Year-End Planning for Executives: A 2026 Checklist for Equity and Deferred Pay

Year-end planning for executives runs on several calendars at once. Deferral elections for 2027 pay close before December 31, the last 2026 estimated tax payment is due January 15, and a trading plan adopted this fall may not place its first trade until spring. The mechanics are covered in our articles on RSUs and stock options and when deferring compensation makes sense. What changes each fall is the deadline attached to each decision, and for 2026 a few of the rules themselves. A CPA should review the tax side of these items before anything is final.

Year-end planning for executives starts with 2027 deferral elections

Under section 409A, an election to defer salary must generally be made by the end of the year before the work is performed. For 2027 salary, that means no later than December 31, 2026, and plans often set an earlier enrollment deadline in November or early December.

Bonus timing depends on how the plan defines the bonus. A bonus earned for 2027 service generally follows the same December 31, 2026 deadline. If it qualifies as performance-based pay with a performance period of at least 12 months, the plan may allow an election as late as six months before the period ends, which is June 30, 2027 for a calendar-year bonus, provided the amount is not yet readily ascertainable. Someone who becomes eligible for a plan for the first time generally has 30 days to elect, and the election covers only pay earned afterward.

The payout election usually travels with the deferral election. Changing it later requires an election made at least 12 months before the scheduled payment, a new payment date at least five years later, and a 12-month wait before the change takes effect. Executives a few years from retirement often check how the 2027 class stacks with earlier classes before choosing installments or a fixed date.

• Plan enrollment deadline and bonus election rules confirmed from the plan document.
• Payout election for the 2027 class compared with existing classes and the expected retirement year.

RSU vests, withholding and the safe harbor

Employers commonly withhold federal tax on RSU vests at the 22 percent supplemental rate, and they must use 37 percent on supplemental wages above $1 million in a calendar year. For 2026, joint filers reach the 32 percent bracket at $403,550 of taxable income, 35 percent at $512,450 and 37 percent at $768,700. A household in the 35 percent bracket with $200,000 of vests withheld at 22 percent is short about $26,000 of federal tax before Utah is counted.

The federal underpayment penalty is avoided when withholding and estimated payments cover at least 90 percent of 2026 tax or 100 percent of 2025 tax. That second test rises to 110 percent of 2025 tax if 2025 AGI was above $150,000. The final 2026 estimated payment is due January 15, 2027.

Withholding has one advantage over estimated payments. Unless you elect otherwise, it is treated as paid evenly through the year, so extra withholding from a December paycheck or year-end bonus can cover a shortfall from an earlier quarter. An estimated payment counts only from the date it is made.

ISO exercises and the 2026 AMT rules

The One Big Beautiful Bill Act changed how the AMT exemption phases out starting in 2026. The exemption is $90,100 for single filers and $140,200 for joint filers, but it now begins phasing out at $500,000 and $1,000,000 of alternative minimum taxable income, down from $626,350 and $1,252,700 for 2025. The exemption also shrinks by 50 cents per dollar instead of 25, so it is fully gone at $680,200 for single filers and $1,280,400 for joint filers.

For ISO holders, the spread at exercise is an AMT adjustment, and many high earners have less room to exercise without owing AMT in 2026 than they did in 2025. An exercise counts in the calendar year it happens, so a December exercise needs to be modeled before the broker’s year-end cutoff. If ISO shares are sold in the same calendar year as the exercise, no AMT adjustment applies, but the sale is a disqualifying disposition and the spread at exercise (or the actual gain, if smaller) is taxed as ordinary income. Long-term capital gain treatment requires holding until the later of two years from grant and one year from exercise.

ESPP enrollment and holding periods

Many employee stock purchase plans open enrollment for the next offering period in late fall. Shares bought through a qualified plan get the most favorable tax treatment only in a qualifying disposition, meaning a sale after the later of two years from the start of the offering and one year from the purchase. Ordinary income is then limited to the smaller of the actual gain or the discount measured at the start of the offering, and the rest is long-term capital gain.

Selling sooner is a disqualifying disposition. The difference between the purchase price and the market value on the purchase date is ordinary income, even if the shares have since fallen. Many executives sell at purchase anyway, accepting ordinary income in exchange for not adding to an already large company position. For lots close to the two-year mark, the year-end question is which shares to sell in 2026 and which to hold into 2027.

