As 2026 draws to a close, take a look at your expected income and deductions for both 2026 and 2027. Comparing the two years can help you decide when to make charitable gifts, realize investment gains or losses, and take retirement distributions. With several provisions of the One Big Beautiful Bill Act (OBBBA) taking effect in 2026, it’s also worth revisiting strategies that worked for you last year. Below, we outline key changes and practical steps to consider before year-end.

Charitable Donations

The tax law allows you to deduct charitable donations within generous limits if you meet stated recordkeeping requirements. But the OBBBA contains several important tax considerations.

YEAR-END MOVE: Bunch charitable donations in the year that provides the most optimal outcome. Typically, but not always, this will be a tax year in which you expect to itemize your deductions. For instance, you may shift large donations initially planned for 2027 into 2026.

Your overall strategy may depend on a couple of OBBBA changes affecting charitable deductions.

First, the OBBBA imposes a new “haircut” of 0.5% of adjusted gross income (AGI) before any donations are deducted, effective in 2026.

Second, limitations may be especially important if you are planning to donate appreciated long-term gain property that would qualify for a deduction equal to the property’s fair market value (FMV). The deduction for property is limited to 30% of AGI, whereas monetary contributions are limited to 60% of your AGI. If giving a combination of property and cash, the 30% limitation continues to apply along with an overall contribution limitation of 50% instead of the 60% limitation available where only monetary contributions are made. Any excess above these thresholds may be carried over for up to five years.

The OBBBA also allows a deduction of up to $1,000 of monetary gifts for non-itemizers, beginning in 2026. The maximum deduction is doubled to $2,000 on a joint return.

Consider a qualified charitable distribution (QCD). If you are age 70½ or older, you can transfer up to $111,000 of IRA funds directly to charity in 2026 and exclude that amount from income rather than claiming a charitable deduction. This is impactful to bypass the AGI limitations that are present with a traditional charitable deduction. Plus, SECURE 2.0 authorizes a one-time transfer of up to $55,000 to a charitable remainder trust (CRT) or charitable gift annuity (CGA) as part of a QCD.

Donor Advised Funds (DAFs) may be an excellent vehicle for taxpayers desiring to “bunch” their itemized deductions or donate appreciated securities or other noncash assets in 2026, particularly if they are also seeking to obtain a charitable contribution deduction this year while deferring payment to the ultimate charitable beneficiary until a later date.

Tip: Do not forget that a monetary contribution made by credit card in 2026 is deductible in 2026—even if the charge is not paid until 2027.

SALT Deductions

The TCJA limited the annual deduction for state and local tax (SALT) payments to $10,000. But the OBBBA increased the cap to $40,000 subject to several special rules and income thresholds.

YEAR-END MOVE: When appropriate, you may accelerate SALT payments into 2026 to increase your current deduction. In any event, however, the SALT deduction is only available to itemizers.

The SALT deduction is comprised of a combination of (1) state and local property taxes and (2) state and local income taxes OR sales taxes. If you choose to include sales taxes, you may deduct an amount equal to your actual receipts or a flat amount from an IRS table based on state of residence and family size.

Under the OBBBA, the $40,000 cap is increased to $40,400 for 2026. This applies to both single and joint filers. The OBBBA also includes a phase-out provision that reduces the deduction limit by 30% of the amount by which modified adjusted gross income (MAGI) exceeds $505,000 until the deduction is reduced to $10,000.

Alternative Minimum Tax

The alternative minimum tax (AMT) calculation requires technical adjustments, inclusion of “tax preference items” and subtraction of an exemption amount, subject to a phase-out. After comparing AMT liability to regular tax liability, you effectively pay the higher of the two.

YEAR-END MOVE: Have your tax professional assess your AMT status. When it makes sense, you may shift certain tax preference items to 2027 to reduce AMT liability for 2026. For instance, you might postpone the exercise of incentive stock options (ISOs) that count as tax preference items for this purpose.

Due to recent legislative changes, the exemption amounts for the AMT have gradually increased, especially during the last decade. The exemption figures for 2021 through 2026 are shown below.

The OBBBA permanently establishes a favorable exemption phase-out threshold of $500,000 for single filers and $1 million for joint filers, with inflation indexing, beginning in 2026. However, the 2025 law also doubles the rate for phasing out exemptions.

