---
title: "Your Year-End Tax Planning Guide: 6 Ways to Lower Your - Tillman Hartley"
description: "Key Takeaways: Year-end tax planning can help you lower your 2026 tax bill and manage future tax liabilities. New tax rules for 2026 make it important to r"
---

# Your Year-End Tax Planning Guide: 6 Ways to Lower Your 2026 Tax Bill

#### Key Takeaways:

- Year-end tax planning can help you lower your 2026 tax bill and manage future tax liabilities.
- New tax rules for 2026 make it important to revisit your itemized deductions, charitable giving strategies, and opportunities to reduce taxable income.
- Managing your adjusted gross income (AGI) through retirement contributions, investment decisions, and qualified charitable distributions may help lower taxes and avoid higher Medicare premiums.
- Most year-end tax strategies must be completed by December 31, so review your options with your CPA and financial planner before the deadline.

As we approach year-end, now is a good time to review your finances and look for opportunities to lower your 2026 tax bill.

Several tax-law changes took effect in 2026, including new charitable-giving rules, higher deduction limits, and income-based restrictions that may affect higher-income households. Some changes create opportunities to save, while others may make familiar tax strategies less effective.

The key is to act before December 31, when many of your options for reducing this year's tax obligation expire. Here are six areas worth reviewing with your financial advisor or tax professional.

## #1: Review Your Tax Withholding and Estimated Payments

If your income changed this year, you may need to adjust how much you've paid toward your federal taxes.

This is particularly important if you're retired and receive income from several sources, such as Social Security, pensions, IRA withdrawals, and investments. It's also worth reviewing if you sold appreciated investments, received a large bonus, or experienced a significant change in income.

The IRS generally requires you to pay taxes throughout the year, either through withholding or quarterly estimated payments. If you haven't paid enough, you could face an underpayment penalty, even if you pay your remaining tax bill by the filing deadline. For the fourth quarter of 2026, [the IRS underpayment interest rate is 7% annually](https://www.irs.gov/payments/quarterly-interest-rates), calculated using a daily rate.

One strategy worth considering is increasing your tax withholding before year-end. If you're still working, you may be able to withhold more from your remaining paychecks. If you're in retirement, you can potentially increase withholding from a taxable IRA distribution.

For example, if you withdraw $20,000 from a traditional IRA, you can instruct your account custodian to send part of that withdrawal directly to the IRS for federal income taxes. Federal withholding is generally treated as if it were paid evenly throughout the year, even when it's taken late in the year. This can help reduce or avoid underpayment penalties that might otherwise apply to late estimated payments.

Before making adjustments, ask your tax professional to estimate your total 2026 tax liability and determine whether you've paid enough to satisfy the [IRS safe-harbor rules](https://www.irs.gov/payments/underpayment-of-estimated-tax-by-individuals-penalty).

## #2: Revisit Whether You Should Itemize Deductions to Lower Your 2026 Tax Bill

If you've taken the standard deduction in recent years, it may be worth reconsidering that decision for 2026. You can generally reduce your taxable income by claiming either the standard deduction or your eligible itemized deductions, whichever is greater.

For 2026, the [standard deduction](https://taxfoundation.org/data/all/federal/2026-tax-brackets/#:~:text=2024%20TAX%20BRACKETS-,2026,Standard%20Deduction,-and%20Personal%20Exemption) is:

- **$32,200** for married couples filing jointly.
- **$16,100** for single filers.
- **$24,150** for heads of household.

[Additional standard deductions](https://www.irs.gov/newsroom/2026-filing-season-updates-and-resources-for-seniors) are available if you're 65 or older.

One significant change involves the state and local tax (SALT) deduction. For 2026, you may be able to deduct up to $40,400 in qualifying state and local income or sales taxes and property taxes, compared with the $10,000 limit that applied before 2025.

However, the higher limit begins to phase down when modified adjusted gross income exceeds $505,000. The deduction generally won't fall below $10,000, or $5,000 if you're married filing separately.

If you live in a high-tax state or own valuable real estate, the higher SALT limit could make itemizing more attractive. Before filing, compare both approaches using your actual expenses and income. Don't assume the method that worked best last year will produce the greatest savings this year.

## #3: Consider Grouping Deductions into One Tax Year

If your itemized deductions are close to the standard deduction, the timing of certain expenses could make a difference.

One approach, known as **bunching**, involves grouping deductible expenses into one year rather than spreading them evenly across multiple years. For example, suppose you typically donate $15,000 to charity each year. Instead of making equal donations in 2026 and 2027, you might contribute $30,000 in 2026 and make fewer donations next year.

Depending on your other deductions and income, this could allow you to itemize in 2026 and take the standard deduction in 2027, potentially reducing your combined taxes over the two years.

A **donor-advised fund (DAF)** can be particularly useful if you want to bunch charitable contributions without changing when your favorite organizations receive support. With a DAF, you make an irrevocable charitable contribution and may qualify for a tax deduction in the year you contribute. You can then recommend grants to eligible charities over time.

