As 2026 comes to an end, many of us may be reviewing strategies to help manage our tax liability. With most of the provisions of the One Big Beautiful Bill Act (OBBBA) in effect, decisions to accelerate or defer income and deductions into one particular year or another may still require attention.
A good first step is to get an understanding of your anticipated tax picture for this year, as well as for future years. This may be especially beneficial if your tax situation tends to fluctuate from year to year or you expect a significant tax event in the future. A multi-year tax projection can help identify years to accelerate or defer income or deductions and evaluate year-end planning strategies. Your tax advisor can help prepare these projections and provide guidance on other planning techniques.
For example, you might consider recognizing capital gains in the year when you expect to be in a lower capital gains bracket. If you plan to give to charity, explore bunching two years of charitable contributions in the year you are subject to higher marginal tax rates. Ultimately, if you can control when to recognize a gain or claim a deduction, choosing the appropriate time to take such actions can help you manage your potential tax liability from year to year. As you evaluate the timing of certain items, do not lose sight of your overall financial picture. Delaying income or accelerating deductions could have a negative impact on your cash flow needs.
If you are considering accelerating or deferring deductions this year, keep in mind your itemized deductions need to exceed the standard deduction to be beneficial. Also, you will want to be aware of a few OBBBA provisions taking effect in 2026, possibly affecting your deductions:
- Beginning in 2026, taxpayers who take the standard deduction may deduct up to $1,000 for single filers or $2,000 for married filing jointly for cash contributions made to qualified charities.
- For taxpayers itemizing their deductions in 2026, a new 0.5% floor for charitable deductions will take effect. The deduction is only allowed for qualified charitable contributions exceeding 0.5% of your adjusted gross income (“AGI”). For example, if your AGI is $500,000 and you make a $10,000 charitable contribution, your deduction is limited to $7,500 due to the 0.5% AGI ($2,500) floor.
- Itemized deductions for taxpayers in the 37% tax bracket will be reduced beginning this year. Generally, this reduction limits the tax benefit of those deductions to the equivalent of being in the 35% tax bracket.
Timing your income and deductions can be complicated. As you assess possible tax benefits of this strategy, you will also want to consider the potential risks and any impacts to your overall financial situation. Consulting with your financial and tax advisors before year-end can help you make informed decisions for current and future years.
IMPORTANT DISCLOSURES: The information provided is based on internal and external sources that are considered reliable; however, the accuracy of this information is not guaranteed. This piece is intended to provide accurate information regarding the subject matter discussed. It is made available with the understanding that Benjamin F. Edwards is not engaged in rendering legal, accounting or tax preparation services. Specific questions on taxes or legal matters as they relate to your individual situation should be directed to your tax or legal professional
6107218 EXP: 11/30/2027