Year-End Tax Planning and Tax-Loss Harvesting for Day Traders

If you're running an S-Corp and contributing to a Solo 401(k), the employee elective deferral piece has to be withheld through payroll by December 31, a genuinely hard deadline that doesn't extend with a filing extension the way some other contributions do. The employer profit-sharing portion is more flexible and can typically be funded up until your tax filing deadline, including extensions, which gives you room to see your full-year numbers before committing to that amount. The distinction between these two pieces, and how to size the underlying salary correctly in the first place, is covered in the entity guide.

If you hold futures or broad-based index options covered under Section 1256, every open position gets automatically treated as sold at fair market value on the last trading day of the year, with no election and no way to opt out. This isn't a planning decision so much as something to be aware of: a large open position you're planning to hold into the new year will still generate a taxable event at year-end under the mandatory 60/40 split, whether or not you intended to realize anything yet.

Trader Tax Status is evaluated on your full-year pattern of activity, covered in detail in the TTS guide, and a trader whose volume or frequency has been borderline all year still has a few weeks to close the gap before the year's pattern is locked in. This isn't about manufacturing trades purely for tax purposes, which creates its own problems, but a genuine review of where your year-to-date numbers actually stand relative to the benchmarks is worth doing in early December rather than discovering the shortfall the following April when nothing can be done about it.

If you've had a strong year and are considering forming an entity to elect mark-to-market accounting for some of this year's activity, a newly formed entity gets a 75-day window from its first day of business to make that election internally, without the April 15 deadline that applies to an existing individual taxpayer. Forming an entity in early November specifically to capture this window for the final weeks of the year is a real, if narrow, planning move, and it only works if you're aware of it before December is mostly gone.

Donating an appreciated security directly, rather than selling it and donating the cash, avoids realizing the capital gain on the position entirely while still generally allowing a deduction for its full fair market value. Starting in 2026, a change under the One Big Beautiful Bill Act means only charitable donations exceeding 0.5% of your adjusted gross income qualify for an itemized deduction, a new floor that didn't exist in prior years and that changes the math for a trader considering smaller, one-off year-end gifts versus a single larger consolidated donation.

The final quarterly estimated tax payment of the year is due January 15, not April 15, a date covered in full in the quarterly estimated taxes guide. A strong December is exactly the scenario most likely to make that payment larger than your first three quarters combined, and exactly the scenario most likely to catch a trader off guard if they're still thinking of tax season as something that starts in the spring.

By early December: review your year-to-date TTS activity pattern, decide on any loss-harvesting sales with enough runway before December 31 to clear the wash sale window if you plan to repurchase, and finalize any planned equipment purchases so they arrive and go into service in time.

By December 31: complete any trade you want settled in the current tax year, fund your Solo 401(k) elective deferral if you're running one through an S-Corp, and account for the automatic mark-to-market hit on any open Section 1256 positions.

By January 15: make your Q4 estimated tax payment based on your actual full-year results, not an earlier estimate that a strong Q4 may have made obsolete.