one paycheck at the higher rate.

Here's what closes on December 31 and what doesn't:

• Workplace retirement contributions have to come out of a 2026 paycheck, so there's no catching up in January.
• Health FSA money is use-it-or-lose-it, though some plans let you carry over up to $680 or give you a grace period into March, so find out which one yours has.
• Roth conversions and the second step of a backdoor Roth have to be done by December 31 to count for 2026.
• IRA contributions (the 2026 limit is $7,500) and HSA contributions ($4,400 self-only, $8,750 family) can still be made until April 15, 2027.

Open enrollment is happening at the same time, so look at 2027 while you're in there. The dependent care FSA limit went up to $7,500 per household starting in 2026, from $5,000, which matters a lot if you're paying for daycare.

Two Michigan tax deductions with a December 31 deadline

Michigan lets you deduct up to $5,000 ($10,000 married filing jointly) for contributions to MESP, the state's 529 college savings plan, and the same amounts for a first-time homebuyer savings account. At Michigan's 4.25% income tax rate for 2026, a full $10,000 contribution cuts a married couple's state tax by $425. Neither one touches your federal return.

If you have kids, a 529 contribution made by December 31 counts for this year. Our guide on how much to put in a 529 plan walks through picking the amount.

The first-time homebuyer account is worth a look if a house is in your plans. Under current law, 2026 is the last tax year for the deduction. You open a designated first-time homebuyer savings account at a bank or credit union, contribute, and deduct the contributions and the interest on your Michigan return.

The future buyer has to be a Michigan resident who hasn't owned a home in the last three years. If you're already saving for a down payment, ask your bank or credit union before year-end whether it offers the account, because not all of them do. The catch is that money you pull out for anything other than a qualifying home purchase gets added back to your Michigan income.

Clean up your investments before the year closes

If you have a taxable brokerage account, December is when you decide which gains and losses you'll take for 2026.

Harvest losses, but watch the wash sale rule

Selling an investment at a loss lets you offset gains plus up to $3,000 of regular income, and anything left over carries forward to future years. Just don't buy the same fund, or one that's substantially identical, within 30 days before or after the sale. That includes buying it in your IRA, and it erases the loss for this year.

Use the 0% capital gains bracket if you're in it

In 2026, long-term gains are taxed at 0% federally as long as your taxable income stays under $49,450 if you're single or $98,900 if you're married filing jointly. A lower-income year, like grad school, a career change or a year one spouse stayed home, is a good time to sell appreciated shares and reset your cost basis. Michigan still taxes the gain at 4.25%, and if you live in Grand Rapids, the city's 1.5% applies too. There's more on how this works in our post on capital gains tax for young investors.

Check what was withheld on vested RSUs

Employers usually withhold federal tax on vesting RSUs at a flat 22%. If you're in the 24% bracket or higher, that's not enough, and the shortfall lands in April. Add up this year's vests now so you're not guessing.

Doing a backdoor Roth? Your pre-tax IRA balance on December 31 is what the IRS looks at, so read up on the pro-rata rule before you convert anything.

Charitable giving works differently starting in 2026

Starting this year, you can deduct up to $1,000 in cash gifts to charity ($2,000 married filing jointly) even if you take the standard deduction. That's new. The standard deduction for 2026 is $16,100 for single filers and $32,200 for married couples filing jointly, so most young professionals don't itemize, and until now their giving got no tax benefit at all.

Two details matter. The gift has to go straight to a qualified charity, so donor-advised fund contributions don't count for this one. And for any single gift of $250 or more, including a year-end gift to your church, you'll need a written acknowledgment from the charity.

If you itemize, usually because of a mortgage, there's a new floor: only the giving above 0.5% of your AGI is deductible. With a $150,000 AGI, the first $750 doesn't count. That makes bunching two years of giving into one year more useful than it used to be. If you're working out how generosity fits next to your other goals, start with this framework for giving generously.

Check your withholding so the year-end tax bill isn't a surprise

Pull your latest pay stub and compare your federal tax withheld so far with your total tax from last year's return. If your withholding covers at least 100% of last year's tax (110% if last year's AGI was over $150,000), you're generally safe from an underpayment penalty even if you still owe in April.

