2026 Tax Planning

   As we approach 2026, now is the perfect time to start thinking about your tax strategy. Smart tax planning isn't just about minimizing what you owe—it's about making informed financial decisions throughout the year that align with your goals. Here's what you need to know to optimize your tax situation for 2026.

Start With What You Know

Tax laws can change, and staying informed is crucial. While we're still awaiting final IRS guidance for 2026, understanding current tax structures and potential changes will help you make better decisions. Consider consulting with a tax professional who can provide personalized advice based on your specific situation.

Maximize Your Retirement Contributions

One of the most effective tax-planning strategies remains maximizing contributions to retirement accounts. These contributions can reduce your taxable income while helping you build long-term wealth.

Traditional 401(k) and IRA contributions lower your current taxable income, which is especially valuable if you expect to be in a lower tax bracket during retirement. Roth options, while funded with after-tax dollars, offer tax-free growth and withdrawals in retirement, which can be advantageous if you anticipate being in a higher tax bracket later or want tax diversification.

If you're self-employed, explore SEP-IRAs or Solo 401(k)s, which often allow for higher contribution limits than traditional retirement accounts.

Take Advantage of Health Savings Accounts

If you have a high-deductible health plan, a Health Savings Account (HSA) offers a triple tax advantage. Contributions are tax-deductible, the money grows tax-free, and withdrawals for qualified medical expenses are tax-free. HSAs can also serve as a supplemental retirement account since you can withdraw funds for any purpose (with taxes but no penalty) after age 65.

Strategic Charitable Giving

If you're charitably inclined, strategic giving can provide tax benefits. Consider bunching multiple years of donations into one year to exceed the standard deduction threshold. Donor-advised funds allow you to make a large contribution in one tax year and distribute the funds to charities over time.

For those over 70½, Qualified Charitable Distributions (QCDs) from IRAs can satisfy required minimum distributions while excluding the amount from taxable income, providing a tax-efficient way to support causes you care about.

Harvest Tax Losses and Gains

Tax-loss harvesting involves selling investments at a loss to offset capital gains. This strategy can reduce your tax liability while allowing you to reposition your portfolio. Be mindful of the wash-sale rule, which prohibits claiming a loss if you repurchase the same or substantially identical security within 30 days.

Conversely, if you're in a lower tax bracket in a particular year, consider harvesting some gains at favorable rates to reset your cost basis.

Review Your Withholding and Estimated Payments

Avoid surprises by ensuring you're having enough tax withheld from your paycheck or making adequate estimated quarterly payments. Life changes like marriage, divorce, a new job, or the birth of a child should trigger a withholding review. The IRS provides a Tax Withholding Estimator tool to help you dial in the right amount.

Consider Roth Conversions

If you anticipate higher tax rates in the future—whether due to personal circumstances or potential tax law changes—a Roth conversion might make sense. This involves paying taxes now on traditional IRA funds to convert them to a Roth IRA, allowing for tax-free growth and withdrawals later. Timing these conversions during lower-income years can minimize the tax impact.

Small Business and Self-Employed Considerations

Business owners have additional planning opportunities. Accelerating expenses or deferring income can shift your tax liability between years. The Qualified Business Income (QBI) deduction can provide significant savings for eligible pass-through entities. Keep meticulous records of business expenses, including home office deductions, mileage, and equipment purchases.

Education Planning

If you're saving for education expenses, 529 plans offer tax-advantaged growth and tax-free withdrawals for qualified education expenses. Some states also offer tax deductions or credits for 529 contributions. These plans aren't just for college anymore—they can be used for K-12 tuition and even some apprenticeship programs.

Estate and Gift Planning

The federal estate and gift tax exemption has been historically high in recent years, but exemption amounts can change. If you have significant wealth, consider working with an estate planning attorney to take advantage of current exemption levels through gifting strategies or trust structures.

Stay Informed About Tax Law Changes

Tax laws evolve, and what works today might change tomorrow. Major legislation can alter deductions, credits, brackets, and exemptions. Stay connected with reliable financial news sources and maintain a relationship with a qualified tax professional who can help you navigate changes.

Don't Wait Until April

The biggest mistake in tax planning is waiting until tax season to think about taxes. Many strategies require action throughout the year or have specific deadlines. Review your tax situation quarterly, especially after major financial events.

Final Thoughts

Effective tax planning for 2026 requires a proactive approach and a clear understanding of your financial picture. While this guide provides a solid foundation, everyone's situation is unique. Working with a qualified tax professional or financial advisor can help you develop a personalized strategy that minimizes your tax burden while supporting your broader financial goals.

Remember, tax planning isn't just about paying less—it's about making smarter financial decisions that serve you both now and in the future. Start planning today, and you'll be in a much better position when next year's tax season arrives.