Get Ahead of Uncle Sam in 2026: Year-End Tax Strategies to Keep More of What You Earn

As 2026 enters its final months, tax season may still seem far away, but many of the best opportunities to reduce your tax bill disappear after December 31.

Year-end tax planning is not about hiding income or claiming questionable deductions. It is about understanding the rules, reviewing your financial situation before the year ends, and making informed decisions while you still have time to act.

This year is especially important. Recent changes to federal tax law, higher contribution limits for retirement accounts and Health Savings Accounts, and the expanded deduction for state and local taxes have created new planning opportunities for individuals, families, investors, and business owners.

Here are some of the most important strategies to consider before the end of 2026.

1. Review Your Projected Income and Tax Bracket

Effective tax planning begins with estimating your total income for 2026—not simply reviewing last year’s tax return.

Your estimate should include:

● W-2 wages and bonuses

● Business or self-employment income

● Interest and dividends

● Capital gains and losses

● Rental-property income

● Retirement-account distributions

● Other taxable income

Once you have a reasonable projection, you can determine whether it may be beneficial to accelerate deductions, defer discretionary income, recognize investment gains, or complete a Roth conversion.

The standard deduction for 2026 is $32,200 for married couples filing jointly, $16,100 for single taxpayers and married taxpayers filing separately, and $24,150 for heads of household. Tax brackets were also adjusted for inflation.

The appropriate decision depends on both your current tax rate and the rate you expect to pay in future years. Deferring income is not always better if it simply shifts that income into a year when you will be subject to a higher tax rate.

2. Take Advantage of the Higher SALT Deduction

One of the most important changes for New York homeowners is the temporary increase in the federal deduction for state and local taxes, commonly known as the SALT deduction.

For 2026, qualifying taxpayers may deduct up to $40,400 in combined state and local income or sales taxes, real-estate taxes, and eligible personal-property taxes. The limit begins to phase down when modified adjusted gross income exceeds $505,000 and cannot be reduced below $10,000.

This increase could make itemizing deductions more beneficial for many Westchester County households that previously received little or no additional federal benefit from their property and state income taxes.

However, the higher limit does not automatically mean you should prepay taxes. The timing of the payments, income limitations, potential exposure to the alternative minimum tax, and whether the payment is legally due must all be considered.

3. Maximize Your Retirement Contributions

Retirement contributions can help you build long-term wealth while potentially reducing your current taxable income.

For 2026, employees may contribute up to $24,500 to a 401(k), 403(b), or governmental 457 plan. The general catch-up contribution for participants age 50 or older is $8,000. Participants between the ages of 60 and 63 may qualify for a higher catch-up contribution of $11,250, depending on their plan. The IRA contribution limit for 2026 is $7,500.

Before year-end:

● Review how much you have contributed.

● Confirm that you are receiving your employer’s full matching contribution.

● Determine whether you can afford to increase your remaining payroll contributions.

● Compare traditional pre-tax contributions with Roth contributions.

● If you own a business, evaluate a SEP IRA, SIMPLE IRA, Solo 401(k), or another retirement plan.

Most employee salary-deferral contributions must be completed through payroll by December 31. IRA contributions and certain employer contributions may have later deadlines, depending on the account and the taxpayer’s circumstances.

4. Maximize Your Health Savings Account

If you participate in an HSA-eligible health plan, a Health Savings Account can provide three important federal tax advantages:

● Contributions may be deductible or made with pre-tax dollars.

● The account can grow tax-deferred.

● Withdrawals for qualified medical expenses may be tax-free.

For 2026, the contribution limit is $4,400 for self-only coverage and $8,750 for family coverage. Eligibility and contribution limits may be affected if you were covered for only part of the year.

Unlike many Flexible Spending Accounts, HSA balances generally are not forfeited at the end of the year. The funds can remain invested and potentially become an important part of a long-term retirement and healthcare strategy.

5. Reconsider Itemized Deductions and Charitable Giving

With the higher SALT limit, more taxpayers may benefit from itemizing their deductions in 2026.

Review potential deductions such as:

● State and local taxes

● Qualified mortgage interest

● Charitable contributions

● Eligible medical expenses exceeding the applicable income threshold

If your deductions are close to the standard-deduction amount, consider a “bunching” strategy. This means concentrating several years of charitable contributions into one year and claiming the standard deduction in another.

A donor-advised fund may allow you to claim a deduction in the year of the contribution while distributing the funds to charities over time. Donating appreciated investments directly may also help an eligible taxpayer avoid recognizing the accumulated capital gain while potentially receiving a charitable deduction.

Always obtain the required acknowledgments, receipts, and valuation documents.

6. Use Tax-Loss Harvesting Carefully

If investments in a taxable account have declined in value, selling selected positions may allow you to offset realized capital gains.

When capital losses exceed capital gains, an individual may generally deduct up to $3,000 of net capital losses against ordinary income and carry unused losses forward to future years.

