Tax filing season may still be several months away, but some of the most important decisions affecting your 2026 federal income tax liability need to be made before January 1, 2027. 

Year-end tax planning is particularly important this year as taxpayers navigate changes under the One Big Beautiful Bill Act (OBBBA). Some provisions are taking effect in 2026, while taxpayers may still be adjusting to changes that became effective last year. 

As the calendar year comes to a close, here are several tax planning opportunities to consider. 

Standard Deduction vs. Itemizing 

Taxpayers generally have the option to itemize eligible deductions on Schedule A or claim the standard deduction based on their filing status. Itemizing can provide greater tax savings when total eligible deductions exceed the standard deduction, although it can make tax filing more complex. 

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 age 65 or older or blind may claim an additional standard deduction of $2,050, or $1,650 per spouse if married. Taxpayers who are both over age 65 and blind can double the additional deduction. 

Despite these relatively high standard deduction amounts, certain temporary OBBBA provisions may make itemizing more beneficial for some taxpayers in 2026. 

High-income taxpayers should also be aware of a new limitation on itemized deductions. Beginning with the 2026 tax year, the OBBBA effectively caps the value of itemized deductions for taxpayers in the highest 37% tax bracket at 35 cents per dollar, rather than 37 cents. 

Consider the New Senior Deduction 

Through the 2028 tax year, taxpayers who are age 65 or older by the end of the tax year may qualify for an additional $6,000 senior deduction. For joint filers, the deduction can reach $12,000 when both spouses qualify. 

Eligible taxpayers can claim the deduction whether they itemize or take the standard deduction. It is also available in addition to the existing extra standard deduction for seniors. 

However, income limitations apply. The deduction begins to phase out when modified adjusted gross income (MAGI) exceeds: 

• $75,000 for single filers 

• $150,000 for joint filers 

The 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. 

If your MAGI is approaching the phaseout threshold, year-end planning may help maximize the deduction. Depending on your circumstances, strategies could include: 

• Reducing taxable retirement plan distributions after satisfying any applicable required minimum distribution 

• Increasing retirement plan contributions if you are still working 

• Using tax loss harvesting or other investment-related strategies to reduce MAGI 

Review the New Charitable Giving Deduction Rules 

Charitable giving rules are also changing for 2026. 

Before the OBBBA, taxpayers who took the standard deduction generally couldn’t deduct charitable contributions. Beginning in 2026, nonitemizers can deduct up to $1,000 in qualifying cash donations, or $2,000 for married filing joint filers. 

The deduction generally applies to cash contributions made directly to qualifying public charities. Ineligible donations include donor-advised funds and most private foundations, as well as noncash contributions. 

For this purpose, cash donations can include contributions made through: 

• Cash 

• Check 

• Debit or credit card 

• Payment apps 

• Payroll deductions 

Proper documentation is important. Donations under $250 must be supported by a bank record, receipt or written communication from the charity. Donations of $250 or more must be substantiated by the charity. 

A New Limitation for Taxpayers Who Itemize 

The OBBBA also introduces a new limitation for taxpayers who itemize. Beginning in 2026, charitable contributions are generally deductible only to the extent they exceed 0.5% of adjusted gross income (AGI). 

For example, if your 2026 AGI is $100,000, the first $500 of charitable contributions is not deductible. 

Amounts excluded by the 0.5% floor generally can’t be carried forward unless the taxpayer also has contributions exceeding applicable percentage-of-AGI deduction limits. For example, deductions for cash contributions to public charities generally can’t exceed 60% of AGI. 

These changes may make bunching charitable contributions into a single tax year worth considering. Traditionally, taxpayers have used bunching to accumulate enough itemized deductions to exceed the standard deduction in alternating years. Concentrating charitable contributions in a single year may now also help reduce the effect of the new 0.5%-of-AGI floor. 

Whether this strategy makes sense depends on your income, other itemized deductions, and the timing of your charitable contributions. 

Evaluate the Higher SALT Deduction Cap 

The OBBBA temporarily increased the state and local tax deduction, commonly known as the SALT deduction, through the 2029 tax year. 

For 2026, taxpayers who itemize can deduct up to: 

• $40,400 for most filers 

• $20,200 for married couples filing separately 

Eligible state and local taxes can include: 

• State and local real estate taxes 

• Qualifying personal property taxes 

• Either state and local income taxes or general sales taxes, but not both 

The SALT deduction cap is scheduled to return to $10,000, or $5,000 for married taxpayers filing separately, in 2030. 

The increased 2026 limit could provide significant savings depending on your state and local tax expenses and MAGI. 

For 2026, the deduction cap is reduced by 30% of MAGI exceeding $505,000, or $252,500 for separate filers. However, the cap can’t be reduced below $10,000, or $5,000 for separate filers. Both the higher deduction cap and income threshold are scheduled to increase by 1% annually through 2029. 

If your 2026 SALT expenses are below the applicable limit, consider whether accelerating certain eligible tax payments into 2026 could increase your deduction. This might include paying property taxes before year end if they have already been assessed or making eligible state estimated income tax payments. 

Consider Tax Loss Harvesting 

If you have underperforming investments in a taxable portfolio, year-end may be an opportunity to use tax loss harvesting. 

Selling investments at a loss before year end may allow those capital losses to offset taxable capital gains you’ve already recognized. 

If your capital losses exceed your capital gains, you generally can deduct up to $3,000 of the excess against ordinary income, or $1,500 for separate filers. Unused losses can be carried forward to future tax years. 

Tax loss harvesting could also help reduce or eliminate exposure to the 3.8% net investment income tax (NIIT), which applies to some or all net investment income when MAGI exceeds: 

• $200,000 for single filers 

• $250,000 for joint filers 

• $125,000 for married taxpayers filing separately 

Because these NIIT thresholds aren’t indexed annually for inflation, more taxpayers are being affected by the tax. 

Don’t Forget the Wash-Sale Rule 

Careful timing is essential when harvesting investment losses. 

The wash-sale rule generally disallows a loss deduction if you purchase substantially identical securities within 30 days before or after the sale. The rule may 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, which defers the tax benefit rather than eliminating it. 

Don’t Wait Until Tax Filing Season 

Effective year-end tax planning happens before the year ends, not when it’s time to prepare your return. 

The OBBBA changes, combined with longstanding tax planning strategies, create both opportunities and additional considerations for taxpayers in 2026. The right approach will depend on your income, investments, deductions, and overall financial situation. 

Before December 31, review your circumstances and consider whether there are steps you can take to reduce your 2026 federal income tax liability. 

Contact TRP Sumner PLLC

This article is intended for general informational purposes only and should not be considered tax, legal, or financial advice. Tax laws and their application can vary based on individual circumstances. Before taking action based on the information discussed above, consult a qualified tax professional regarding your specific situation.