Tax filing season is still months away, but the decisions you make before January 1, 2027, can significantly affect your 2026 federal income tax bill. Year-end tax planning matters more than usual this year because new provisions of the One Big Beautiful Bill Act (OBBBA), passed in 2025, take effect for 2026. You may also still be getting used to the OBBBA changes that started last year.

Here are five year-end tax strategies to consider before the calendar turns to 2027.

1. Compare the 2026 standard deduction with itemizing

Taxpayers can choose to itemize certain deductions on Schedule A or take the standard deduction based on their filing status instead. Itemizing saves tax when your total deductions are higher than the standard deduction, but it makes filing more complicated.

For 2026, the standard deduction is:

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

Taxpayers who are 65 or older, or blind, can claim an additional standard deduction of $2,050 ($1,650 per spouse if married). If you are both 65 or older and blind, the additional amount doubles.

With such large standard deduction amounts, you may not think much about itemizing. However, certain temporary OBBBA provisions (covered below) could make itemizing worthwhile for some taxpayers this year.

High earners, take note: the OBBBA’s new limit on itemized deductions begins with the 2026 tax year. For taxpayers in the top 37% bracket, it effectively caps the value of itemized deductions at 35 cents per dollar, down from 37 cents.

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2. Maximize the new senior deduction

Through the 2028 tax year, taxpayers who are 65 or older by the end of the tax year may qualify for an additional $6,000 senior deduction ($12,000 for joint filers if both spouses qualify). You can take this tax break whether you itemize or claim the standard deduction, and it is in addition to the existing extra standard deduction for seniors.

The senior deduction phases out once modified adjusted gross income (MAGI) exceeds $75,000 for single filers or $150,000 for joint filers. This deduction is reduced by 6% of MAGI exceeding these thresholds. Married taxpayers must file jointly to qualify, and each eligible individual must have a valid Social Security number.

How to reduce MAGI before year end:

• If you’ve already taken your required minimum distribution (if applicable) and your budget allows, consider cutting back on taxable retirement plan distributions for the rest of 2026.
• If you’re still working, increase your 2026 retirement plan contributions.
• Whether you’re working or retired, tax loss harvesting (see Strategy 5) and other investment-related strategies can also lower MAGI.

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3. Plan around new charitable giving deduction rules

A new charitable deduction for non-itemizers

Before the OBBBA, taxpayers who didn’t itemize generally couldn’t deduct charitable gifts. Starting in 2026, non-itemizers can deduct up to $1,000 in qualifying cash donations ($2,000 for joint filers).

The deduction generally applies to cash gifts made directly to qualifying public charities. Gifts to donor-advised funds, most private foundations and noncash donations are not eligible.

“Cash donations” include not just actual cash but gifts made by check, debit or credit card, payment app, or payroll deduction. If you plan to claim this deduction, be sure to substantiate your cash donations. They must be:

• Supported by a bank record, receipt or written communication from the charity if under $250, or
• Acknowledged in writing by the charity if $250 or more.

A new 0.5% floor for itemizers

The OBBBA also added a limit for taxpayers who itemize. Starting in 2026, only charitable contributions above 0.5% of adjusted gross income (AGI) are deductible. For example, if your 2026 AGI is $100,000, the first $500 of your donations is not deductible.

Amounts disallowed by this floor generally can’t be carried forward, unless you also have contributions above the percentage-of-AGI limits. (For example, deductions for cash gifts to public charities generally can’t exceed 60% of AGI.)

Consider “bunching” your donations

These changes make bunching charitable contributions into a single tax year worth considering. Taxpayers have traditionally used bunching to push itemized deductions above the standard deduction in alternating years. Now, concentrating donations in one year may also help reduce the impact of the 0.5%-of-AGI floor. However, the potential benefits depend on your income, your other itemized deductions and the timing of your gifts.

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4. Take advantage of the higher SALT cap in 2026

The OBBBA temporarily raised the limit on state and local tax deductions (the SALT cap) through the 2029 tax year. For 2026, taxpayers who itemize can deduct up to $40,400 ($20,200 for married couples filing separately). Deductible expenses include:

• State and local real estate taxes
• Qualifying personal property taxes, and
• Either state and local income taxes or general sales taxes, but not both.

The SALT cap is scheduled to drop back to $10,000 ($5,000 for separate filers) in 2030.

Depending on your SALT expenses and MAGI, the higher cap could mean substantial savings. For 2026, the cap is reduced by 30% of MAGI above $505,000 ($252,500 for separate filers), but it can’t fall below $10,000 ($5,000 for separate filers). Both the higher cap and the income threshold are scheduled to rise 1% each year through 2029.

Year-end move: If your 2026 SALT expenses are below the applicable cap, consider accelerating payments into 2026. For example, you might pay property taxes before year end (if they’ve already been assessed) or make eligible state estimated income tax payments.

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5. Use tax loss harvesting to offset gains

Economic conditions have been mixed in 2026, but the stock market has generally performed well. If you hold underperforming investments in your taxable portfolio, consider selling them before year end to harvest capital losses that can offset gains you’ve already realized.

If your losses exceed your gains, you can generally deduct up to $3,000 of the excess against ordinary income ($1,500 for separate filers). Unused losses carry forward to future years.

Harvesting losses may also help reduce or eliminate the 3.8% net investment income tax (NIIT). The NIIT applies to some or all net investment income when MAGI exceeds $200,000 ($250,000 for joint filers and $125,000 for separate filers). Because these thresholds aren’t annually indexed for inflation, more taxpayers are subject to the tax each year.

Watch the wash-sale rule. It generally disallows a loss if you buy substantially identical securities within 30 days before or after the sale. The rule can also apply to purchases by your spouse or in an IRA. In most cases, a disallowed loss is added to the tax basis of the replacement securities, so the tax benefit is deferred rather than eliminated.

 

 

Frequently asked questions about year-end tax planning for 2026

What is the standard deduction for 2026?

For 2026, the standard deduction is $16,100 for single filers and married couples filing separately, $24,150 for heads of household and $32,200 for married couples filing jointly.

Who qualifies for the new $6,000 senior deduction?

Taxpayers who are 65 or older by the end of the tax year may qualify, through 2028. It begins to phase out when MAGI exceeds $75,000 (single) or $150,000 (joint). Married couples must file jointly.

Can I deduct charitable donations if I don’t itemize?

Yes, starting in 2026. Non-itemizers can deduct up to $1,000 ($2,000 for joint filers) in qualifying cash donations made directly to public charities.

What is the SALT cap for 2026?

For 2026, itemizers can deduct up to $40,400 in state and local taxes ($20,200 for married filing separately). The cap is reduced for MAGI above $505,000 but can’t fall below $10,000.

When should I complete year-end tax planning?

Before December 31, 2026. Most of these strategies, including charitable gifts, tax prepayments and loss harvesting, must be completed by year end to count for 2026.

 

 

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