10b5-1 plans for 2027 sales

Under SEC rules adopted in 2022, a director or officer who adopts or modifies a 10b5-1 plan cannot trade under it until the later of 90 days after adoption or two business days after the company discloses financial results for the quarter in which the plan was adopted, capped at 120 days. Other employees face a 30-day cooling-off period. Directors and officers must also certify that they are not aware of material nonpublic information, overlapping plans are generally not allowed, and single-trade plans are limited to one in any 12-month period.

In practice, an officer who adopts a plan during a November 2026 trading window generally cannot see a first sale before February 2027, and possibly not until March. Company insider trading policies often add their own windows and pre-clearance rules. For executives working down a large position, the plan adopted this fall sets the pace for most of 2027. Our article on concentrated stock after an IPO or acquisition covers how to set a target.

401(k) limits, catch-ups and Roth options

Anyone not yet at the 2026 maximum has until the final paycheck of the year: $24,500 of elective deferrals, plus $8,000 more from age 50, or $11,250 more for those who reach 60 through 63 during the year.

New this year, catch-up contributions must be Roth for anyone whose 2025 FICA wages from the employer sponsoring the plan exceeded $150,000. The test uses Social Security wages (box 3 of the W-2) from that employer only. A plan without a Roth option can bar affected employees from catch-ups entirely. Final IRS regulations generally apply from 2027, and plans follow a good-faith reading of the law for 2026.

Mega backdoor Roth. Some plans accept after-tax contributions above the $24,500 limit, up to a combined $72,000 for 2026 counting your own deferrals and employer contributions, paired with in-plan Roth conversions or in-service withdrawals. Only payroll contributions count, so this window also closes with the final paycheck.

Backdoor Roth IRA. Direct Roth IRA contributions phase out between $242,000 and $252,000 of modified AGI for joint filers ($153,000 to $168,000 for single filers). The workaround is a nondeductible traditional IRA contribution converted to Roth. The trap is the pro-rata rule: the taxable share of a conversion is figured using the combined December 31 value of all your traditional IRAs, including SEP and other employer-sponsored IRAs. A large rollover IRA makes most of the conversion taxable unless it is moved into an employer plan that accepts roll-ins before year-end. Our article on Roth vs. traditional IRAs for high earners compares the options.

Benefits open enrollment

• Group long-term disability. Many plans replace a percentage of base salary up to a monthly cap and leave out bonus and equity, so an executive’s actual coverage can be a small share of total pay. If the employer pays the premium, benefits are generally taxable. Supplemental individual coverage can fill part of the gap.
• Supplemental life insurance. Group coverage is convenient but usually tied to the job. The cost of employer-provided group-term coverage above $50,000 is taxable wages.
• HSA. Choosing an HSA-eligible plan for 2027 opens a higher limit: the IRS has set 2027 HSA contributions at $4,500 for self-only coverage and $9,000 for family coverage, with $1,000 more from age 55. Money that goes in through payroll generally escapes Social Security and Medicare tax, which a contribution made directly to the HSA does not.

Giving company shares in a high-income year

A year with a large vest, bonus or exercise is often the year to fund several years of giving at once. Shares held more than one year can go to a donor-advised fund or charity for a deduction at market value, generally up to 30 percent of AGI, without realizing the gain. RSU shares start their holding period at vest, so lots that vested more than a year ago qualify for market-value treatment, while recent lots generally are limited to their cost basis. Shares from ISO or ESPP purchases that have not met their holding periods need a closer look before any gift.

The 2026 charitable rules apply here too: the 0.5 percent of AGI floor, and for taxable income above $768,700 on a joint return, a reduction that holds each deducted dollar to about 35 cents of tax savings. Our year-end tax planning checklist covers those rules. Officers should also check company policy, since gifts of company stock may require pre-clearance and reporting.

One calendar for the whole year

These decisions interact: a deferral election changes next year’s bracket, which changes how much ISO spread fits under the AMT, which changes the right size for a gift. Our executive financial planning work keeps them on one calendar, beginning with a full list of grants, plan documents and election dates assembled in the Take Inventory step.

Frequently asked questions

Written by Trevor Hanson, Founder | President | Author | Wealth Advisor, RJFS. Last reviewed: October 28, 2026.