Year-End Tax Planning Tips for Individuals 2026

1. Game the Standard Deduction

If your itemized deductions are near your standard deduction this year, consider strategic year-end expenses like charitable donations or medical bills to potentially itemize and lower your 2026 tax bill.

Note: Higher standard deductions are allowed to those who are age 65 or older or blind ($1,650 per qualified individual for joint filers; $2,050 for single or head-of-household filers in 2026).

Next, look at state and local income taxes (SALT) and property taxes that are due early next year. Prepaying those bills between now and year end can lower this year’s federal income tax bill, because your total itemized deductions will be that much higher. For 2026, the maximum deduction for state and local taxes is capped at $40,400 ($20,200 if you use married filing separate status). Note that the SALT deduction is reduced by 30% of excess modified adjusted gross income (MAGI) beginning with $505,000 MAGI ($252,500 if you use married filing separate status).

In certain cases, accelerating deductible expenses such as mortgage interest, property taxes, or charitable contributions may increase itemized deductions.

Other ways to increase your itemized deductions for 2026 include:

• Making charitable donations to IRS-approved charities this year and smaller donations next year to compensate OR if you typically gift the same amount to a particular charity each year, perhaps doubling up at year-end 2026 effectively covering two years on one tax return, if you will itemize deductions and it will provide benefit.
• Accelerating elective medical procedures, dental work, and expenditures for vision care if you think you can qualify for a medical expense deduction. You can claim an itemized deduction for medical expenses to the extent they exceed 7.5% of your adjusted gross income (AGI).

Beware

Pre-paying state and local taxes can be unhelpful if you’ll owe the alternative minimum tax (AMT) for this year. Under the AMT rules, no deductions are allowed for state and local taxes. While AMT is not as common as it once was, check with your tax advisor about possible exposure.

Gambling losses are limited to offsetting only 90% of taxable winnings and at the state level, typically there is no gambling loss deduction allowed since it is part of Federal itemized deductions and state’s generally start with Federal adjusted gross income (AGI) as the base.

New Limitation on Itemized Deductions for High-Income Taxpayers

Beginning in 2026, taxpayers in the highest individual tax bracket (37%) receive only a 35% benefit from itemized deductions, effectively creating a 2% haircut on deductions that would otherwise offset income taxed at 37%. Itemized deductions otherwise allowable are reduced by 2/37 of the lesser of 1) the amount of the itemized deductions or 2) the amount of the taxpayer’s taxable income that exceeds the start of the 37% tax bracket.

2. Manage Gains and Losses in Your Taxable Investment Accounts

The stock market has experienced plenty of ups and downs this year. If you hold investments in taxable brokerage firm accounts, consider the tax-saving advantage of selling appreciated securities that have been held for over 12 months.

The federal income tax rate on net long-term capital gains (LTCGs) recognized this year is 15% for most individuals, although it can reach the maximum 20% rate at higher income levels (see “2026 Tax Rates and Brackets for Individuals” below). An additional 3.8% Net Investment Income Tax (NIIT) can also kick in for higher-income taxpayers (single MAGI over $200,000; joint MAGI over $250,000). So, the actual federal tax rate on LTCGs can be 18.8% (15% plus 3.8%), or 23.8% (20% plus 3.8%) at higher income levels. However, that’s significantly lower than the maximum rate that can apply to short-term capital gains (up to 37% plus 3.8% NIIT = 40.8%).

If you’re holding some investments that are currently worth less than you paid for them, consider harvesting those capital losses between now and year end. Harvested losses can shelter capital gains from the sale of appreciated stocks this year. Similarly if you already have capital loss carryforwards from prior years, consider selling appreciated stocks to utilize those loss carryforwards, as applicable.

If harvesting loss positions on stocks causes your 2026 capital losses to exceed your 2026 capital gains, the net capital loss can be used to shelter up to $3,000 of higher-taxed ordinary income ($1,500 if married filing separately). Any excess net capital loss is carried forward to future tax years indefinitely.