Tip: If you are sure that you will have to pay the AMT in 2026 and your top AMT rate of either 26% or 28% is lower than your top regular rate—currently topping out at 37%—you might choose to accelerate income into 2026.

Medical Expenses

Currently, you may deduct qualified medical expenses in excess of 7.5% of your AGI if you itemize deductions. This typically includes doctor and dentist visits, hospital stays, prescription drugs, health insurance, etc. Other special rules may apply.

YEAR-END MOVE: If it is appropriate, shift non-emergency expenses planned for 2027 into 2026.

These extra expenses may push you over the 7.5%-of-AGI threshold for 2026 or boost an existing deduction if you have already cleared the mark. Conversely, if you absolutely will not qualify for a deduction, you could postpone these expenses to 2027.

Note that the cost of traveling for medical treatment is deductible even if comparable treatment is closer. In this case, you may deduct your actual expenses or an amount based on an IRS-approved flat rate (plus medical-related tolls and parking fees).

Interest Deductions

Although personal interest is generally nondeductible, you may be able to write off certain other types of interest, subject to special rules.

YEAR-END MOVE: It may make sense to accelerate interest expenses into 2026 if you intend to itemize this year. Assuming you stay within the tax law limits, the “extra” interest may be deductible in 2026.

Some of the main types of deductible interest expenses are as follows:

  • Mortgage interest: Limited to the interest on the first $750,000 of “acquisition debt” to buy, build or substantially improve a qualified residence. You can generally deduct mortgage interest on your principal residence and one other residence as long as the debt is secured by the property.
  • Investment interest: Limited to the amount of net investment income.
  • Student loan interest: Limited to the first $2,500 of interest on qualified student loan debt subject to a phase-out based on MAGI.
  • Auto loan interest: Limited to up to $10,000 of interest paid on qualified vehicles. This only applies to new (not used) vehicles, but most passenger cars, SUVs, minivans, and pick-up trucks assembled in the U.S. should otherwise qualify.

Tip: The auto loan interest deduction, authorized by the OBBBA, only lasts from 2025 through 2028. It is subject to a phase-out beginning with MAGIs above $100,000 for single filers and $200,000 for joint filers.

Capital Gains and Losses

Investors can manage sales of assets like securities at year-end to maximize tax benefits, but the rules are complex.

First, capital gains and losses offset each other. If you show an excess loss for the year, you can offset up to $3,000 of ordinary income and carry over any remainder to next year. Long-term capital gains from sales of securities owned longer than one year are taxed at a maximum rate of 15% (20% for high-income investors). Conversely, short-term capital gains are taxed at ordinary income rates reaching as high as 37%.

YEAR-END MOVE: Review your investment portfolio. Depending on your situation, you may decide to “harvest” capital losses to offset gains, especially high-taxed short-term gains, or realize capital gains that will be partially or wholly absorbed by losses.

Also, be aware that a 0% rate applies to taxpayers below certain income levels, such as young children. Plus, some taxpayers who ultimately pay ordinary income tax at higher rates due to their investments may qualify for the 0% tax rate on a portion of their long-term capital gains.

However, watch out for the “wash sale rule.” If you sell securities at a loss and reacquire substantially identical securities within 30 days of the sale, the tax loss is disallowed. One way to avoid this adverse result is to wait at least 31 days to reacquire substantially identical securities.

Tip: A disallowed loss increases your basis for the securities you acquire. Thus, it could reduce the amount of a taxable gain on a future sale.

Required Minimum Distributions

Typically, you must begin taking “required minimum distributions” (RMDs) from IRAs and qualified retirement plans, like 401(k) plans, after a specified age. Under SECURE 2.0, the age threshold has been raised to 73 (scheduled to increase to 75 in 2033). The amount of the RMD is based on IRS life expectancy tables and your account balance at the end of last year.

YEAR-END MOVE: Review your situation and act accordingly. If you can postpone RMDs longer, you can continue to benefit from tax-deferred growth. Otherwise, make arrangements to receive RMDs before January 1, 2027, to avoid any penalties.

Previously, the penalty for failing to take timely RMDs was equal to 50% of the shortfall. But SECURE 2.0 cuts the penalty in half to 25% (10% if corrected in a timely fashion).

