Why it matters
Updated 2026 thresholds, contribution limits and planning considerations make year-end an important time to review your personal tax strategy and position your private wealth for the year ahead:
- Inflation-adjusted thresholds, surtax triggers and deduction phaseouts should shape your year-end decisions.
- SALT deduction phaseouts apply to top incomes, and the estate and gift tax exemption climbs to $15 million per person.
- New rules for charitable giving affect high-income filers, making it important to review your charitable giving.
Start Your 2026 Tax Planning Well Before December
Many of the major individual tax provisions of the One Big Beautiful Bill Act (OBBBA) are now fully in place. But a stable framework still leaves plenty of room for costly missteps and missed savings.
New thresholds, deduction limitations and updated retirement rules make it important for high-net-worth individuals (HNWI) and families to review their plans before year-end. Examining the details of your tax strategy is especially important if you manage wealth across trusts, investments, operating businesses and multiple generations.
The most effective year-end strategies rarely come together in December. They develop over time through regular conversations with your tax advisor, so important tax decisions support your larger priorities — including wealth preservation, family legacy and charitable goals.
This guide walks you through the year-end moves that matter most for 2026, from income timing to retirement planning and charitable giving. The goal is making sure you know where the opportunities and the tradeoffs are before year-end.
In this guide:
See What's New for 2026 HNWI and Family Tax Planning
The following changes for 2026 may affect your planning decisions:
- The rate structure holds. The top marginal rate stays at 37% and the top long-term capital gains rate stays at 20%. Inflation nudged the income thresholds higher, so check where your numbers land before you act.
- The estate and gift tax exemption rises to $15 million per person ($30 million per married couple), with future adjustments indexed for inflation. The scheduled drop back to roughly $7 million is off the table.
- The indexed SALT deduction cap jumps to $40,400 ($20,200 if married filing separately). It phases out above $505,000 of modified AGI (half that if separate), reverts to $10,000 above $600,000 ($300,000 if separate) and expires after 2029.
- The Roth catch-up requirement starts. If your prior-year wages top $150,000 (indexed), your age-50-plus catch-up contributions must go into an after-tax Roth account.
- Charitable gifts face a 0.5% AGI floor. Bunching or timing your giving matters more than it used to.
- Non-itemizers can’t deduct certain gifts. If you give to a private foundation or donor-advised fund, in 2026 you can’t deduct the gift on your tax return unless you itemize.
Bottom line: Predictable rates give you a steadier planning base. They don't hand you the savings automatically. That part still requires you to make decisions before December 31.
Elevated SALT Deduction Cap
For 2026, individuals who itemize can deduct up to $40,400 of eligible state and local taxes, including income and property taxes. This limit applies to both single filers and married couples filing jointly; married taxpayers filing separately have a $20,200 limit. For single and joint filers, the cap is reduced by 30% of modified adjusted gross income (MAGI) above $505,000, reaching its $10,000 minimum at approximately $606,333 of MAGI. Separate filers have different thresholds. The individual SALT cap does not apply to C corporations.
The higher cap may provide additional relief for business owners, but it does not replace pass-through entity tax (PTET) planning. OBBBA preserved the federal deduction for qualifying entity-level PTET payments, which can remain valuable when an owner’s personal state and local taxes exceed the applicable cap.
Action items
- Compare your projected federal tax result with and without a PTET election rather than assuming the higher individual cap makes the election unnecessary.
- Coordinate entity-level payments with owners’ projected income, personal deductions and state tax credits.
Time Income for Tax Impact — Deferral or Acceleration?
Timing still makes a world of difference in tax planning. Traditional advice like deferring income and accelerating deductions doesn't always apply. Your timing strategy should fit your unique financial picture.
Income timing may affect more than your bracket. It can also change your exposure to the 3.8% net investment income tax, Medicare surtaxes, charitable deduction efficiency, SALT deduction phaseouts, and alternative minimum tax (AMT)-related outcomes.
For many high-income households, the goal isn't simply lowering taxable income in one year. It's managing your adjusted gross income (AGI) across several years. Schedule an in-depth review with your tax professional now to find the best option for your situation. That conversation should guide the actions you take before the end of 2026.
- If income deferral is right for you: Look for opportunities to shift income into 2027. For example, you may be able to defer a year-end bonus, invoicing or asset sales. This lets you postpone paying tax on the income until next year, which can help if you expect a lower tax bracket, or if you want to stay under key AGI thresholds that affect deductions and credits.
- If accelerating deductions makes sense this year: Consider pulling deductible expenses into 2026. If you itemize, you might accelerate medical expenses, qualifying interest or charitable gifts. Because charitable contributions are now subject to a 0.5% AGI floor, accelerating or bunching charitable gifts into a single tax year may maximize available deductions, depending on your income and giving goals.
