When tax season arrives, most of the financial decisions that affect your tax return have already been made.
Your income has been earned. Investments have been bought and sold. Retirement contributions have been made—or missed. Charitable gifts have already happened. Business expenses have been paid.
That is why tax planning before December 31 can be so important.
If you expect to owe more than you would like for 2026, there may still be strategies worth considering before the year ends.
The right moves depend on your income, investments, retirement accounts, business ownership, charitable goals, and overall financial situation. But here are several areas worth reviewing.
1. Start by Estimating What Your 2026 Tax Bill Actually Looks Like
Before looking for ways to reduce your taxes, you first need an idea of where you stand.
A tax projection can estimate your:
Expected 2026 income
Federal income tax liability
Capital gains and losses
Deductions and credits
Taxes already withheld
Estimated tax payments
Potential balance due or refund
This can be especially important if something changed during the year.
Maybe you:
Received a large raise or bonus
Changed jobs
Started a business
Received significant overtime or tips
Sold investments
Sold real estate
Exercised stock options
Received a large distribution from a retirement account
Retired
Started collecting Social Security
Earned substantially more interest or dividends
Your withholding may not automatically adjust for all of those changes.
The IRS provides a Tax Withholding Estimator that uses income, withholding, deductions, credits, and estimated payments to help taxpayers estimate whether they may be withholding too much or too little.
Finding out in September, October, or November that you could owe a significant amount gives you considerably more options than finding out while preparing your return next spring.
2. Consider Increasing Pre-Tax Retirement Contributions
One of the more straightforward ways some taxpayers can reduce current taxable income is by contributing more to a traditional, pre-tax workplace retirement plan.
For 2026, employees can generally contribute up to $24,500 to a 401(k), 403(b), or governmental 457 plan. The general catch-up limit for participants age 50 or older is $8,000, while certain participants ages 60 through 63 may qualify for a higher catch-up limit of $11,250.
If you are currently contributing less than the maximum, increasing your contribution percentage for the remaining pay periods of the year may allow you to:
Put more money toward retirement
Potentially reduce current taxable income
Take greater advantage of an employer match, if available
It is important to distinguish between traditional and Roth contributions.
Traditional 401(k) contributions can generally reduce current federal taxable income. Roth 401(k) contributions generally do not provide the same current-year federal income tax reduction because the contribution is made on an after-tax basis.
What About an IRA?
For 2026, the combined contribution limit across traditional and Roth IRAs is generally $7,500, or $8,600 for someone age 50 or older.
However, contributing to a traditional IRA does not automatically mean the contribution is deductible.
Your ability to deduct a traditional IRA contribution can depend on your income, filing status, and whether you or your spouse participate in a retirement plan through work.
That makes it important to evaluate the tax impact before assuming an IRA contribution will lower your tax bill.
3. Don't Forget About Your HSA
If you are eligible to contribute to a Health Savings Account, or HSA, it can be another valuable tax-planning tool.
For 2026, the HSA contribution limit is:
$4,400 for self-only qualifying coverage
$8,750 for qualifying family coverage
Eligibility depends in part on being covered by a qualifying high-deductible health plan and meeting other requirements.
HSAs can be particularly attractive because they combine several potential tax advantages.
Eligible contributions may be deductible or excluded from income, the money can grow tax-deferred, and distributions used for qualified medical expenses can generally be received tax-free.
If you have an HSA but have contributed substantially less than the annual limit, it may be worth reviewing whether additional contributions fit within your cash-flow and financial plan.
Not every HSA contribution has to be completed by December 31, so make sure you understand the applicable deadline and contribution rules for your situation.
4. Review Your Investments for Tax-Loss Harvesting Opportunities
If you sold investments at a gain during 2026, take another look at your taxable investment accounts.
You may also own investments that are currently worth less than what you paid for them.
Selling an investment at a loss may allow that loss to offset realized capital gains elsewhere in the portfolio.
If your capital losses exceed your capital gains, individuals can generally deduct up to $3,000 of net capital losses against other income, with additional unused losses potentially carried into future tax years.
For example, suppose you realized a $15,000 capital gain earlier in the year.
You also own an investment currently sitting at an $8,000 unrealized loss.
If selling that investment also makes sense from an investment perspective, realizing the $8,000 loss could potentially offset part of the gain.
Be Careful With the Wash-Sale Rule
Tax-loss harvesting is not as simple as selling an investment at a loss and immediately buying it back.
The wash-sale rules can generally disallow a loss if you sell a stock or security at a loss and acquire substantially identical securities within the 30-day period before or after the sale.
Tax considerations also should not override sound investment decisions.
Before selling anything, consider whether the investment still belongs in your portfolio and how you would reinvest the proceeds.
We will take a deeper look at this strategy in an upcoming post on tax-loss harvesting and when it may make sense.
5. Be Strategic About Charitable Giving
If you already plan to give to charity, the way you make those gifts can sometimes matter almost as much as the amount you give.
For 2026, there is also an important change for taxpayers who take the standard deduction.
Beginning with the 2026 tax year, eligible taxpayers who do not itemize may generally deduct up to $1,000 of qualifying cash charitable contributions, or $2,000 for married couples filing jointly, when contributions are made to certain qualified organizations.
For people who itemize or have larger charitable goals, additional strategies could be worth discussing.
Donating Appreciated Investments
If you own a stock, mutual fund, or other investment that has appreciated substantially, donating the investment itself may sometimes be more tax-efficient than selling it and donating the cash.
The IRS generally allows donations of property to qualified organizations, although the amount deductible and treatment of appreciated property depend on the type of asset and other circumstances.
Qualified Charitable Distributions
Individuals age 70½ or older may also be able to make a qualified charitable distribution, or QCD, directly from an eligible IRA to a qualified charity.
