Year-End Tax Planning Strategies for 2026: What Taxpayers Need to Know

Standard Deduction vs. Itemized Deductions: Which is Better for 2026?

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 deductions saves tax, but it makes filing more complicated.

For 2026, the standard deduction is:

• • • $16,100 for single filers and married individuals 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 for qualifying single taxpayers
    • $1,650 per spouse for married taxpayers

Individuals who are both blind and age 65 or older may qualify for a doubled additional deduction.

Many taxpayers may assume itemizing isn’t beneficial, as standard deductions remain historically high. However, several OBBBA provisions implemented for 2026 could make itemizing more attractive, particularly for taxpayers with significant charitable contributions, state and local taxes or mortgage interest deductions.

Higher-income taxpayers should also be aware of a new limitation on itemized deductions. Beginning in 2026, taxpayers in the 37% federal income tax bracket effectively receive a tax benefit of only 35 cents per dollar of itemized deductions rather than 37 cents.

How the New Senior Deduction Can Help Reduce 2026 Taxes

One of the most notable OBBBA changes is a new temporary deduction for taxpayers age 65 and older.

Through the 2028 tax year, eligible taxpayers may claim:

• • • Up to $6,000 per qualifying individual
    • Up to $12,000 for married couples filing jointly if both spouses qualify

This deduction is available whether you claim the standard deduction or itemize deductions and is separate from the existing additional standard deduction available to seniors.

However, income limits do apply. The deduction begins phasing out when modified adjusted gross income (MAGI) exceeds:

• • • $75,000 for single taxpayers
    • $150,000 for married couples filing jointly

The deduction is reduced by 6% of income above these thresholds.

Strategies to Maximize the Senior Deduction

If your income is near the phaseout threshold, consider these strategies that may help reduce MAGI, including:

• • • Reducing discretionary taxable retirement account withdrawals
    • Increasing workplace retirement plan contributions
    • Harvesting investment losses
    • Evaluating the timing of income recognition events
    • Coordinating withdrawals from taxable and tax-advantaged accounts

Event modest planning adjustments may help preserve some or all of the deduction because the benefit phases out based on income.

Charitable Giving Tax Deductions Under the OBBBA

Charitable giving remains an important planning strategy, but several deductions rules changed beginning in 2026.

New Deductions for Nonitemizers

Historically, taxpayers who did not itemize generally received no tax benefit for charitable contributions. Beginning in 2026, non-itemizers can deduct:

• • • Up to $1,000 of qualifying cash donations
    • Up to $2,000 for married couples filing jointly

Eligible contributions generally must be made directly to qualified public charities.

The following generally do not qualify:

• • • Donor-advised fund contributions
    • Most private foundation gifts
    • Noncash contributions

Qualifying cash donations include:

• • • Cash
    • Checks
    • Debit card payments
    • Credit card payments
    • Payment app donations
    • Payroll deductions

Documentation Required for Charitable Contributions

Proper documentation is required to claim the deduction.

For contributions under $250:

• • • Bank records
    • Receipts
    • Written communication from the charity

For contributions of $250 or more:

• • • Contemporaneous written acknowledgment from the charitable organization

New Limitation for Itemizers

Beginning in 2026, taxpayers who itemize may only deduct charitable contributions that exceed 0.5% of adjusted gross income (AGI). For example:

• • • AGI: $100,000
    • 5% threshold: $500

In this scenario, the first $500 of charitable contributions is not deductible.

Consider Bunching Charitable Contributions

The new AGI limitation may increase the value of a charitable “bunching” strategy. This approach involves concentrating multiple years’ worth of charitable giving into a single tax year to:

• • • Increase deductible contributions
    • Exceed standard deduction thresholds
    • Reduce the impact of the new 0.5%-of-AGI floor

For taxpayers with consistent annual giving goals, bunching may create larger tax benefits while maintaining charitable support.

Understanding the Higher SALT Deduction Limit for 2026

The OBBBA temporarily increased the state and local tax (SALT) deduction cap through 2029.

For 2026, taxpayers who itemize may deduct up to:

• • • $40,400 for most taxpayers
    • $20,200 for married individuals filing separately

Deductible SALT Expenses May Include:

• • • State and local real estate taxes
    • Qualified personal property taxes
    • State and local income taxes or State and local sales taxes

Taxpayers must choose between deducting income taxes or sales taxes. They cannot claim both.

Income-Based SALT Limitation

The increased deduction begins to phase down when MAGI exceeds:

• • • $505,000
    • $252,500 for married taxpayers filing separately

The limitation reduces the cap by 30% of excess income but cannot reduce the deduction below:

• • • $10,000
    • $5,000 for separate filers

Year-End SALT Planning Ideas

Depending on your circumstances, additional deductions may be available if you accelerate eligible payments before year-end, including:

• • • Property taxes that have already been assessed
    • State estimated income tax payments
    • Certain deductible local taxes

The temporary increase could provide meaningful tax savings for taxpayers living in higher-tax states or those with significant property holdings.

Tax-Loss Harvesting Strategies Before Year-End

Despite market volatility during portions of 2026, many taxpayers have experienced investment gains. Before year-end, review your taxable investments accounts for opportunities to harvest losses.

What Is Tax-Loss Harvesting?

Tax-loss harvesting involves selling investments at a loss to offset taxable capital gains found elsewhere in your portfolio.

Potential benefits include:

• • • Offsetting short-term and long-term capital gains
    • Reducing current-year tax liability
    • Improving after-tax investment returns
    • Potentially reducing Net Investment Income Tax exposure

Capital Loss Deduction Limits

If capital losses exceed capital gains, taxpayers generally may deduct:

• • • Up to $3,000 annually against ordinary income
    • Up to $1,500 for married taxpayers filing separately

Unused losses can generally be carried forward indefinitely to future tax years.

Watch for the Wash-Sale Rule

The wash-sale rule may disallow losses if you purchase substantially identical securities within 30 days before the sale or 30 days after the sale. This rule can also apply to spousal transactions and certain IRA purchases.

Although the tax benefit is typically deferred rather than permanently lost, proper planning can help avoid unintended consequences.

Can Tax-Loss Harvesting Reduce NIIT Exposure?

Potentially. The 3.8% Net Investment Income Tax (NIIT) may apply when MAGI exceeds:

• • • $200,000 for single taxpayers
    • $250,000 for married couples filing jointly
    • $125,000 for married taxpayers filings separately

Reducing investment income through tax-loss harvesting may help lower or eliminate NIIT exposure in some situations.

Build Your Year-End Tax Strategy Before 2027

Once the new year begins, many tax planning opportunities disappear. New provisions take effect due to OBBBA, meaning 2026 creates both opportunities and challenges for taxpayers seeking to reduce taxable income and maximize available deductions.

Proactive planning can help you make informed decisions before the end of the year. Whether you’re evaluating charitable giving strategies, managing investment gains, optimizing SALT deductions or determining how OBBBA provisions may affect your tax situation, Boulay is ready to discuss your year-end tax planning strategies. Reach out before December 31, 2026.