Why smart 2026 tax planning starts today

Far too many American taxpayers save tax planning for the week of April 15, but waiting until filing season to start thinking about minimizing tax liability is not a winning strategy.

In fact, by the time most Americans start thinking about taxes, the decisions that will most impact their wallets come Tax Day already have been made months earlier in payroll systems, retirement accounts and investment portfolios.

As we head into the 2025 tax paying season, the time to start thinking about your 2026 tax strategy is now. Here are some tips for making the most of your paycheck well before Uncle Sam comes to call.

Review your withholdings and contributions

For full-time employees, one of the most impactful things you can do to mitigate your annual tax burden is review how much of your paycheck is being withheld at the start of the year. One major misconception about tax season is the idea that receiving a large tax refund is a good thing. In reality, a refund often means you withheld more than necessary throughout the year, effectively giving the government an interest-free loan out of your own pocket, when you could have put that money to work in ways that could generate more income. Not the most strategic financial choice.

Many employers and payroll providers offer W-4 and withholding calculators that help individuals factor in total income, including bonuses and investment activity, into their withholding strategy.

While changing how much you’re withholding early in the year won’t change how much tax you owe overall, it can help to improve cash flow throughout the year and minimize reliance on high interest credit cards by enabling you to access money that’s rightfully yours in every paycheck, not just in a lump sum in April. That distinction, for many households, can make significant difference in their larger financial picture.

Other considerations for W-2 employees looking to reduce their tax burden include increasing contributions to a 401(k) or retirement account and increasing charitable donations to nonprofit organizations you support.

Consider the timing

When it comes to tax deductions, timing is key. One common strategy is “bunching” deductions, or intentionally grouping multiple years of eligible deductions into a single tax year to exceed the standard deduction threshold for that year. This can help taxpayers with mortgage interest, property taxes or significant amounts of annual charitable contributions increase their tax savings — especially given the recent changes in federal tax law, which bumped up the standard deduction to $15,750 for single filers and $32,500 for married couples.

Proactive and well-timed tax planning is essential to maximize the impact that real estate tax or mortgage interest payments can have on your taxes, as these expenses are not typically deductible until the payments themselves are actually due. While the rules vary by county and jurisdiction, sending a check early or prepaying for these expenses may not be enough to mitigate your tax bill unless the deductions meet IRS requirements. In practice, that means coordinating payment dates, lender statements, and year-end cutoffs to ensure the deduction is recognized in the same tax year you intend to itemize.

Timing also matters for charitable contributions. Adjusting the timing of charitable gifts can help taxpayers ensure those contributions are made when their tax deductions are the most valuable — particularly in higher income years or time periods when those contributions can be combined with other itemized expenses to give more bang for your charitable bucks.

For taxpayers with investment portfolios, strategic tax planning goes beyond well-timed deductions and withholdings — it requires ongoing attention. For example, tax loss harvesting, the practice of realizing investment losses to offset gains, is typically viewed as a year-end exercise. But waiting until December often limits the effectiveness of the strategy. Instead, investors should be monitoring their portfolios throughout the year and responding to market changes and tax benefits as they happen.

Understand the nuances of your situation

It’s essential to stay up to date on what your filing status means, and what options you have for Tax Day.

For example, if you’re married (or will be married by the end of the year), you should weigh the tax liability for yourself and for your spouse based on all the filing statuses you might select. Compare what happens when you file jointly versus what happens when you as a married couple file separately, and you may be surprised at which results in a lower overall tax bill.

Self-employed taxpayers who use the cash method of accounting, on the other hand, have an opportunity to defer income by delaying billing clients until the following year, and can sometimes even defer a bonus until the following year as well.

Additionally, if you and one or more other people are helping to financially support someone (such as an aging parent or ailing family member), but none of you individually qualifies to claim that person as a dependent, consider making a legal agreement with the other parties that ensures at least one of you can claim the individual as a dependent and capitalize the tax benefits of the situation.

Tax planning: A year-round activity

At the end of the day, there is no single deduction or loophole that will magically change your tax standing. Good and effective tax planning comes down to coordination, timing and consistency with a trusted adviser. Those three points are where many taxpayers fall short.

While the tax law changes going into effect in 2026 won’t appear on this year’s statement, they should materially influence the financial decisions you make today. With shifting limits on deductions and thresholds, planning early can help you adjust gradually and maximize your benefits in the future.

By the time April rolls around, withholding has already occurred, contribution limits may already be reached, and many of the most impactful tax timing strategies are no longer available. Incorporate a simple 15-minute review each quarter to confirm withholdings, contribution pace, charitable timing and realized gains/losses.

By starting tax planning early and treating it as a year-round process, it enables taxpayers to ask the right questions, know where they stand and make informed adjustments while there’s still time to act. That kind of proactive approach ultimately leads to better tax outcomes today, tomorrow and in the years ahead.

The biggest tax mistake isn’t what you file in April — it’s what you didn’t plan for last January.

• Doug Throneburg, CFA, CFP and CPA, is head of wealth management at Byline Bank.