- If the reverse is true: Depending on your situation, it may help to take the opposite approach — accelerating income into 2026 and delaying deductions until 2027.
- If a balanced approach works best: Spreading income and deductions across 2026 and 2027 may help you avoid spikes that trigger surtaxes, AMT exposure or deduction phaseouts. A multi-year strategy can smooth your taxable income and preserve more deductions. Review your projected income and deductions with your advisor to find the most tax-efficient path forward.
Coordinate State Tax Residency and Tax-Aware Borrowing
As you review your year-end tax strategy, consider where your income is taxed and how borrowing decisions affect your after-tax costs.
Support your residency position
Changing your mailing address alone does not establish a new tax domicile. States consider your home, time spent, family and business connections, and other evidence. Separate residency tests may apply, and income sourced to a former state can remain taxable after a move.
Action item: Before a major liquidity event, review residency and income sourcing with your advisor. Keep contemporaneous travel records and documentation supporting a genuine move; no universal day-count rule settles residency.
Trace borrowing to its actual use
Interest deductibility generally follows how you use borrowed funds—not the collateral. Borrowing against investments to fund personal expenses does not automatically create deductible investment interest. Investment and business uses receive different treatment, subject to limitations.
Action item: Plan before drawing funds, keep proceeds separately identifiable and document expenditures. Investment interest deductions generally cannot exceed net investment income; business interest may also be limited. Compare after-tax borrowing costs rather than assuming an immediate deduction.
Understand 2026 Income Tax and Capital Gains Thresholds
The One Big Beautiful Bill Act (OBBBA) made the Tax Cuts and Jobs Act’s (TCJA) rate structure permanent, so the top marginal income and capital gains rates hold steady for 2026. Inflation adjustments have raised the income thresholds, and phaseouts tied to AGI still apply, so it's worth knowing exactly where you stand before year-end.
For high-income households, these thresholds do more than set your marginal rate. They also affect the tax cost of recognizing gains, converting retirement assets, bunching deductions and coordinating distributions from trusts, partnerships and investment portfolios.
- The top marginal tax rate remains 37% in 2026. For high earners, this maximum rate applies to taxable income that exceeds:
- $640,600 if single or head of household
- $768,700 if married filing jointly
- $384,350 if married filing separately
- The top capital gains rate is 20%. Your long-term capital gains and qualified dividends could be taxed at this rate in 2026 if your taxable income exceeds:
- $545,500 if single
- $613,700 if married filing jointly or a surviving spouse
- $306,850 if married filing separately
- $579,600 if head of household
- Don't forget the net investment income tax. As a top earner, you may owe an additional 3.8% net investment income tax (the unearned income Medicare contribution tax). This tax could apply to some or all of your net investment income if your modified AGI exceeds the threshold for your filing status:
- $200,000 if single or head of household
- $250,000 if married filing jointly or widowed with a dependent child
- $125,000 if married filing separately
- There's also an additional Medicare tax. You'll owe an extra 0.9% Medicare (hospital insurance) payroll tax on wages exceeding:
- $200,000 if single, head of household or a surviving spouse
- $250,000 if married filing jointly
- $125,000 if married filing separately
Tip: If your projected taxable income lands near a breakpoint, you may improve your after-tax result by managing capital gain timing, trust distributions, Roth conversions, charitable gifts or business income before year-end.
Prepare for the Opportunity Zone Deferred-Gain Deadline
For high-net-worth investors, December 31, 2026, is a major tax and liquidity milestone. Under the original Opportunity Zone program, remaining deferred gains generally become taxable on then — even if you continue holding your Qualified Opportunity Fund (QOF) investment and receive no cash distribution.
An Opportunity Zone is a designated economically-distressed community where qualifying investments may receive federal tax benefits.
The deadline triggers income recognition for 2026; it is not itself the tax-payment deadline.
- Calculate your exposure before year-end. Review your original deferred gains, prior inclusion events and applicable basis adjustments with your advisor. The amount recognized may differ from the amount originally deferred, and calculations can vary depending on the fund’s structure.
- Plan how you’ll fund the tax. A substantial liability without a corresponding distribution can strain liquidity. Coordinate your tax projection, estimated payments and available funding rather than assuming the QOF will provide the cash you need.
- Separate the original gain from future appreciation. Recognizing deferred gains in 2026 does not automatically eliminate the potential exclusion for appreciation on a qualifying QOF investment held for at least 10 years. Evaluate any sale against that longer-term benefit.
Factor in the Alternative Minimum Tax
The AMT affects fewer taxpayers than it used to, but it can still matter for high-income individuals, especially those with incentive stock options, significant capital gains or large state and local tax deductions.
