Tax Planning Strategies

Tax planning means arranging your money during the year so you owe less legally when you file, not scrambling in April. For most households, the biggest levers are retirement and health savings accounts, using the deductions you qualify for, holding investments in the right place, and giving to charity in the most tax-efficient way. The numbers below are for tax year 2026, the return you’ll file in 2027.

Start with the standard deduction

Most people don’t itemize, because the standard deduction is larger than their itemized deductions would be. For 2026 it’s:

• $16,100 for single filers and married filing separately
• $24,150 for heads of household
• $32,200 for married couples filing jointly

If your mortgage interest, state and local taxes, and charitable gifts don’t add up to more than that, take the standard deduction and focus on the strategies below.

Max out tax-advantaged accounts

401(k), 403(b) and similar plans: up to $24,500 in 2026, plus $8,000 if you’re 50 or older ($11,250 if you’re 60 to 63). Traditional contributions lower your taxable income now. If you’re in the 22% bracket, putting in an extra $5,000 cuts this year’s federal tax by about $1,100.

IRA: up to $7,500, plus $1,100 at 50 or older. Whether a traditional IRA contribution is deductible depends on your income and whether you have a workplace plan.

Roth or traditional? Roughly: if you expect a higher tax rate in retirement than today, Roth tends to win; if lower, traditional tends to win. Splitting between the two hedges your bets.

HSA: if you have an eligible high-deductible health plan, you can contribute up to $4,400 (self-only) or $8,750 (family) in 2026. Contributions are deductible, growth is tax-free, and withdrawals for medical costs are tax-free.

Check the new deductions

The 2025 tax law known as the One Big Beautiful Bill Act added several temporary deductions for tax years 2025 through 2028, and you can claim them whether or not you itemize. Each phases out at higher incomes:

• Tips: up to $25,000 of qualified tip income
• Overtime: up to $12,500 ($25,000 for joint filers) of the premium part of overtime pay, such as the “half” in time-and-a-half
• Car loan interest: up to $10,000 a year on a loan for a new, U.S.-assembled personal vehicle
• Seniors: an extra $6,000 per person aged 65 or older, on top of the existing additional standard deduction

If any of these apply, keep good records, such as pay stubs showing tips and overtime and your car loan statement, and check the IRS guidance for the income limits.

Give smarter

Starting in 2026, people who don’t itemize can deduct up to $1,000 ($2,000 for joint filers) of cash donations to qualifying charities. Donations to donor-advised funds don’t count.

If you do itemize, only the part of your charitable gifts that exceeds 0.5% of your adjusted gross income is deductible. Bunching two or three years of giving into one year can push you over the standard deduction in that year.

If you’re 70½ or older with a traditional IRA, a qualified charitable distribution sent directly from the IRA to a charity isn’t taxable and can count toward your required minimum distribution.

Be tax-smart with investments

• Hold investments more than a year when you can. Long-term gains are taxed at lower rates than short-term gains.
• Harvest losses. Selling investments at a loss can offset gains, and up to $3,000 of net losses a year can offset ordinary income, with the rest carried forward.
• Put tax-inefficient investments, like bond funds, inside retirement accounts, and broad stock index funds in taxable accounts.

Don’t overlook the basics

• Check your withholding after any change in job, marriage, or a new child, using the IRS withholding estimator. A big refund means you lent the government money for free; a big bill may come with a penalty.
• Pay estimated taxes on freelance or side income. How to Budget With Irregular Income covers setting money aside.
• Claim credits you qualify for, such as the child tax credit, education credits, and the earned income tax credit.

For how these accounts fit a long-term plan, see Retirement Planning Essentials. For complex situations like a business, rental property, or a large windfall, a tax professional usually pays for themselves.

Sources

• IRS: One Big Beautiful Bill Act provisions
• IRS: New tax deductions for working Americans and seniors
• IRS: 401(k) limit increases to $24,500 for 2026, IRA limit increases to $7,500
• IRS: Topic 506, Charitable contributions
• IRS: Topic 409, Capital gains and losses

This article is for educational purposes and is not financial advice.