A useful year-end tax projection generally requires more than a salary estimate. High-income households may need to account for wages, bonuses, RSUs, business income, investment gains, interest, dividends, rental income, and retirement distributions. Missing one significant source can make the projection less representative of the tax picture that ultimately appears on the return.
Why Is Salary Alone Often Not Enough?
For households relying primarily on one W-2 paycheck, taxable income may be relatively predictable.
For high earners, however, salary is often only the starting point.
Consider a household with:
- Two salaries
- Annual bonuses
- RSU vesting
- A taxable investment account
- A rental property
- Consulting income
Looking only at payroll withholding would exclude several components that can change the household’s eventual tax liability.
A useful projection therefore begins by identifying all meaningful income sources.
Should Bonuses Be Included?
Yes.
Bonuses are generally taxable wages.
Depending on how they are paid, federal withholding may be calculated differently from regular wages. For certain separately identified supplemental wages, employers may use the 22% flat withholding method in 2026. (IRS)
Because withholding is not the same as final tax liability, both the gross bonus and the tax withheld from it should generally be considered in a projection.
How Should RSUs Be Included?
RSUs generally create taxable compensation when they vest.
A projection should therefore consider:
- RSUs that have already vested
- Expected vesting events before year-end
- Estimated value at future vesting dates
- Federal and state withholding associated with prior vests
- Shares subsequently sold
The final value of a future vest cannot be known in advance because the stock price can change.
A projection may therefore use reasonable estimates and then be updated as circumstances change.
Do Stock Sales Count?
A stock sale itself is not necessarily taxable income equal to the full sale proceeds.
The relevant figure is generally the capital gain or loss, which depends on sale proceeds relative to tax basis and other applicable adjustments.
Holding period also matters because short-term and long-term gains can receive different federal tax treatment.
The IRS notes that taxable capital gains may create an estimated-tax obligation. (IRS)
High-income investors may also need to evaluate the 3.8% Net Investment Income Tax when applicable. (IRS)
What About Interest and Dividends?
Investment accounts may produce taxable income even when no securities are sold.
Common examples include:
- Bank interest
- Bond interest
- Ordinary dividends
- Qualified dividends
- Money-market distributions
- Mutual-fund capital-gain distributions
Year-end mutual-fund distributions can be particularly easy to overlook because a taxable distribution may occur even if the investor did not personally sell the fund.
Should Business and Consulting Income Be Included?
Yes.
Business income can be especially important because it may arrive without traditional payroll withholding.
Depending on the business structure and nature of the income, there may also be self-employment, payroll, qualified business income, or other tax considerations.
For 2026, Publication 505 specifically identifies self-employment and other income without sufficient withholding as potential reasons estimated-tax payments may be necessary. (IRS)
Does Rental Income Matter?
Potentially.
Rental income and related deductions may affect taxable income.
A projection may need to consider:
- Gross rental receipts
- Operating expenses
- Depreciation
- Interest
- Repairs
- Other deductible expenses
- Passive-activity limitations
The amount deposited into a bank account is not necessarily the same as the taxable rental-income figure.
What About Retirement Distributions?
Distributions from traditional IRAs, 401(k)s, pensions, and other retirement accounts may create taxable income depending on the account and distribution.
For someone approaching or already in retirement, distributions can interact with:
- Tax brackets
- Investment income
- Social Security taxation
- Estimated taxes
- Future Medicare premium calculations
This is one reason retirement-income decisions should generally be incorporated into the same tax projection rather than reviewed separately.
What Should Be Gathered for a Year-End Projection?
A practical starting list includes:
Employment income
- Recent pay statements
- Expected salary through December
- Bonuses
- RSU vesting
- Other equity compensation
Investment income
- Realized gains and losses
- Expected dividends
- Interest
- Capital-gain distributions
Other income
- Business profit
- Consulting income
- Rental income
- Retirement distributions
- Other taxable payments
Payments toward tax
- Federal withholding
- State withholding
- Estimated-tax payments
- Prior-year overpayments applied to 2026
Planning items
- Retirement contributions
- Charitable contributions
- Material deductions
- Expected credits
- Significant transactions planned before year-end
Why Should a Projection Be Updated?
A projection is based on assumptions.
Those assumptions can change.
If stock rises significantly before an RSU vest, compensation changes. If a business earns more than expected, projected taxable income changes. If an investment is sold, capital gains may change.
A useful projection is therefore generally a living estimate, not a one-time calculation.
How Does Falcon Wealth Planning Approach Tax Projections?
Falcon Wealth Planning is a Fee-Only fiduciary Registered Investment Adviser. Our CFP® professionals and CPAs work with clients to coordinate tax planning with investment management, retirement planning, estate considerations, business decisions, and cash flow.
For households with multiple sources of income, that may involve evaluating how separate financial events combine within the broader plan.
Frequently Asked Questions
Is gross income the same as taxable income?
No. Gross income is only one component of the tax calculation. Adjustments, deductions, exemptions where applicable, and other tax rules affect taxable income.
Do unrealized stock gains belong in my current tax projection?
Generally, a stock’s increase in value does not create a federal capital gain until a taxable realization event occurs, although equity-compensation rules can differ.
Should future RSU vests be estimated?
They may be useful to include in a forward-looking projection, recognizing that the actual value can change before vesting.
How often should a tax projection be updated?
There is no universal schedule. Significant income, compensation, investment, business, or family changes may justify updating assumptions.
Schedule a No-Cost Financial Assessment
A year-end tax projection becomes more useful when it reflects the same financial decisions being made elsewhere in the plan. A No-Cost Financial Assessment can help determine whether Falcon Wealth Planning’s coordinated fee-only fiduciary approach may be appropriate for your family’s circumstances.
