Even though tax filing season is still several months away, the decisions you make before January 1, 2027, could have a significant impact on your 2026 federal income tax liability. Changes under the One Big Beautiful Bill Act (OBBBA) of 2025 continue to take effect during 2026 and influence year end planning decisions for many taxpayers. Here are several tax-planning areas to consider before the calendar turns to 2027. If any of the following tax-planning areas are applicable to your situation, please give us a call to discuss.

Standard deduction vs. itemizing

Tax Law: Taxpayers can choose to itemize certain deductions on Schedule A or take the standard deduction based on their filing status instead. Itemizing deductions when the total exceeds the standard deduction saves tax, 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, and
• $32,200 for married couples filing jointly.

Taxpayers who are age 65 or older or blind can claim an additional standard deduction of $2,050 ($1,650 per spouse if married). For taxpayers both over 65 and blind, the additional deduction is doubled.

Planning Considerations: Temporary OBBBA provisions (see below) could make itemizing more beneficial for some taxpayers who typically utilize the standard deduction.

For taxpayers in the highest tax bracket, 2026 brings an additional limitation on itemized deductions. Under OBBBA, the 2/37ths rule gradually reduces the value of itemized deductions which effectively acts as a partial phase out once income reaches the top bracket.

The senior deduction

Tax Law: Through the 2028 tax year, taxpayers age 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). Eligible taxpayers can take this tax break whether they itemize or claim the standard deduction, and it’s in addition to the existing extra standard deduction for seniors.

However, the new deduction begins to phase out when modified adjusted gross income (MAGI) exceeds $75,000 for single filers or $150,000 for joint filers. The 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.

Planning Considerations: If your MAGI might exceed the applicable phaseout threshold, you may be able to take steps before year end to reduce it and maximize your senior deduction. For example, if your budget allows and you’ve already taken your required minimum distribution for the year (if applicable), consider whether discretionary retirement account distributions can be reduced or delayed.

If you’re still working, increasing your retirement plan contributions for 2026 can reduce your MAGI. Whether you’re retired or still working, loss harvesting (see below) and other investment-related strategies can also reduce your MAGI.

Increase in the SALT cap

Tax Law: The OBBBA temporarily increased 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.

For 2026, the deduction is reduced by 30% of MAGI exceeding $505,000 ($252,500 for separate filers). Although the cap and deduction are set to increase by 1% annually, the SALT cap is scheduled to return to $10,000 in 2030.

Planning Considerations: If your 2026 SALT expenses are below the applicable cap, consider whether accelerating certain tax payments into 2026 could increase your deduction. For example, you may benefit from paying property taxes before year end, provided they’ve already been assessed, or making eligible state estimated income tax payments.

Changes to charitable deductions

Tax Law: Before OBBBA, taxpayers who claimed the standard deduction generally couldn’t deduct their charitable contributions. Beginning in 2026, however, individuals claiming the standard deduction can also deduct up to $1,000 in qualifying cash donations ($2,000 for joint filers). The deduction generally applies to cash contributions made directly to qualifying public charities. Donations to donor-advised funds and most private foundations, as well as noncash contributions, aren’t eligible. Charitable donations should be substantiated with either bank record, receipt or written communication from the charity.

Taxpayers who have reached age 70½ or older and own traditional IRAs may consider qualified charitable distributions (QCDs). A QCD generally allows a direct transfer from an IRA to a qualifying charity while excluding the distribution from taxable income. In some cases, QCDs can satisfy all or a portion of a taxpayer’s required minimum distribution.

The OBBBA also introduced a new limitation on charitable deductions for taxpayers who itemize. Beginning in 2026, only contributions exceeding 0.5% of adjusted gross income (AGI) are deductible. For example, if your 2026 AGI is $100,000, the first $500 of your charitable contributions will be disallowed.

Planning Considerations: These changes make the strategy of “bunching” charitable contributions into a single tax year worth considering. Traditionally, taxpayers have used this approach to accumulate enough itemized deductions to exceed the standard deduction in alternating years. Now, concentrating donations in one year may also help reduce the impact of the new 0.5%-of-AGI floor. However, the potential benefits depend on your income, other itemized deductions and the timing of your contributions.

For taxpayers considering a charitable bunching strategy, a donor-advised fund may offer additional flexibility by allowing a current-year deduction while spreading charitable grants among qualifying organizations over future years.

Maximize retirement plan contributions

Planning Considerations: Employees may still have time to increase salary deferrals to employer-sponsored retirement plans before year end. Contributions to traditional 401(k), 403(b), SIMPLE IRA, and similar plans generally reduce current-year taxable income.

Self-employed individuals may also have opportunities to make deductible contributions through SEP IRAs, Solo 401(k) plans, or other retirement arrangements.

Consider a Roth conversion

Planning Considerations: If your taxable income is lower than expected in 2026, converting a portion of a traditional IRA to a Roth IRA before year end may be worth considering. The conversion is included in taxable income for the year of conversion; but earnings grow tax free and reduce any future required minimum distributions.

Taxpayers should consider the additional income could affect eligibility for the senior deduction, increase Medicare premiums, or push income into a higher tax bracket. Careful tax modeling is important before making a conversion.

Review HSA contribution opportunities

Tax Law: If you’re covered by a qualified high-deductible health plan, contributing to a Health Savings Account (HSA) can provide a triple tax benefit: deductible contributions, tax-deferred growth and tax-free withdrawals for qualified medical expenses.

Planning Considerations: If you haven’t yet maximized your 2026 HSA contributions, increasing contributions before year end may reduce your taxable income while helping build a tax-advantaged pool of funds for future healthcare expenses.

Tax loss harvesting

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

Tax Law: If your capital losses exceed your gains, you generally can deduct up to $3,000 of the excess against ordinary income ($1,500 for separate filers), with unused losses carried forward to future tax years. Harvesting losses also may help reduce or eliminate your exposure to the 3.8% net investment income tax (NIIT). It applies to some or all net investment income when MAGI exceeds $200,000 per year ($250,000 for joint filers and $125,000 for separate filers). The NIIT thresholds aren’t annually indexed for inflation, so more taxpayers are being hit by this tax.

Planning Considerations: Be mindful of the wash-sale rule, however. It generally disallows a loss deduction if you purchase substantially identical securities within 30 days before or after the sale. The rule can also apply to purchases made by your spouse or through an IRA. In most cases, a disallowed loss is added to the tax basis of the replacement securities, deferring the tax benefit rather than eliminating it.

Don’t delay

Changes under the OBBBA, combined with longstanding tax-saving tactics, create both opportunities and challenges. The most effective approach depends on your income, investments, deductions and overall financial situation. Many year-end planning opportunities must be implemented before December 31, and some become ineffective once the calendar year closes. In closing, if any of the tax-planning areas mentioned above are applicable to your situation, please give us a call to discuss.

Coauthored by Ryan Jacobs and Nicole Piscitello