- AMT planning can be counterintuitive. Traditional year-end moves like deferring income or accelerating deductions may increase liability under AMT. That's because AMT disallows certain deductions, including state and local tax (SALT) deductions, and adds back items like tax-exempt interest and incentive stock option (ISO) exercise spreads.
- You can control some AMT triggers. Your tax advisor can help you calculate AMT exposure by factoring in ISO exercises, especially if you hold the shares after exercising. They'll also consider tax-exempt interest earned on certain private-activity municipal bonds, Schedule K-1 adjustments from partnerships or trusts, and SALT deductions, which AMT disallows even though the cap has increased to $40,400 under regular tax rules.
- ISO timing matters. Exercising ISOs when your regular tax exceeds AMT can capture favorable tax treatment without triggering extra liability. Selling ISO shares within the same year (a disqualifying disposition) may also help offset AMT exposure.
- Previous ISO events may help your current tax situation. If you exercised ISOs in prior years and paid AMT, you may be eligible for AMT credits. Review your ISO history with your tax advisor to find the best approach.
- The AMT exemption is indexed for inflation. For the 2026 tax year, the AMT exemption amounts are:
- $140,200 for married taxpayers filing jointly.
- $90,100 for single filers and heads of household.
- $70,100 for married taxpayers filing separately.
- The exemption begins to phase out if your alternative minimum taxable income (AMTI) exceeds:
- $1,000,000 for joint filers.
- $500,000 for single and separate filers.
Contribute to Tax-Advantaged Retirement Accounts
Maximizing your retirement contributions is still one of the most effective ways to reduce taxable income and build long-term wealth. High income may limit your options, so review the updated 2026 thresholds and contribution limits to see where you can still contribute or convert.
- Anyone with taxable compensation can contribute to a traditional IRA. The limit is $7,500 for 2026, or $8,600 if you're age 50 or older. If you have access to a retirement plan through your job, you can't deduct those contributions if your income is greater than:
- $91,000 if single
- $149,000 if married filing jointly
- $10,000 if married filing separately
- If your income is near those limits but still below the deductibility cap, you may be able to claim a partial deduction or make a traditional nondeductible contribution. The partial deductibility cap varies based on your income, filing status and whether you or your spouse have access to a workplace retirement plan. Ask your tax advisor about the cap that applies to you.
- Contributions to a Roth IRA or Roth 401(k) are never deductible. There's no immediate tax benefit. The payoff comes later because qualified Roth distributions are completely free from federal income tax. You can contribute to a Roth IRA in 2026 if your modified AGI is less than:
- $153,000 for single filers
- $242,000 for married taxpayers filing jointly
- $10,000 for married taxpayers filing separately
- The maximum Roth IRA contribution for 2026 is $7,500, or $8,600 if you're 50 or older. An income phaseout applies, so you won't be able to contribute the full amount if your 2026 modified AGI is more than:
- $153,000 for single filers
- $242,000 if you're married filing jointly
- $0 if you're married filing separately
- You can contribute up to $24,500 to your 401(k) in 2026. If you're at least 50, the limit rises to $32,500. These limits apply across both traditional and Roth 401(k) accounts.
- Simplified Employee Pension (SEP) plans have wage-related limits. You can contribute up to $72,000 or 25% of eligible compensation in 2026, whichever is less. For sole proprietors, the 25% calculation is based on net self-employment income, which includes adjustments for factors like self-employment taxes. For employees, it's based on wages.
Tip: For higher-income participants, plan features vary. Confirm with your plan administrator whether the plan permits Roth contributions, in-plan conversions or after-tax contributions that could expand the strategies available to you.
Take Your Required Minimum Distributions
Required minimum distributions (RMDs) are the minimum amounts you must withdraw from your retirement accounts each year once you reach the required age. RMDs apply even if you’re still working, in most cases. Planning ahead helps you manage the tax consequences, especially in your first RMD year. If you also give to charity, please read the section on gifting for another planning opportunity.
- You must start taking RMDs at age 73. If you miss an RMD, you'll owe a 25% penalty on the amount you failed to withdraw. Correct it within two years and the penalty drops to 10%.
- You can defer your first RMD until April 1 of the year after you reach the required age. All later RMDs are due by December 31. Deferring the first RMD could stack two taxable distributions into one year. For example, if you turn 73 in 2026, you can take your first distribution by April 1, 2027. You'll still need your second RMD by December 31, 2027, which could mean two taxable distributions in one year.
- Roth accounts aren't subject to RMDs. Original owners of Roth IRAs, Roth 401(k)s or Roth 403(b)s face no lifetime RMDs, so you can leave the funds in place as long as you like. Beneficiaries, though, follow RMD rules.