Be careful with the wash-sale rule. A loss may be disallowed if you purchase the same or a substantially identical security during the 61-day period beginning 30 days before the sale and ending 30 days afterward. Transactions in a spouse’s account or an IRA may also create complications.

Tax considerations should support your investment strategy—not replace it. Avoid selling a good long-term investment solely to create a deduction without considering asset allocation, transaction costs, and the possibility of missing a market recovery.

7. Evaluate Roth Conversions

A Roth conversion transfers money from a traditional retirement account into a Roth account. The converted amount is generally taxable in the year of the conversion, but qualified Roth withdrawals in the future may be tax-free.

A partial conversion may be worth evaluating if:

● Your taxable income for 2026 is temporarily lower than usual.

● You expect to face higher tax rates later.

● You want to reduce future required minimum distributions.

● You have enough cash outside the retirement account to pay the resulting tax.

Conversions should be analyzed carefully. A larger conversion can increase your adjusted gross income and affect deductions, credits, Medicare premiums, and other income-based provisions.

8. Understand the New Deductions for Workers and Seniors

Federal legislation introduced several temporary deductions that apply from 2025 through 2028. Depending on income and eligibility, these may include:

● A deduction of up to $25,000 for qualified tips

● A deduction of up to $12,500 for qualified overtime compensation, or $25,000 for taxpayers filing jointly

● A deduction of up to $10,000 for interest on qualified personal vehicle loans

● An additional $6,000 deduction for qualifying taxpayers age 65 or older, or up to $12,000 when both spouses qualify

Each provision has specific definitions, income phaseouts, documentation requirements, and eligibility restrictions. The phrase “no tax on overtime,” for example, generally applies only to the premium portion of eligible overtime compensation—not the employee’s entire overtime paycheck.

Review your pay statements, vehicle-purchase records, interest statements, and other documentation now instead of waiting until tax-filing season.

9. Make Strategic Business Purchases—Not Last-Minute Purchases

Business owners should review their income, expenses, equipment needs, payroll, estimated taxes, and retirement-plan opportunities before year-end.

Current law provides a permanent 100% first-year bonus-depreciation deduction for certain qualifying business property acquired after January 19, 2025.

This can create significant tax savings, but a deduction does not turn an unnecessary purchase into a sound financial decision. The equipment generally must be eligible, used for a legitimate business purpose, and placed in service—not merely ordered or paid for—within the required period.

Business owners should also evaluate:

● Section 179 expensing

● The qualified business income deduction

● Reasonable compensation for S corporation owners

● Accountable reimbursement plans

● Health-insurance and retirement-plan deductions

● Proper payments to family members who perform legitimate work

● The timing of recognizing income and deductible expenses

● Whether the current business entity remains appropriate

Payments to family members must correspond to actual work, reasonable compensation, proper recordkeeping, and applicable payroll and tax-reporting requirements.

10. Review New York PTET Planning

Eligible New York partnerships and S corporations should evaluate the Pass-Through Entity Tax, or PTET.

The election generally must be made by March 15 of the applicable tax year and ordinarily cannot be made retroactively after that deadline. Businesses that elected PTET for 2026 should review their estimated payments and owner allocations before year-end. Businesses that did not make the election should add the 2027 deadline to their planning calendars now.

PTET can still be valuable, but its benefit should be coordinated with the expanded federal SALT deduction and each owner’s individual tax situation.

11. Review Withholding and Estimated Tax Payments

Tax savings and tax payments are two different matters. Even after implementing sound strategies, you could face penalties if you did not pay enough tax during the year.

Review:

● Federal and New York withholding

● Your spouse’s income

● Business profits

● Investment gains

● Bonuses

● Rental income

● Estimated tax payments already submitted

If you have underpaid, increasing the withholding from your remaining paychecks may be especially effective in some cases because federal withholding is generally treated as having been paid evenly throughout the year.

Do Not Wait Until December

The most valuable part of tax planning is having options.

By late December, it may be too late to adjust payroll contributions, complete business purchases, process charitable donations, establish certain retirement plans, or properly document a strategy.

A productive year-end tax review should answer four questions:

1. What will my approximate 2026 tax liability be?

2. Am I taking advantage of every strategy for which I legitimately qualify?

3. Do I have sufficient withholding and estimated tax payments?

4. How will today’s decisions affect my finances in 2027 and beyond?

Turn Tax Planning Into Wealth Planning

A sound tax strategy should do more than reduce a single year’s tax bill. It should help you preserve cash flow, invest efficiently, protect your family, grow your business, and build long-term wealth.

At Tolosa Wealth Management, we help individuals, families, and business owners take a proactive approach to tax strategy and financial planning. Instead of waiting until tax season to discover what happened, we help our clients evaluate their options while there is still time to make a difference.

Schedule your year-end tax-planning consultation today and enter 2027 with a clearer strategy.

This article is provided for general educational purposes only and does not constitute individualized tax, legal, or investment advice. Tax rules are complex, and eligibility depends on each taxpayer’s particular circumstances. Consult an appropriately qualified professional before implementing any strategy.