When summer heats up is a great time to be cool and start strategizing how to reduce your family’s 2026 tax bill. Starting early with proactive planning gives you time to make strategic decisions and devise an action plan that could help you keep more profit in your pocket.
Our top six strategies include great ideas for individuals:
- Consider if you’ve experienced any lifestyle changes that would require you to update your W-4. Did you have too little or too much tax withheld the prior year? If you’ve added a dependent, taken on additional work or another job, got a BIG bonus, or are planning to itemize this year, check with your TFG tax professional on whether you should make any adjustments to your W-4 for the remainder of this year.
- Take a careful look at the winners and losers in your taxable accounts and consider whether it would make sense to sell any of the positions you hold at a loss. Tax-loss harvesting lets you use realized losses to offset realized gains. Make sure that you maintain your targeted investing mix by selling one investment at a loss and replacing it with a similar, but not substantially identical, security (the “wash-sale” rule).
- Reconsider itemizing if you bought a house or had large out-of-pocket medical expenses this year. If that’s the case, and you think your deductions will add up to more than the standard deduction, it makes sense to start getting organized now. Itemized deductions can include medical expenses, home mortgage interest, state and local taxes, charitable contributions, and theft and casualty losses. Consider “bunching” several years’ worth of charitable donations into the current tax year for eligibility.
- Boost contributions to traditional (but not Roth) employer retirement plans, traditional IRAs, and health savings accounts (HSAs), which will reduce your current federal taxable income dollar for dollar when they are made with pre-tax money. They’re also an investment in your future financial security.
- With continued market and economic volatility, this may be the time to think about a Roth conversion, and transfer money from a traditional IRA into a Roth IRA. A conversion can let you tap into the advantages of a Roth account, including no RMDs and tax-free and penalty free qualified withdrawals in retirement. You’ll have to pay taxes on the amount you convert but that could be beneficial especially if you’re currently in a lower tax bracket than you expect to be in the future.
- If you’re a bit older, plan for RMDs that might kick you into another bracket. The SECURE 2.0 Act increased the age at which owners of certain retirement accounts must start taking required minimum distributions (RMDs) from 72 to 73. These withdrawals from traditional 401(k)s and IRAs are taxable, but there are ways to reduce the bite with smart planning. Remember there are penalties for failing to take RMDs.
Reach out to us: Taxes play a big part in your financial picture. Whether it’s income, investments, retirement savings, or estate planning, taxes affect every aspect of your financial life. With effective planning, you can choose the right options to help keep more of what you’ve earned. Contact us at 855-542-7537 or CPA@fuoco.com.