- RMD rules differ for inherited accounts. If you inherit a retirement account, you may have to take distributions earlier, depending on the account type and your relationship to the original owner. Most non-spouse beneficiaries must deplete inherited IRAs within 10 years and may owe annual RMDs depending on the owner's age at death. Your tax advisor can help you determine when RMDs apply.
Tip: Because RMDs raise taxable income, they can affect Medicare premium surcharges, taxation of investment income and your deduction efficiency. If charitable giving is already part of your plan, a qualified charitable distribution may help reduce that tax drag.
Review Key SECURE 2.0 and Retirement Planning Updates for 2026
The Setting Every Community Up for Retirement Enhancement (SECURE) 2.0 Act continues to reshape retirement planning. For high-income taxpayers, the practical effect is less about the headlines and more about how plan administration, catch-up rules and Roth treatment change your year-end decisions.
- Penalty-free withdrawals remain available for emergencies, domestic abuse, terminal illness, and qualified disasters. Check whether your plan offers these options.
- IRA catch-up contributions are indexed for inflation. The catch-up limit for individuals 50 and older adjusts annually.
- Enhanced catch-up contributions apply for ages 60 to 63. If you're in this range, you can contribute $11,250 for 2026.
- Catch-up contributions must be after-tax. At the beginning of this year, catch-up contributions for high-income plan participants (prior-year wages above $150,000) can only go into Roth accounts.
- Plan readiness matters. Not all employers administer SECURE 2.0 changes the same way or on the same timeline. Confirm with your plan administrator how Roth catch-up contributions, employer contribution treatment and any optional features will work in 2026.
Explore the Potential Benefits of a Roth Conversion
Year-end is an appropriate time to evaluate whether converting a tax-deferred account, such as a traditional IRA or 401(k), to a Roth account could reduce future tax liability. Consider the following factors when evaluating a potential conversion in 2026:
- You'll pay more taxes this year. When you convert a traditional IRA to a Roth IRA or a traditional 401(k) to a Roth 401(k), the converted amount is taxed as ordinary income in the year of conversion. This doesn't apply to any non-deductible after-tax contributions already in the account.
- Taking the one-time tax hit can be a smart move. Once the funds sit in a designated Roth account, qualified withdrawals are tax-free. And if you have net operating losses (NOLs) or other deductions available in the conversion year, they may offset most or all of the tax liability.
- Timing still counts. Even with a more stable rate structure, Roth conversions deserve a close look, especially in years when your income is temporarily lower, your deductions are unusually high or your legacy goals favor tax-free growth for heirs. But conversions raise your income, which can trigger deduction phaseouts, Medicare income-related monthly adjustment amount surcharges and higher state taxes in places like California.
- It's a complicated decision. Is a Roth conversion a good idea? The answer depends on many factors and demands a thorough look at your current and projected income, available deductions, applicable tax rates and long-term goals. Always talk through the costs and benefits with your tax advisor before you commit.
Understand Roth-Specific SECURE 2.0 Rules
Several SECURE 2.0 provisions continue to shape how Roth accounts work inside retirement plans. These updates affect contribution types, employer plan design and rollover flexibility, all of which may influence your year-end strategy.
- Mandatory Roth catch-up contributions begin in 2026. If your prior-year wages exceed $150,000 (indexed), any catch-up contributions you make at age 50 or older must be Roth (after tax). This applies to 401(k), 403(b) and governmental 457(b) plans. Plans that don't offer Roth options will need to restrict catch-up contributions for affected participants.
- Optional Roth treatment for employer contributions. If you participate in a 401(k), 403(b) or 457(b) plan through your employer, SECURE 2.0 gives you the right to receive some or all of your matching and nonelective contributions as Roth contributions, if your plan allows it and you're fully vested. These contributions are taxable in the year they're made and reported on Form 1099-R, not through payroll.
- 529-to-Roth IRA rollovers. If you're the beneficiary of a Section 529 education savings account, you may roll unused funds into a Roth IRA, tax- and penalty-free, up to a lifetime limit of $35,000. To qualify:
- The 529 account must have been open at least 15 years.
- Contributions made in the last five years are ineligible.
- Rollovers are subject to annual Roth IRA contribution limits (e.g., $7,500 in 2026 for taxpayers younger than 50. If you’re 50 or older, the limit is $8,600).
- The account beneficiary must have earned income equal to the rollover amount.
Deduct Eligible Business Travel and Meal Expenses
Under current tax law, you can deduct business travel and meal expenses only if you're self-employed. It’s important to keep records and receipts that document expenses tied directly to your business travel:
- Required travel expenses are 100% deductible. You can deduct airfare, cab fare, hotels and other travel necessities.