Coming up short? Raise your withholding on a new W-4 for the last few paychecks. The IRS treats withholding as if it were paid evenly through the year, and that's something a December estimated payment can't do.

There's also a city tax gap I see a lot. People who live in Grand Rapids but work remotely for a company based somewhere else often have no city tax withheld, so the whole 1.5% shows up at once with the city return. On an $85,000 salary, that's about $1,275. Ask payroll whether it can withhold the city tax, or set the money aside now. The Grand Rapids city income tax guide covers who owes it and when it's due.

What this checklist is worth in real dollars

Let's assume you're single, earning $95,000, and living in Grand Rapids. In December you bump your 401(k) to put in an extra $3,000, put $5,000 into MESP for your daughter, and spend the last $400 in your FSA on new glasses instead of letting it expire. That's about $660 in federal tax and $128 in Michigan tax saved on the 401(k), $213 from the MESP deduction, and $400 you didn't forfeit. Roughly $1,400, from a few hours of work in one month (hypothetical example, your numbers will differ).

You probably won't do all of these, and that's fine. The goal isn't to check every box. It's to do the two or three that fit your situation before the deadline passes. Whether your next $5,000 goes to the 401(k), the MESP or the down payment account depends on your tax bracket and on when you'll actually need the money, and a checklist can't make that call for you.

With clients, the one I see slip most often is an FSA balance that sat untouched until December 28. Do the heavy lifting this week, while every option is still open. Sorting out that order is a big part of financial planning in Grand Rapids with us, and in the spring we prepare federal, Michigan and city returns together through our tax preparation service.

If you want a second set of eyes on your year-end moves before December 31, schedule a free intro call and we'll look at your full picture.

Frequently Asked Questions

What should be on a year-end tax checklist for 2026?

The main items are maxing out your 401(k), 403(b) or 457(b) through payroll, spending your FSA balance, making Michigan 529 or first-time homebuyer account contributions, harvesting investment losses, finishing any Roth conversions, and checking your withholding. All of these have to be done by December 31, 2026. IRA and HSA contributions for 2026 can wait until April 15, 2027.

What is the deadline to contribute to a 401(k) for 2026?

Your 401(k) contributions have to come out of a paycheck dated in 2026, so your last paycheck of the year is the real deadline. The 2026 employee limit is $24,500. Raise your contribution rate early, because payroll changes can take one or two pay cycles to take effect.

Can I still get a Michigan tax deduction for a 529 contribution in 2026?

Yes. Michigan residents can deduct up to $5,000 in MESP contributions, or $10,000 if married filing jointly, for contributions made during 2026. At Michigan's 4.25% rate, a $10,000 contribution saves $425 on your state return. The deduction applies to Michigan income tax only, not federal.

Do Grand Rapids residents need to plan for city income tax at year-end?

Yes, especially if you work remotely for an employer outside the city. Grand Rapids residents owe 1.5% city income tax on their income, and employers based elsewhere often don't withhold it. On an $85,000 salary that is about $1,275, so ask payroll to withhold it or set the money aside before the city return is due.

Can I deduct charitable donations in 2026 if I don't itemize?

Yes. Starting in 2026, people who take the standard deduction can deduct up to $1,000 of cash gifts to qualified charities, or $2,000 if married filing jointly. Contributions to a donor-advised fund don't qualify for this deduction. Keep a written acknowledgment for any single gift of $250 or more.

Sources: IRS 401(k) contribution limits, IRS Publication 550 (wash sales), IRS One, Big, Beautiful Bill provisions, Michigan Treasury 2026 income tax rate, Michigan Treasury first-time homebuyer account FAQ, MESP, City of Grand Rapids income tax guide.

---

Disclosure: This article is for educational purposes only and does not constitute personalized investment, tax, or legal advice. Individual situations vary. Please consult a qualified financial professional before making financial decisions. Villaire Financial, LLC is a registered investment adviser. Schedule a free intro call if you'd like to talk through your specific situation.