7 Tax-Smart Strategies to Reduce Your 2026 Tax Bill: How New Rules Can Work in Your Favor

As 2026 gets underway, investors and families alike are facing plenty of uncertainty. What will happen to the global economy? Will stock market volatility return? Where are interest rates headed next? While none of us can predict the future with certainty, there is one area where preparation really does pay off: tax planning.

Taxes are one of the largest expenses most households face over a lifetime. While you can’t eliminate them entirely, thoughtful, proactive planning can often reduce what you owe—and help you keep more of your money working for you. That’s especially important this year, as new tax rules and inflation adjustments take effect, and with the possibility that tax rates may rise in the near future.

Below are seven tax-smart strategies to consider early in 2026. Used together, they can help lower your tax bill this year while strengthening your long-term financial plan.

1. Be Aware of Available Deductions

One of the simplest ways to reduce taxes is making sure you’re taking advantage of every deduction you’re entitled to. The good news for 2026 is that inflation adjustments have expanded tax brackets and increased the standard deduction, potentially lowering taxes for many households.

For 2026:

• The standard deduction rises to $32,200 for married couples filing jointly and $16,100 for single filers.
• Wider tax brackets mean you can earn more income before moving into a higher marginal tax rate.

Special considerations for non-itemizers

If you don’t itemize deductions, there are still meaningful opportunities:

• Taxpayers age 65 or older may qualify for a new senior deduction worth $6,000 ($12,000 for joint filers). This applies from 2025 through 2028 and does not require itemizing.
• This deduction begins to phase out at higher income levels, but it is in addition to the existing age-based deduction that has no income phaseout.
• Non-itemizers may also claim a new $1,000 deduction for cash charitable donations ($2,000 for joint filers).

For itemizers

If you itemize, review the major categories carefully: state and local taxes, mortgage interest, medical expenses, charitable donations, and disaster-related casualty losses. Some taxpayers may benefit from “bunching” deductions, especially charitable contributions, into a single year to exceed the standard deduction threshold.

Be aware, however, that 2026 introduces a 0.5% income floor on itemized charitable deductions, and high earners may see the value of deductions capped at an effective rate below the top marginal tax rate. These changes make planning ahead even more important.

2. Make the Most of Higher Saving Incentives

Tax-advantaged accounts remain one of the most powerful tools for reducing taxes—both now and in the future.

You still have until April 15, 2026, to make certain contributions for the prior tax year, which gives you a valuable planning window early in the year.

Key contribution limits for 2026

• IRAs: Up to $7,500, with an additional $1,100 catch-up contribution if you’re over age 50.
• HSAs:
  • $4,400 for self-only coverage
  • $8,750 for family coverage
  • Additional $1,000 catch-up contributions per spouse age 55 or older
• 529 college savings plans: Up to $19,000 per recipient ($38,000 for married couples) without triggering gift taxes, with the option to front-load five years’ worth of gifts.

Contributions to traditional IRAs and HSAs may reduce your current taxable income if you’re eligible. Roth IRA contributions don’t provide an upfront deduction, but they offer tax-free growth and withdrawals when rules are met—often a powerful long-term benefit.

3. Put Your Savings to Work in a Tax-Efficient Way

If you’ve built up savings, how—and where—you invest those dollars can have a significant tax impact.

A smart approach is asset location, which means placing investments in accounts that minimize their tax drag:

• Tax-deferred accounts (like traditional IRAs) may be ideal for bonds, CDs, and other investments that generate ordinary interest income.
• Taxable accounts may be better suited for stocks and equity funds, where long-term capital gains and qualified dividends are taxed at lower rates.

This strategy doesn’t change your overall asset allocation, but it can materially improve your after-tax returns over time.

4. Use Tax-Loss Harvesting Strategically

Market volatility can be uncomfortable—but it can also create tax planning opportunities.

Tax-loss harvesting involves selling investments at a loss to offset capital gains, plus up to $3,000 of ordinary income each year (depending on filing status). Any unused losses can be carried forward indefinitely.

This strategy works best when:

• You reinvest the proceeds into a similar—but not substantially identical—investment to maintain your market exposure.
• You carefully avoid violating the wash-sale rule, which can disallow losses.

When done correctly, tax-loss harvesting can improve after-tax performance without changing your long-term investment strategy.

5. Consider a Roth Conversion

With tax rates scheduled to increase in the future unless Congress acts, 2026 may be an opportune time to consider converting traditional IRA assets to a Roth IRA.

A Roth conversion requires paying taxes now on the converted amount, but offers several potential advantages:

• Future growth and qualified withdrawals may be tax-free.
• Roth IRAs are not subject to required minimum distributions during the original owner’s lifetime.
• Conversions can reduce future tax exposure, especially if rates rise.

This strategy is particularly attractive if your current income places you in a lower tax bracket than you expect in retirement.

6. Do a Tax and Financial Checkup

Tax planning works best when it’s done throughout the year—not just at filing time.

A mid-year or early-year checkup can help ensure:

• Your withholding and estimated payments are on track.
• You’re capturing all available deductions and credits.
• Changes in work arrangements, such as remote work, haven’t altered your state tax obligations.

For those working remotely, reviewing residency and domicile rules can uncover meaningful long-term tax savings, especially if you have flexibility in where you live.

7. Revisit Your Estate Plan

Estate planning isn’t just for the ultra-wealthy—it’s a critical part of tax planning for many families.

Recent legislation increased the lifetime estate and gift tax exemption to $15 million, with inflation indexing starting in 2027. In addition:

• You can gift $19,000 per person in 2026 without triggering gift taxes.
• Married couples can effectively double that amount.

Regularly reviewing your estate plan ensures it aligns with current laws, your financial goals, and your family situation—while taking full advantage of available exemptions.

Bottom Line: Plan Early, Plan Often

Tax planning is not a one-time event. It’s an ongoing process that rewards foresight and coordination. By understanding the new rules, maximizing deductions and savings incentives, investing tax-efficiently, and reviewing your overall financial picture, you can reduce taxes this year and position yourself for long-term success.

If your situation is complex—or if you simply want peace of mind—working with a qualified tax advisor and financial professional can help ensure your strategy is both compliant and optimized for your goals.