- Only legitimate business expenses qualify. Outings not tied to your business don't count. Entertainment expenses remain non-deductible, even when business-related.
- You can deduct 50% of the cost of meals on business travel. That holds even if you're not conducting business during the meal. All meals and lodging must be reasonable. The IRS won't allow "lavish or extravagant" expenses.
- Mix business and pleasure, and you'll need to separate the costs. You can't deduct hotels, meals or transportation for personal days. The trip also has to be primarily for business, or you can't deduct any of the costs.
- Local business meals qualify for the same 50% deduction. You don't lose the deduction just because the meeting is in your hometown. As long as the expense is reasonable and tied to a business purpose, like hosting clients or discussing a potential deal, it's eligible.
- Use the applicable IRS standard mileage rate for 2026. From January 1 through June 30, the rate is 72.5 cents per mile and from July through December the rate is 76 cents per mile. You can deduct actual expenses instead (and might get a bigger deduction), but that requires detailed recordkeeping. Most people find the standard rate easier to manage. To claim it, keep a log of business travel that includes:
- Who you met.
- Where you went.
- The purpose of the trip.
- The number of miles traveled.
Tip: For families with operating businesses, investment entities or reimbursable family office activity, remember that strong documentation preserves these deductions if the IRS asks questions.
Track Key Tax Deductions, Thresholds and Planning Numbers for 2026
Reading the entire tax code would take a lifetime (and wouldn't be much fun). Skip that and keep these 2026 numbers handy instead.
- The standard deduction is:
- $16,100 for single filers and those married filing separately.
- $32,200 for married filing jointly and qualifying surviving spouses.
- $24,150 for head of household.
- The annual gift tax exclusion is $19,000 per recipient. You and your spouse can each give up to the limit to as many people as you choose.
- You can deduct qualified, unreimbursed medical and dental expenses for yourself, your spouse and your dependents, but only the portion that exceeds 7.5% of your AGI.
- You can deduct up to $40,400 ($20,200 if married filing separately) for state and local income, sales and property taxes, a big jump from the previous $10,000 cap. This benefit begins to phase out once your modified AGI exceeds $505,000 ($250,000 if married filing separately) and expires after 2029. For incomes above $606,333 ($300,000 if married filing separately), the deduction reverts to the original $10,000 cap ($5,000 if married filing separately).
- You can deduct mortgage interest on up to $750,000 ($375,000 for married filing separately) of qualifying debt. Mortgages originated before December 16, 2017, may still qualify for the $1 million cap ($500,000 for anyone married filing separately).
- Home equity loan interest isn't deductible unless you used the loan to make substantial home improvements.
- Personal casualty and theft losses from federally declared disasters may be deductible, but only to the extent they exceed insurance reimbursements. Business casualty and theft losses are also deductible, with fewer restrictions.
- Miscellaneous itemized deductions subject to the 2% floor, such as investment expenses and unreimbursed employee business expenses, remain nondeductible at the federal level. Talk with your advisor, though, because some states still allow them.
- Bonus depreciation is back at 100% for qualified business property acquired and placed in service after January 19, 2025. Property acquired on or before January 19, 2025, remains subject to the prior phase-down rules: generally, 40% if placed in service in 2025, 20% if placed in service in 2026 and 0% after that.
- You can carry net operating losses (NOLs) forward, limited to offsetting 80% of taxable income in any given year. Carrybacks are generally disallowed.
Complete These Important Tax Planning Action Items
Many tax planning opportunities have a firm year-end deadline. Review these action items to help avoid overlooking potential tax savings:
- Perform tax-loss harvesting. Even the most successful investment portfolio usually has some positions with unrealized losses. You may want to harvest capital losses to offset any gains you’ll recognize in 2026. If losses exceed gains, you can use up to $3,000 to offset ordinary income and carry the rest forward indefinitely.
- Tell your tax advisor about life changes. Many life events can influence your tax picture. Your advisor needs to know what’s going on so they can make the appropriate elections, adjustments and projections. Report on things like:
- Marriage or divorce.
- Births and deaths in the family.
- Job or employment changes.
- Starting a business.
- Significant expenditures (e.g., real estate purchases or college tuition).
- Consider funding or contributing to a Section 529 Plan. These accounts still offer tax-advantaged ways to fund education for family members. Under SECURE 2.0, you may also be able to roll up to $35,000 in unused 529 funds into a Roth IRA for the beneficiary (subject to annual contribution limits and eligibility rules).
- Initiate a timely Roth conversion, if appropriate. If 2026 is a good time for you to roll over funds from a traditional IRA or 401(k) to a Roth IRA, remember to complete the conversion process before December 31.