A qualifying QCD is generally excluded from taxable income and may also count toward all or part of an individual's required minimum distribution.
That can make charitable giving particularly valuable to coordinate with retirement-income planning.
The important point is not to give money away simply to generate a deduction.
If charitable giving is already one of your goals, tax planning can help you evaluate how to accomplish that goal efficiently.
6. Business Owners: Review Expenses Before Year-End
Business owners may have additional planning opportunities before December 31.
Start by reviewing your year-to-date income and expenses and asking:
Are there legitimate business expenses that still need to be paid?
Are you planning to purchase equipment or technology for the business?
Have all business expenses been properly recorded?
Are business and personal expenses being kept separate?
Are there retirement-plan contributions worth considering?
Has business income been significantly higher or lower than expected?
The IRS generally requires deductible business expenses to be both ordinary and necessary for the business. Personal expenses generally cannot simply be classified as business expenses to create a tax deduction.
And remember: spending money simply to receive a tax deduction is not automatically a good financial decision.
If you spend $10,000 on something your business does not need solely because it is deductible, you still spent $10,000.
The better question is whether an expense already makes sense for the business and, if so, whether there is a tax-planning reason to complete it before or after year-end.
Business tax planning can become significantly more complex depending on entity type, accounting method, depreciation, retirement plans, payroll, and other factors, so this is an area where working with your tax professional before December can be especially valuable.
7. Make Sure You're Taking Advantage of 2026 Tax Deductions
Tax planning is not only about creating new deductions.
Sometimes the opportunity is simply making sure you know what you are already eligible to claim.
Current federal law includes several deductions that may apply to certain taxpayers, including deductions associated with:
Qualified tips
Qualified overtime compensation
Certain qualifying passenger vehicle loan interest
An enhanced deduction for qualifying seniors
These deductions have their own definitions, income phaseouts, limits, and eligibility requirements. For example, the IRS notes that the car-loan-interest deduction can be as much as $10,000 for qualifying interest, while eligible taxpayers age 65 and older may qualify for an additional senior deduction of up to $6,000 per person, subject to applicable rules and phaseouts.
If one of these provisions may apply to you, it is worth incorporating it into your 2026 tax projection rather than waiting until filing season to discover its impact.
The IRS also updated its Tax Withholding Estimator in 2026 to account for current-law provisions including tips, overtime, vehicle-loan interest, and the senior deduction.
8. Should You Do a Roth Conversion?
A Roth conversion deserves a special mention because it is commonly discussed during year-end tax planning.
However, a Roth conversion generally does not lower your current-year tax bill.
In fact, converting pre-tax retirement money to a Roth IRA generally creates taxable income in the year of conversion.
So why would someone consider doing it?
Because paying some tax today could potentially improve the person's long-term tax situation if the conversion occurs during a relatively favorable tax year.
For example, a conversion may be worth evaluating during:
A temporarily low-income year
Early retirement before required minimum distributions begin
A year with unusually large deductions or losses
A period when someone wants to reduce future pre-tax retirement balances
This is a good example of why the goal of tax planning should not always be:
“How do I pay the least possible tax this year?”
Sometimes the better question is:
“How do I manage my taxes efficiently over my lifetime?”
For a deeper explanation, see our recent article “Should I Do a Roth Conversion Before the End of the Year?”
9. Review Your Withholding and Estimated Tax Payments
Reducing your tax bill and reducing the amount you owe when you file are not necessarily the same thing.
Suppose your tax liability is $20,000.
If you had $19,000 withheld throughout the year, you may owe around $1,000 when filing.
If you had only $10,000 withheld, you may owe substantially more—even though your underlying tax liability was the same.
That is why reviewing withholding and estimated payments is an important part of year-end planning.
The IRS provides worksheets specifically for comparing projected 2026 tax liability with taxes already withheld and expected withholding for the remainder of the year.
If you appear significantly underwithheld, addressing it before year-end may help you avoid a large surprise at tax time and, depending on the circumstances, potential underpayment penalties.
Don't Make a Financial Decision Just for the Tax Deduction
This may be the most important takeaway.
A tax deduction reduces the amount of income subject to tax. It generally does not reimburse you dollar-for-dollar for what you spend.
If you are considering:
Making a large purchase
Selling an investment
Giving money to charity
Increasing a retirement contribution
Buying equipment for a business
Converting an IRA
Accelerating or delaying income
Start with whether the decision makes sense financially.
Then determine how taxes affect the decision.
Taxes should be an important part of your financial plan—but they should not necessarily be the only reason you make a financial decision.
Why Year-End Tax Planning Matters
When your tax return is prepared next year, the job is primarily to accurately report what happened during 2026.
There may be relatively little your tax preparer can do at that point to change decisions that needed to occur before December 31.
Year-end tax planning gives you the opportunity to look at the numbers before the year is over.
That may allow you to evaluate retirement contributions, investment gains and losses, charitable giving, withholding, business expenses, and other strategies while there is still time to act.
Can You Still Lower Your 2026 Tax Bill?
Depending on your situation, potentially.
But there is no single strategy that works for everyone.
Someone approaching retirement may have very different opportunities from a business owner, a young professional maximizing a 401(k), or an investor who realized significant capital gains.
At Generations Tax & Wealth Management, we help clients look at tax planning alongside investments, retirement, cash flow, and their broader financial goals.
If you would like to understand where your 2026 tax situation currently stands—and whether there are planning opportunities worth considering before December 31—schedule a conversation with our team today.
This material is intended for general educational purposes only and should not be considered individualized tax, legal, or investment advice. Tax laws, eligibility requirements, contribution limits, and individual circumstances can vary. Consult with qualified tax and financial professionals before implementing a tax-planning strategy.