MID-YEAR TAX PLANNING: STRATEGIES TO CONSIDER FOR 2026
Tax planning is often associated with filing season, but many opportunities may arise throughout the year. With recent legislative updates, including changes introduced under the One Big Beautiful Bill Act (OBBBA), 2026 presents a shifting landscape for both individuals and business owners. Some provisions may create new planning opportunities, while others could limit strategies that were previously effective.
Taking time mid-year to review your financial picture may help you better understand how these changes could affect your overall tax situation and long-term planning approach.
Revisit Your Payroll Elections and Contributions
One area many individuals may consider reviewing is paycheck withholding and retirement contributions. Adjustments here could influence taxable income and cash flow throughout the year. The IRS provides a paycheck checkup tool that may help evaluate whether current withholding aligns with your situation. (1)
Certain groups may want to pay closer attention:
Parents of older dependents: Tax credits for dependents age 17 and older may be reduced, which could impact overall tax liability. (1)
Higher-income households: Individuals with multiple income sources, such as bonuses, stock compensation, or partnership income, may experience greater sensitivity to tax rule changes. (1)
Taxpayers in higher-tax states: Updates to state and local tax (SALT) deductions may affect how much benefit is received, depending on income levels. (1)
Retirement contribution limits have also increased for 2026, which may create additional opportunities for tax-deferred or tax-advantaged savings:
401(k) contribution limits increase to $24,500. (1)
IRA contribution limits rise to $7,500, with catch-up contributions indexed for inflation. (1)
Individuals ages 60–63 may qualify for an additional “super catch-up” contribution of up to $11,250. (1)
This creates a limited window where eligible individuals could contribute significantly more to retirement accounts. It’s also important to note that, beginning in 2026, certain catch-up contributions for higher earners are required to be made on a Roth basis, which may shift the timing of tax benefits. (1)
Even small adjustments to withholding or contribution strategies could influence tax outcomes over time, depending on individual circumstances. (1)
Revisit SALT Strategies and PTE Elections
Changes to SALT deductions under the OBBBA may affect taxpayers differently depending on income and location. The cap on itemized SALT deductions has increased to $40,000, subject to income-based phaseouts and future adjustments. (2)
For individuals in higher-tax states, pass-through entity (PTE) elections may provide an alternative way to manage state tax exposure. This approach could allow some taxes to be paid at the entity level rather than individually, depending on eligibility and structure. (2)
Additional considerations may include:
Evaluating whether accelerating or timing SALT payments within the allowable cap could provide benefits. (2)
Comparing itemized deductions versus the standard deduction, particularly as standard deduction thresholds have also increased. (2)
Because these strategies can vary significantly based on income and filing status, modeling different scenarios may provide helpful insight. (2)
Harvest Capital Losses and Manage Gains
Tax-efficient investment management remains an important component of overall planning. While the general principles of capital gain and loss management remain consistent, income thresholds and tax brackets may shift over time. (2)
Some investors may explore:
Harvesting capital losses to offset realized gains and, where applicable, a limited amount of ordinary income. (2)
Timing the realization of gains based on current or projected tax brackets. (2)
These approaches may help manage tax exposure, though outcomes can vary depending on market conditions and individual financial goals. (2)
Build a Tax-Aware Retirement Strategy
Recent tax law changes may also present an opportunity to revisit how assets are allocated across taxable and tax-advantaged accounts. A more tax-aware approach to portfolio construction could influence long-term efficiency. (2)
Planning considerations may include:
Allocating tax-efficient investments, such as index funds or ETFs, within taxable accounts. (2)
Positioning income-generating assets thoughtfully across account types. (2)
Reviewing employer-sponsored retirement plans and available matching contributions. (2)
Evaluating Roth versus traditional contribution strategies based on current and expected future income. (2)
Looking ahead, projecting future income sources—such as required minimum distributions (RMDs), Social Security, and investment income—may help inform multi-year tax planning strategies. (2)
Additionally, certain deductions introduced under recent legislation, such as those related to tips, overtime, or vehicle loan interest, may apply in specific situations. These typically require proper documentation and eligibility verification. (2)
Evaluate Insurance Coverage and HSA Opportunities
Insurance and healthcare decisions may also play a role in tax efficiency and overall financial planning. Reviewing coverage mid-year may help ensure alignment with current income, family needs, and long-term goals. (2)
Areas to consider include:
Comparing high-deductible health plans (HDHPs) with traditional plans to determine eligibility for Health Savings Account (HSA) contributions. (2)
Reviewing life insurance coverage, including policy structure and beneficiary designations. (2)
In some cases, strategies such as permanent life insurance for dependents may be explored as part of broader financial planning, though suitability can vary based on individual circumstances. (2)
Bottom Line
Mid-year tax planning can provide an opportunity to reassess your current strategy in light of changing tax rules and personal financial developments. While no single adjustment is likely to dramatically alter your tax outcome, a combination of thoughtful, coordinated decisions may influence long-term efficiency.
Because tax laws and individual circumstances can change, strategies that may be effective in one year could produce different results in another. Taking a proactive, measured approach may help you stay aligned with your broader financial goals.
If you’re evaluating how recent tax changes could affect your situation, connecting with a qualified financial or tax professional may help you explore strategies that align with your needs.
FAQ: Mid-Year Tax Planning for 2026
What is mid-year tax planning?
Mid-year tax planning involves reviewing your income, deductions, and financial strategies before the end of the year to identify potential opportunities or risks that could affect your tax outcome.
How can I potentially reduce my tax burden in 2026?
Some individuals may explore strategies such as adjusting withholding, increasing retirement contributions, managing capital gains and losses, or reviewing deduction eligibility. The effectiveness of these strategies can vary based on individual circumstances.
What is the SALT deduction cap for 2026?
Under current legislation, the SALT deduction cap has increased to $40,000, though income-based limitations and future changes may apply.
Should I adjust my 401(k) or IRA contributions mid-year?
Depending on your financial situation, increasing contributions could provide tax advantages or support long-term savings goals. Contribution limits and eligibility requirements should be reviewed carefully.
What is tax-loss harvesting and how does it work?
Tax-loss harvesting involves selling investments at a loss to offset realized capital gains. In some cases, a limited amount of losses may also offset ordinary income, subject to IRS rules.
Why is it important to review tax strategies annually?
Tax laws, income levels, and financial goals can change over time. Regular reviews may help ensure your strategy remains aligned with current conditions and long-term objectives.
This content is provided for general educational and informational purposes only. It does not constitute personalized investment, tax, legal, or financial advice. Any examples or illustrations are hypothetical and do not reflect the results of any specific person or account. Future tax laws, investment results, and financial outcomes are uncertain and may change.
Article Sources:
(1) Huszczo, Sam. “The IRS has changed the tax rules for 2026 - here's how to keep more money and not overpay,” MorningStar. March 17, 2026. https://www.morningstar.com/news/marketwatch/2026031792/the-irs-has-changed-the-tax-rules-for-2026-heres-how-to-keep-more-money-and-not-overpay. Accessed March 17, 2026.
(2) Christian, Blake and Malachi Trujillo. “Top 12 Federal and State Tax Planning Moves for Individuals and Businesses in 2026,” HCVT. January 7, 2026. https://www.hcvt.com/alertarticle-12-Strategies-to-Maximize-After-Tax-Income. Accessed March 17, 2026.