Explore Expanded Qualified Small Business Stock Opportunities
Qualified small business stock (QSBS) is stock in an eligible domestic C corporation that may qualify for a federal capital gains exclusion under Section 1202. For founders and early investors, eligibility depends on share acquisition, company assets and activities and holding period.
Understand the higher limits. For qualifying stock acquired after July 4, 2025, the dollar-based gain limit increased from $10 million to $15 million per taxpayer, per issuer, with inflation adjustments after 2026. The alternative limit of 10 times adjusted basis remains available. The company gross-asset threshold also rose from $50 million to $75 million. Earlier shares retain prior-law treatment.
Evaluate flexible exit timing. Eligible newer shares qualify for a 50% exclusion after three years, 75% after four years and 100% after five years, replacing the five-year, all-or-nothing requirement for those shares. The taxable portion of partially excluded gains can face special rates.
Consider “stacking” carefully. Gifting eligible shares to family members or properly structured nongrantor trusts may allow separate taxpayers to claim their own exclusions while preserving the donor’s holding period. Plan well before a sale: last-minute gifts and duplicative trusts can face assignment-of-income and trust-aggregation challenges.
Assess Tax-Smart Gifting Strategies
With the right strategy, your generosity can also deliver real tax benefits. But the rules have changed around the tax benefits of charitable giving. Here are some tips to help your giving make the most impact and save you money on taxes:
- Think through your charitable giving. You and your family have very personal reasons for making charitable gifts. Those reasons probably include helping others, making a difference in the community, creating a family legacy and reducing your income tax liability. While planning your annual charitable gifts, consider how layering an intentional year-end gift into your overall strategy can reduce your 2026 tax bill. For itemizers with AGI of $400,000 or more, charitable gifts are deductible only above $2,000. These deductions (and all itemized deductions) are capped at 35%, down from the previous 37%.
- Make gifts to public charities. You can claim an itemized deduction for your contributions to qualified public charities. There’s an almost limitless number of IRS-approved charities, from large eligible charities like the United Way and the American Red Cross to art museums, hospitals, educational institutions and religious groups. You can deduct cash gifts to public charities up to 60% of your AGI. If your gift is in the form of publicly traded securities, artwork or other appreciated property, you can deduct their value up to 30% of your AGI, but only if you’ve held the assets for at least a year and a day.
- Consider giving through a donor-advised fund (DAF). These charitable vehicles let you claim a tax deduction now while retaining control over when and where the funds are distributed. DAFs can be great vehicles for giving but be aware that the new rules for charitable giving apply here as well: Deductibility has a floor of 0.5% of AGI for all itemizers, not just charitable gifts. If your AGI is greater than $400,000 you may only deduct gifts above $2,000, up to 60% of AGI for cash gifts and 30% for appreciated assets.
- Establish a private foundation. A private foundation allows your family’s charitable legacies to continue through multiple generations. It offers you greater administrative control over assets and grant-making powers, with a board composed of family members and other trusted advisors. But a private foundation isn’t right for everyone. Along with their many benefits, they come with additional administrative requirements. These pay a minimum excise tax of 1.39% on their net investment income and have annual distribution requirements. Filing requirements include getting tax-exempt status and submitting annual federal and state tax returns.
- Cash gifts to a private foundation are deductible up to 30% of your AGI, but only if you itemize.
- Gifts of appreciated property are deductible up to 20% of AGI for itemizers.
- Take qualified charitable distributions from retirement accounts. You can turn RMDs into a tax-smart giving opportunity by making a qualified charitable distribution (QCD). A QCD is a direct transfer of funds from your IRA custodian to one or more public charities. Amounts up to $111,000 per person in 2026 won’t count as taxable income. For couples, that’s up to $222,000 total. (Transfer more if you like, but it will be a taxable distribution.) The 0.5% giving floor doesn’t apply to QCDs, either.
- You can begin making QCDs at age 70 ½, even though RMDs don’t start until age 73, and QCDs can satisfy all or part of your RMD for the year. Note:
- DAFs and private foundations do not qualify as QCD recipients.
- Only IRAs are eligible for QCDs, not 401(k)s or other retirement plans.
- If you’re interested in making a similar donation from another type of retirement account, talk to your advisor about potential workarounds.
- Form a charitable split-interest trust.
- A charitable remainder trust lets you donate assets like low-basis marketable securities. You’ll receive an immediate tax deduction for the present value of the charitable beneficiaries’ remainder interest and then collect an annuity stream back from the trust. At the conclusion of its term, the trust ends with a residual donation to one or more charities. The remainder must equal at least 10% of the initial fair market value of the assets placed in the trust.