Digital Asset and Cryptocurrency Reporting

2025 was largely a transition year for cryptocurrency and digital asset reporting, but beginning with the 2026 tax year, custodial exchanges and brokers are now required to issue Form 1099-DA, Digital Asset Proceeds from Broker Transactions which is the cryptocurrency equivalent of Form 1099-B for securities. The IRS rules generally require tracking of basis by wallet/account/custodian and the new rules will give the IRS better visibility into substantially more transaction-level information.

Taxpayers remain responsible for maintaining records and transfers between different digital asset platforms can cause basis tracking problems. If taxpayers do not receive Form 1099-DA they are still required to answer the digital asset question on page 1 of Form 1040 and report taxable events.

3. Donate to Qualified Charitable Organizations

If you itemize deductions and want to donate to IRS-approved public charities, you can combine your generosity with an overall revamping of your taxable investment portfolio:

• Underperforming stocks: Sell taxable investments that are worth less than they cost and book the resulting capital loss. Give the sales proceeds to charity to claim both the capital loss and an itemized deduction.
• Appreciated stocks: Donate publicly traded shares held for over a year directly to a charity. You receive a charitable deduction equal to the current market value and avoid capital gains taxes on the appreciation.

Starting in 2026, taxpayers who do not itemize deductions can claim a charitable deduction for qualifying cash contributions up to $2,000 for married filing joint ($1,000 for single). This is a very practical year-end planning strategy for taxpayers that will otherwise be locked into claiming the standard deduction.

For taxpayers who itemize and have charitable contributions (cash and/or non-cash), the charitable deduction is only allowed to the extent your total charitable contributions exceed 0.5% of your adjusted gross income (AGI). For example, if your AGI is $100,000 then your total charitable contributions must exceed $500 in order to be eligible to claim as an itemized deduction.

4. Make Charitable Donations from Your IRA

IRA owners and beneficiaries who have reached age 70½ are permitted to make cash donations totaling up to $111,000 annually for 2026 (indexed for inflation) to IRS-approved public charities directly out of their IRAs.

You don’t owe income tax on these qualified charitable distributions (QCDs), and they can satisfy your Required Minimum Distributions (RMDs) without boosting your adjusted gross income. The amount is excluded from your income, rather than being deducted as a charitable contribution which often yields a better tax result, especially for taxpayers otherwise claiming the standard deduction. Contact your IRA custodian before year-end to arrange direct transfers to qualified charities.

5. Give to Loved Ones

When thinking about tax-smart gifts to loved ones, consider your investment portfolio for potential opportunities. For underperforming assets, selling them and donating the cash proceeds may allow you to claim capital losses and reduce your tax burden. Alternatively, gifting appreciated investments directly can benefit your loved ones by potentially subjecting them to lower capital gains tax brackets upon a future sale. The recipient generally receives a carryover basis in gifted property and may recognize gain upon a later sale.

With cash gifts, if you give a similar amount each year to loved ones (for example up to the annual exclusion amount), you can essentially double this up at year-end by gifting an amount in December and then again in January while still straddling two separate tax years.

For 2026, the annual gift tax exclusion is $19,000 per recipient. Married couples can effectively give $38,000 per recipient using gift splitting. The lifetime estate and gift tax exemption is $15,000,000 per person ($30,000,000 combined for a married couple).

6. Pre-pay College Bills

If paid for you, your spouse, or a dependent, higher education expenses may qualify you for one of the following tax credits:

• The American Opportunity Credit: Equals 100% of the first $2,000 of qualified postsecondary education expenses, plus 25% of the next $2,000 (maximum $2,500 annual credit per student).
• The Lifetime Learning Credit: Equals 20% of up to $10,000 of qualified education expenses (maximum $2,000 credit per family).

For 2026, both higher education credits phase out for modified adjusted gross income (MAGI) between:

• $80,000 and $90,000 for unmarried individuals
• $160,000 and $180,000 for married couples filing jointly

If eligible, consider pre-paying college tuition bills due in early 2027 for academic periods that begin in January through March 2027 to boost your 2026 credit.

