2026 Year-End Tax Planning: Individual Tax Considerations

2026 Year-End Tax Planning: Individual Tax Considerations

October 22, 2026 

INDIVIDUAL TAX PLANNING

As another turbulent year draws to a close, taxpayers from all walks of life must cope with the ever-changing tax laws of the nation, including new rules and requirements established by the massive One Big Beautiful Bill Act (OBBBA) passed in 2025. Some OBBBA provisions became effective last year, while others kicked in this year and still others are scheduled to take effect next year and beyond.

Generally, the OBBBA provides tax-saving opportunities for individuals and small business owners, although there are potential pitfalls to avoid. Furthermore, several longstanding tax benefits, such as residential energy credits, electric vehicle (EV) credits and the Work Opportunity Tax Credit (WOTC) for hiring disadvantaged workers, are no longer on the books.

In addition, other extenuating factors—including the midterm elections and the uncertain economic climate—may have a significant impact on your tax outlook at the end of the year.

Finally, year-end tax planning should reflect other legislation enacted in recent years—including the “SECURE 2.0” law and the Tax Cuts and Jobs Act (TCJA) enacted during the president’s first term—as well as key rulings and regulations issued by the IRS. It is difficult to navigate through this maze of complex rules without expert professional guidance.

Charitable Donations

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

YEAR-END MOVE: Bunch charitable donations in the year that does you the most “tax good.” 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.

Similarly, your overall strategy may depend on a couple of OBBBA changes affecting charitable deductions. First, the OBBBA imposes a first-time-ever “haircut” of 0.5% of adjusted gross income (AGI) before any donations are deducted, effective in 2026. This new rule 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, but any excess may be carried over for up to five years.

Second, 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.

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.

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 by 1% each year from 2026 through 2029 until it reverts to $10,000 in 2030, making it $40,400 for 2026. This applies to both single and joint filers. Conversely, 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 $500,000 ($505,000 in 2026) until the deduction is reduced to $10,000.

TIP: Your SALT deduction will likely include state and local income taxes if you reside in a state with high state income taxes. Conversely, you will probably opt to deduct sales taxes if you are a resident of a state with no or a low state income tax. Residents in other states falling in the middle may face tougher decisions.

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. For example, you might arrange to have a routine year-end medical exam or a dental cleaning in late December instead of early January.

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 might as well 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).

TIP: For 2026, the flat rate began at 20.5 cents per mile, but it was raised to 23.5 cents per mile for the last six months of the year due to rising gas prices.

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.

• 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.

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 2½-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.

CONCLUSION

This 2026 Year-End Tax Letter is based on the prevailing federal tax laws, rules and regulations. Of course, it is subject to change, especially if additional tax legislation is enacted by Congress before the end of the year.

Finally, remember that this letter is intended to serve only as a general guideline. Your personal circumstances will likely require careful examination. Please call Larson & Company today at 801-313-1900 to schedule a meeting for assistance with all your tax-planning needs.  Larson and Company has developed a suite of services specifically to serve the needs of individuals and companies in a wide range of industries.

For more insights, visit our page for practical guidance on the One Big Beautiful Bill Act (OBBBA), including summaries of the key tax provisions most relevant to you and your business.

Source:  Elite Editorial Services, 2026 Year-End Tax Planning Letter, 10/22/2026

This year-end tax-planning letter is published for our clients, friends and professional associates. It is designed to provide accurate and authoritative information with respect to the subject matter covered. The information contained in this letter is not intended or written to be used for the purpose of avoiding any penalties that may be imposed under federal tax law and cannot be used by you or any other taxpayer for the purpose of avoiding such penalties. Before any action is taken based on this information, it is essential that competent, individual, professional advice be obtained.