- A charitable lead annuity trust (CLAT) allows you to contribute to the trust and benefit from a substantial tax deduction in the year of contribution. The trust pays out an annuity stream to the charitable entities you choose (which can include public charities, DAFs and private foundations) over the term of the trust. The remainder interest in the trust at the end of the term transfers to the residual beneficiaries that you’ve named (either individually or in trust), free of gift or estate tax. This strategy is especially useful if you’ve already used up your lifetime exemption and want to transfer additional wealth tax-efficiently.
- These charitable trusts take time to establish, and it’s important to select the right assets to contribute. Only a grantor CLAT gets an income tax deduction up front upon contribution. They also require filing annual split-interest trust tax returns with the IRS. Consult your tax and estate planning advisors if either of these split-interest trusts sound like solutions for your personal, estate, gift and charitable goals.
- Factor charitable giving considerations into your gifting plan. The IRS has many rules that affect the deductibility and net tax impact of your gift. Always work with your advisor to address these considerations before making a gift or claiming a related tax benefit:
- Substantiating charitable gifts. For all gifts above $250, you’ll need a receipt from the charity. This applies to all charities, including DAFs and your own private foundations. The receipt should:
- Be in writing (emails are okay).
- State the amount or value of the cash or property donated.
- Describe the nature of any non-cash donation (such as XX shares of ABC company stock).
- Disclose any goods or services received in return.
- Verifying the holding period and nature of gifted assets. How long you’ve held an asset you later donate can make a big difference in your tax deduction amount. You can claim the fair market value of donated assets that:
- Meet long-term holding period requirements (that’s at least a year and a day). Short-term holdings are only deductible at cost basis.
- Have readily available market quotes for the value of the stock.
- Timing your gifts for tax purposes. Any gift you initiate before midnight on December 31, 2026, counts for this tax year, even if the charity receives it in January. “Initiate” means you’ve requested an online transfer, charged a credit card or mailed a check postmarked by year-end. Many last-minute gifts aren’t considered complete in time to qualify for a current-year tax deduction. Allow plenty of time so you can be sure you’ll get the credit you’re counting on.
- Making complex gifts. Begin discussions with the receiving charity early if you plan to donate partnership interests, company stock or hard-to-value assets. Many public charities and DAF sponsors have cutoff dates in mid-December for accepting these types of gifts.
- Seeking qualified appraisals. If you donate non-cash assets worth more than $5,000, the IRS requires a qualified appraisal. For gifts of greater than $500,000, you must attach the full appraisal to your tax return. The appraisal must be:
- Prepared by a qualified appraiser.
- Dated no earlier than 60 days before the gift.
- Received before the due date of your return, including extensions.
- Bunching charitable gifts. With the 2026 standard deduction of $32,200 (married filing jointly, with half that amount available for single filers), you may want to bunch two years of donations into one to exceed the threshold and itemize. You’d then claim the larger standard deduction in alternating years. This strategy works well for recurring gifts, such as tithing or annual support for nonprofits.
Plan for Tax-Efficient Wealth Transfer
The federal estate and gift tax exemption offers an opportunity to transfer significant wealth tax-free. And while the generous exemption is now permanent, strategic planning is still essential. You may significantly benefit from acting now, especially to remove future appreciation from your estate.
- Use it or lose it — strategically. Consider making large gifts, either outright or in trust, to fully utilize your lifetime exemption. Your advisor can help you evaluate your estate makeup, cash flow and family goals. Depending on your situation, you might:
- Gift cash or marketable securities.
- Gift a partnership interest at a discount.
- Gift shares of an S- or C-corporation (including qualified small business stock) at possible discounts.
- Gift real estate (watch for reassessment rules in states like California).
- Forgive an existing intra-family loan.
- Structure part-sale/part-gift transactions.
- Gift tangible personal property (art, cars, collectibles).
- Gift partial interest in assets to get valuation discounts.
- Explore the benefits of a grantor trust. Under IRS rules, you can structure a trust that’s treated as a grantor trust for income tax purposes and a completed gift for estate and gift tax purposes.
- The assets placed in a grantor trust are excluded from your estate. Meanwhile, the trust is treated as a disregarded entity for income tax purposes, meaning you pay the taxes on its income, not the trust itself. This setup allows the trust to grow without incurring its own tax liability, effectively benefiting your beneficiaries while avoiding additional gift tax implications.
- You can also sell assets to the trust. And since the trust is ignored for income tax purposes, the sale doesn’t trigger a gain at the time of the sale.
- If you sell assets to the trust as an installment sale with a promissory note over a period of years, you don’t have to report the interest payments on the installment sale as taxable income. That’s because, for income tax purposes, it is as though you are selling an asset to yourself.