Tip: Beneficiaries of qualified plans and IRAs must also comply with RMD rules. If you are a non-spouse beneficiary, you are generally required to empty out the account over ten years. There are additional rules in the year of death of an IRA owner related to the RMD. If the IRA owner was subject to the RMD but had not yet taken their RMD at the time of their death, then the beneficiary typically must take the same RMD from the inherited IRA in that year to avoid penalties.

Net Investment Income Tax

Certain high-income investors must pay the 3.8% “net investment income tax” (NIIT) in addition to their regular income tax responsibilities.

YEAR-END MOVE: Consider whether you can reduce potential NIIT exposure for 2026. The tax applies to the lesser of net investment income—including capital gains, dividends, interest, royalties, and passive income—or MAGI above $200,000 for single filers and $250,000 for joint filers.

Several potential ideas for minimizing the impact of the NIIT at the end of the year are as follows:

  • Invest in tax-free municipal bonds or municipal bond funds.
  • Harvest capital losses to offset gains.
  • Focus on growth stocks instead of dividend-paying stocks that create current income.
  • Consider participation level in business activities to determine if the activity potentially rises to the level of a nonpassive activity.

Miscellaneous

  • Minimize “kiddie tax” problems by having your child invest in tax-deferred or tax-exempt securities. For 2026, unearned income above $2,700 received by a dependent child under age 19 (or under age 24 if a full-time student) is taxed at the top tax rate of the parents.
  • Pay tuition in 2026 for a child’s semester beginning in early 2027 if you can claim one of two higher education credits. However, both credits are subject to phase-outs based on MAGI.
  • Avoid an estimated tax penalty under one of the safe-harbor exceptions. Generally, a penalty will not be imposed if you pay 90% of your current year’s tax liability or 100% of your prior year’s tax liability (110% if your AGI exceeds $150,000)
  • Empty out flexible spending accounts (FSAs) for health care or dependent care expenses if you will forfeit unused funds based on the “use-it-or-lose-it” rule. However, your employer’s plan may provide a carryover to 2027 of up to $680 of unused funds or a two-month grace period.
  • Make home improvements that qualify for mortgage interest deductions as acquisition debt. This includes loans made to substantially improve your principal residence or one other home. Note that you can no longer claim deductions for interest paid as home equity debt.
  • Weigh the benefits of a Roth IRA conversion, especially if this will be a low-tax year. Although the conversion is subject to current tax, you generally can receive tax-free distributions in retirement, unlike taxable distributions from a traditional IRA.
  • Fund retirement plan contributions. Contributions compound tax-deferred until withdrawn. The maximum 401(k) deferral for 2026 is $24,500, but larger contributions are allowed for certain older workers.

Estate and Gift Tax

The higher federal estate and gift tax exemption in 2026 makes year-end a good time to revisit your estate plan. If you’re considering gifts to family members, review how those gifts fit with any trusts you’ve established and how you want to pass on your assets over time. Below, we explain what changed and how the annual gift tax exclusion can factor into your plans for 2026 and 2027.

About 25 years ago, the federal estate and gift tax exemption was a relatively low $1 million. But it was gradually increased until it reached $10 million, indexed annually for inflation. Now the OBBBA has permanently increased the exemption to $15 million, beginning in 2026, with future indexing. The exclusion amounts for this decade are shown below.

YEAR-END MOVE: Review your estate plan and adjust if needed. For instance, your plan may implement various techniques, including the use of trusts, to maximize the benefits of the estate tax exemption.

Furthermore, you can reduce the size of your taxable estate through lifetime gifts. Thanks to the annual gift tax exclusion, you can give each recipient up to $19,000 in 2026 without any gift tax liability. Thus, a couple can effectively give tax-exempt gifts up to $38,000 per recipient.

Tip: You may “double up” by giving gifts in both December and January that qualify for the annual gift tax exclusion for 2026 and 2027, respectively. The gift tax exclusion rises to $20,000 in 2027.

Your Next Steps

The concepts included are intended to provide only a general overview of year-end tax planning. As you review your priorities, consider how decisions today could affect your tax picture in the future and support your long-term goals. Your tax professional can help you determine which strategies fit your personal situation.