7. HSA Contributions

If part of a high-deductible health plan (HDHP), contributing to a health savings account (HSA) can be a good individual tax planning opportunity. Contributions via payroll to an employer-sponsored plan reduce your taxable wages and the growth in the account is tax-free and can be withdrawn tax-free for qualified medical expenses.

8. Convert a Traditional IRA into a Roth IRA

The optimal scenario for a Roth conversion is when you expect your tax rate to be the same or higher during retirement than it is at present. Converting creates a current tax bill—treated as a taxable distribution—but unlocks tax-free growth and tax-free qualified withdrawals in the future. Conversion of Traditional IRAs to a Roth IRA can offer estate planning benefits and help with coordinating future required minimum distributions (RMDs). Generally it is more advantageous to convert during a lower-income tax year or when you may have other ordinary losses to offset the taxable distribution and fill up the lower income tax brackets as much as possible without subjecting too much income to a higher income tax bracket.

Qualified withdrawals require having at least one Roth account open for at least five years and reaching age 59½, becoming disabled, or passing away.

9. Trump Accounts

Parents can set up a Trump account for their children and contribute up to $5,000 per year (indexed for inflation). These contributions are not deductible but grow tax-deferred inside the account and employers are also eligible to contribute to the account.

Children born between after December 31^st, 2024 and before January 1^st, 2029 are eligible for a one-time $1,000 government contribution to the account if they are a U.S. citizen and have a valid SSN. This requires Form 4547 to be filed with the parent/guardian’s tax return or it can be submitted separately online.

At age 18, the account essentially becomes a Traditional IRA in their name and is subject to the same RMD and early withdrawal rules as an IRA. Section 529 education plans, custodial UTMA/UGMA accounts and Roth IRAs for working children continue to be other strategies that work along side Trump accounts.

10. Schedule 1-A Additional Deductions

Enhanced Senior Deduction

Taxpayers who are age 65 or older can claim an additional deduction of $6,000 per eligible taxpayer (up to $12,000 on a MFJ return if both spouses are age 65 or older). There are income phase-outs beginning at $75,000 for single taxpayers ($150,000 for MFJ). Unless extended via a Congressional act, this provision is currently set to expire after the 2028 tax year.

Car Loan Interest Deduction

For new, personal-use vehicles that are assembled in North America, taxpayers may be eligible to deduct up to $10,000 of qualifying interest paid on vehicle loans. There are income phase-outs beginning at $100,000 for single taxpayers ($200,000 for MFJ). Unless extended via a Congressional act, this provision is currently set to expire after the 2028 tax year.

No Tax On Tips

For qualifying tip income, taxpayers may be eligible to deduct up to $25,000. There are income phase-outs beginning at $150,000 for single taxpayers ($300,000 for MFJ). Tips must be properly reported on the taxpayer’s W-2 or 1099 (required by employers for 2026 tax years) and be received in qualifying occupations that are earned in businesses where tipping is customary. Note that this provision does not eliminate income reporting requirements and does not make tips exempt from payroll taxes.  Unless extended via a Congressional act, this provision is currently set to expire after the 2028 tax year.

No Tax on Overtime

For qualifying overtime compensation, taxpayers may be eligible to deduct up to $12,500 for single taxpayers ($25,000 for MFJ). There are income phase-outs beginning at $150,000 for single taxpayers ($300,000 for MFJ). Only the overtime premium portion above the taxpayer’s regular hourly rate is eligible for the deduction. Overtime compensation must be properly reported on the taxpayer’s W-2 or 1099 (required by employers for 2026 tax years). Unless extended via a Congressional act, this provision is currently set to expire after the 2028 tax year.

Disclaimer: This article provides general information and should not be considered professional financial or tax advice. Please consult with a qualified CPA or financial advisor for guidance specific to your individual business needs.