2026 year-end tax planning: Strategies to help reduce your tax bill

Year-end tax planning is about more than identifying deductions before December 31. It is an opportunity to look across tax years and consider how the timing of income, investment gains and losses, charitable giving and other financial decisions may affect your overall tax liability. As you evaluate your 2026 tax situation and look ahead to 2027, consider these planning strategies.

1. Coordinate the timing of income and deductions

Your income and deductions can vary significantly from one year to the next. Comparing your expected tax situation for 2026 and 2027 can help determine when it may be advantageous to recognize income or investment gains and when to take deductions or realize losses. For higher-income taxpayers, this analysis should also account for the 3.8% Net Investment Income Tax, which can increase the tax cost of certain investment income and capital gains.

If your income will be higher (or the same) in 2026 vs. 2027

In this case your goal may be to maximize deductions that can help offset your income. Keep in mind that beginning in 2026, the tax benefit of itemized deductions is reduced for taxpayers in the highest federal income tax bracket. If you plan to itemize your deductions instead of taking the 2026 standard deduction of $16,100 for a single filer or $32,200 for a married couple filing jointly, consider:

• Pay your property tax before Dec. 31. If you itemize, determine whether you could benefit from paying January’s property tax bill before year end. For 2026, the SALT (state and local tax) deduction is generally limited to $40,400 and begins to phase down for taxpayers with modified adjusted gross income above $505,000, although the deduction cannot be reduced below $10,000.
• Pay all pending medical expenses during the current year. You can receive a deduction for any unreimbursed paid medical expenses that exceed 7.5% of your adjusted gross income.
• Make charitable contributions. Beginning in 2026, charitable contributions by itemizers are generally deductible only to the extent they exceed 0.5% of adjusted gross income, subject to applicable AGI limits. If you regularly make charitable gifts, bunching multiple years of planned contributions into a single year may help increase the amount eligible for a deduction.

Other moves you should consider before year end:

• Defer one-time income events into next year. If you can control when certain income arrives, push it into next year when possible. Examples include choosing to defer compensation or a bonus or holding off on a sale of property into next year.
• Consider Opportunity Zones for capital gains. If you realize an eligible capital gain toward the end of 2026, investing in a Qualified Opportunity Fund within 180 days may allow you to defer the tax, under the new law. If you previously used this strategy, however, any remaining deferred gain under the prior law generally must be recognized in 2026.
• Realizing investment losses before year end. Selling investments that have declined in value can help offset capital gains realized elsewhere in your portfolio. If your losses exceed your gains, up to $3,000 can generally be used to offset ordinary income, with additional losses carried forward to future years. You may also consider realizing additional gains to make use of available losses. Be mindful of the wash-sale rules. These rules prevent investors from claiming a capital loss if they buy the same asset or a “substantially identical” stock or security within 30 days before or after the sale.
• Review tax withholding on required minimum distributions. If you are subject to RMDs, consider whether the federal income tax being withheld from your distributions reflects your overall tax picture. If you expect to owe more than anticipated, increasing withholding on a year-end distribution may help cover the additional tax liability and, in some cases, address an estimated tax shortfall.
• Maximize health savings account contributions. HSAs offer a combination of tax benefits: contributions are generally made pre-tax or are tax-deductible, earnings can grow tax-deferred and withdrawals for qualified medical expenses are tax-free. For 2026, the contribution limit is $4,400 for self-only coverage and $8,750 for family coverage. In 2027, those limits increase to $4,500 and $9,000, respectively.

If your income will be lower in 2026

In this case your goal may be to recognize income-generating events now, when you may be subject to a lower tax rate. Steps include:

• Take distributions from an inherited traditional IRA. These distributions are taxed as ordinary income. Many non-spouse beneficiaries are subject to the 10-year distribution rule, so taking distributions now may allow you to pay tax on that income at a lower rate and help you avoid larger taxable distributions in later years.
• Take trust distributions. Depending on the trust and the type of income it earns, distributions may shift taxable income from the trust to the beneficiary. Because trusts reach the highest federal income tax bracket at relatively low levels of income, this may reduce the overall tax paid. The 65-day election may also provide additional flexibility by allowing certain distributions made early in 2027 to be treated as if they were made in 2026.
• Realize capital gains. Selling appreciated investments now may allow you to recognize gains at a lower tax rate or use available capital losses to offset the gains. If you expect your tax rate to be higher in future years, recognizing some gains now may reduce the tax ultimately paid on that appreciation.
• Review stock options and deferred compensation. If you have flexibility over when to exercise certain stock options or recognize deferred compensation, doing so now may allow you to recognize that income at a lower tax rate.

2. Maximize tax savings from charitable donations

The IRS offers tax incentives to help you make the most of each dollar you contribute to charity. By planning ahead, you can capture some tax benefits. Here are some strategies to help you maximize your tax savings:

• Make a qualified charitable distribution. If you are age 70 ½ or older, you can make a qualified charitable distribution (QCD) directly from your IRA to an eligible charity, up to a maximum of $111,000 in 2026. The distribution is excluded from taxable income and, once you are subject to RMDs, can count toward satisfying your RMD for the year. You cannot also claim a charitable deduction for the QCD.
  You may also use up to $55,000 of your $111,000 QCD limit to make a one-time contribution to certain split-interest entities, such as a charitable gift annuity or charitable remainder trust.
• Donate appreciated securities. If you’ve held the securities for over a year, you may be eligible to deduct the fair market value (subject to applicable limitations) and avoid paying taxes on the appreciation of the security.
• Establish a Donor-Advised Fund. If you have large capital gains or another income event, a Donor-Advised Fund can allow you to bunch several years of planned charitable contributions into a single year, subject to AGI limits (30% for appreciated capital gain property and up to 60% for cash). You can then recommend grants to charities over time.
• Harvest losses before you give. If you hold property with an unrealized loss, consider selling it first to recognize the loss, then donating the cash proceeds. This may allow you to use the capital loss while also claiming a charitable deduction for the cash contribution, subject to applicable limitations.

3. Save taxes as you save for retirement

As you continue to save for retirement, your contributions may also provide opportunities for current tax savings.

• Maximize retirement plan contributions. Before year end, review how much you have contributed to your tax-advantaged retirement accounts and whether you have additional capacity to contribute:
  • $24,500 maximum employee contribution to a 401(k) in 2026; $32,500 if you’re age 50 or older. For individuals ages 60 through 63, the higher catch-up contribution allows for a total contribution of up to $35,750;
  • $7,500 maximum for IRAs; $8,600 for 50 and over. 2026 IRA contributions can be made through the federal tax filing deadline in 2027. The deductibility of traditional IRA contributions depends on income and participation in a workplace retirement plan.
  • Contribute enough to your 401(k) to take advantage of your employer’s matching contribution. Don’t leave money on the table!
  • Self-employed individuals can contribute to a SEP IRA. The maximum amount is the lesser of $72,000 or 20% of adjusted business earnings.
• Be aware of new Roth catch-up rules. Beginning in 2026, employees age 50 or older whose prior-year wages from their employer exceeded $150,000 generally must make catch-up contributions on a Roth, rather than pre-tax, basis if the plan offers catch-up contributions and has a Roth feature. For affected employees, those catch-up contributions will no longer reduce current taxable income.

Year-end tax planning is most effective when individual decisions are considered together rather than in isolation. The timing of income, investment gains and losses, charitable giving and retirement contributions can have implications across your broader financial plan and across multiple tax years. Reviewing these opportunities with your tax and wealth advisors before year end can help you determine which strategies make sense for your circumstances.