- Depending on how your trust agreement is drafted, you can include features like powers of substitution, allowing you to swap assets of equivalent value for income tax and cash flow planning. You may also choose to “toggle off” grantor status by releasing certain powers, shifting the income tax burden back to the trust when it makes sense.
- A grantor trust offers significant flexibility. By building in adaptable provisions, you can respond to future legislative shifts or changes in your personal financial situation without losing the advantages of the trust.
- Update your estate plan. It’s easy to procrastinate drafting and updating estate planning documents — but outdated or incomplete plans can be costly for your beneficiaries and prevent you from leaving the legacy you’d wanted. Avoid that outcome by taking concrete steps:
- Contact your estate planning attorney to draft or revise wills, trusts and healthcare directives.
- If you already have estate documents, take time to review them closely and make any necessary changes and updates. This is especially important if you’ve had family or financial changes (birth, death, marriage, divorce, job change, inheritance, adult children becoming financially independent, etc.)
- Confirm that all assets are properly titled. Assets in a trust need to be titled in the trust’s name, or the trust becomes useless. Setting up a trust won’t avoid probate unless you actually transfer the assets to the trust.
- Review irrevocable non-grantor trust distribution powers. If your trust allows discretionary distributions, consult with your advisor to determine whether to make them before year-end:
- Review the current 1041 income tax rates versus the rates that apply to individual beneficiaries. This can help you evaluate the potential income tax benefit of making distributions.
- For complex trusts, you can make distributions for the prior income tax year within 65 days of the trust’s year-end.
- Consider a pause or delay in making distributions if:
- The trust agreement limits the trustee’s ability to make distributions, and doing so could violate the agreement.
- Assets in the trust are protected from the beneficiaries’ creditors, and a distribution could make the distributed assets vulnerable.
- You feel that a beneficiary does not have the judgment to manage a distribution responsibly. In this case, paying taxes at the trust level may be a better idea.
- The terms of an irrevocable trust no longer meet your objectives. In this case, you should talk with your advisor because there may be ways to restructure the trust under your state’s trust laws.
- Assess additional strategies to manage exceptional wealth. If you’re dealing with a level of assets or income that pushes you into the ultra-high-net-worth category, there are more tactics you can use to manage your tax burden. Consult an experienced tax advisor to talk through estate planning techniques that could be helpful in your situation, including:
- Grantor retained annuity trusts.
- Sales to intentionally defective grantor trusts.
- Charitable lead trusts.
- Refinancing old family loans.
- The sale of remainder interests.
- Annual exclusion gifting.
- Direct payments of tuition or medical expenses.
- Funding Section 529 plans for children or grandchildren, including looking at funding with five years of annual exclusion gifts.
- Late allocation of unused generation-skipping transfer tax exemption to prior appreciated gifts.
Use Irrevocable Life Insurance Trusts Effectively
Irrevocable life insurance trusts (ILITs) remain a useful estate planning tool for high-net-worth individuals and families. They serve as both a financial asset and a strategic lever to reduce estate tax exposure.
If you’re considering establishing an ILIT, or you already have one, keep these insights in mind:
- ILITs help reduce estate tax liability. If you have an insurance policy in your own name, it’s typically part of your taxable estate. When an ILIT owns the policy and pays the premiums, the death benefit is excluded from your estate, potentially saving you millions in estate taxes.
- An ILIT provides liquidity when it’s needed most. Upon your passing, the ILIT receives the insurance payout, which can be used to loan funds to your estate. This can prevent the forced sale of illiquid assets to meet estate tax obligations, which are due nine months after death.
- You can use ILITs to achieve year-end gifting goals. The IRS treats premiums you pay into an ILIT as gifts to the trust beneficiaries. In 2026, the annual gift tax exclusion is $19,000 per recipient ($38,000 for married couples). You can also choose to prefund premiums which allow you to fund several years up front while using the current year exclusion.
- ILITs are not “set it and forget it” structures. Work with your advisor to review the trust regularly and address questions like:
- Are the ownership and beneficiary designations up to date?
- Is the policy functioning as expected? For example, has the trust experienced shortfalls in funding? Are better-suited products emerging?
- Does the ILIT still align with your overall estate plan?
- Should you file an annual gift tax return for premium payments to track gift and generation-skipping transfer exemptions?
Also be aware of “Crummey powers.” These are trust provisions that let beneficiaries temporarily withdraw contributions (often for 30 to 60 days). Doing so converts an otherwise future-interest gift into a present-interest gift that may qualify for the annual gift-tax exclusion.
Get the Most Out of Your Tax Planning
If you’re unsure where to start with your tax planning, we can help. Find out how our private tax planning advisors can help you apply the latest year-end tax strategies, minimize your tax liability and preserve wealth.