You may also be able to group [qualifying medical expenses](https://www.irs.gov/taxtopics/tc502) into one year, provided they meet IRS requirements. Keep in mind that medical expenses are generally deductible only to the extent they exceed 7.5% of your adjusted gross income.

## #4: Account for New Charitable-Giving Rules

Charitable giving remains an important tax-planning opportunity, but several new rules affect how much you can deduct in 2026.

**If you don't itemize:** You can now deduct up to $1,000 in qualifying cash contributions, or $2,000 if you're married filing jointly, even if you take the standard deduction.

This creates a potential tax benefit for people whose charitable contributions previously didn't result in a federal deduction. However, donations to donor-advised funds don't qualify for this new deduction.

**If you itemize:** A new limitation allows you to deduct charitable contributions only to the extent they exceed 0.5% of your adjusted gross income (AGI).

For example, if your AGI is $400,000, the first $2,000 of charitable contributions generally won't be deductible. If you donate $20,000, only $18,000 would be eligible for deduction, subject to other applicable limits.

In addition, taxpayers in the highest federal income tax bracket face a new restriction on the value of itemized deductions. Although the top marginal tax rate remains 37%, the tax benefit of itemized deductions is generally capped at 35% for affected taxpayers.

These changes don't necessarily mean you should give less. Instead, they make it more important to think about how and when you give.

If you're considering a substantial donation,[compare the potential benefits of giving cash, donating appreciated investments, or using a donor-advised fund](https://www.tillmanhartley.com/resources/tools.html). Depending on your situation, one approach may lower your 2026 tax bill more effectively than another.

## #5: Pay Attention to Your Adjusted Gross Income

When reviewing your tax situation, it's easy to focus on taxable income. But your adjusted gross income (AGI) can be just as important, particularly in retirement.

AGI is your total income from sources such as wages, investments, and taxable retirement withdrawals, minus certain allowable adjustments. This number can affect several other tax calculations, including:

- **Medicare premiums:** Higher income can trigger income-related surcharges on Medicare Part B and Part D premiums, generally based on your tax return from two years earlier.
- **Social Security taxes:** Additional income may cause a greater portion of your benefits to become taxable.
- **Investment taxes:** Higher-income households may owe the 3.8% net investment income tax on certain investment earnings.
- **Deductions:** Income-based phaseouts can reduce the tax benefits available to you.

Depending on your situation, you may be able to manage AGI through pretax retirement contributions, eligible health savings account contributions, deductible business expenses, or carefully timed investment sales.

Tax-loss harvesting may also help. This involves selling investments at a loss to offset realized capital gains and, within certain limits, other income.

For retirees, managing the timing and amount of taxable IRA withdrawals can be especially valuable.

Keep in mind that not every tax deduction reduces AGI. For example, itemized deductions generally reduce taxable income without lowering AGI. That's why the specific strategy matters, especially if you're trying to avoid higher Medicare premiums or other income-based costs.

## #6: Consider Qualified Charitable Distributions From Your IRA to Lower Your 2026 Tax Bill

If you're at least 70½ and have money in an eligible IRA, a qualified charitable distribution (QCD) may be one of the most tax-efficient ways to support the organizations you care about. A QCD allows you to transfer money directly from your IRA to an eligible charity without including the qualifying distribution in your taxable income.

For 2026, [the annual QCD limit](https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-iras-distributions-withdrawals) is $111,000 per person. Married couples can potentially give up to $222,000 combined if each spouse has an eligible IRA and makes qualifying distributions.

Unlike traditional charitable deductions, QCDs aren't subject to the new 0.5% AGI floor. You also don't need to itemize to benefit.

For example, suppose you typically withdraw $25,000 from your IRA each year and donate $10,000 of that amount to charity. Instead of withdrawing the full amount and making a separate donation, you could direct $10,000 from your IRA to an eligible charity through a QCD. That $10,000 would generally be excluded from your taxable income.

This approach may help reduce your AGI, potentially limiting taxes on Social Security benefits or future Medicare premium increases. QCDs can also satisfy your required minimum distribution (RMD). Just make sure the funds go directly from your IRA to an eligible charity.

If you're planning a QCD, be sure to start the process well before December 31 to allow enough time for processing.

## Make the Most of Your Year-End Tax Planning Opportunities

The window to reduce your 2026 tax bill is closing. Charitable contributions, QCDs, investment sales, and many withholding adjustments generally need to be completed by December 31. Certain eligible IRA and health savings account contributions, however, can still be made until April 15, 2027, and deducted on your 2026 tax return.

With several tax-law changes taking effect this year, it's worth revisiting your strategy rather than relying on what's worked in the past. The decisions you make now could help you lower your 2026 tax bill while managing future tax liabilities, Medicare premiums, and retirement income.

Before year-end, consider meeting with your CPA and financial planner to review your options and identify strategies that make sense for your circumstances. A coordinated approach can help you keep more of what you've earned and make the most of your wealth throughout retirement.

If you'd like to discuss your year-end planning opportunities, we'd be happy to help. [Contact us to learn more.](https://www.tillmanhartley.com/contact.html)