Summer may feel far removed from tax-filing season. But for strategic taxpayers, it's a great time to gather information and plot moves that may pay off when they file their 2026 return. Here are some midyear tax planning tips to consider.
Many people don't think about their individual tax rate or bracket until gearing up to file their return. But it's critical to be mindful of these important details throughout the year. So consider reviewing your projected income for the rest of 2026 now and determining whether changes to your tax bracket may be afoot.
The good news is that the One Big Beautiful Bill Act (OBBBA), enacted in July 2025, made permanent the rates established under the Tax Cuts and Jobs Act (TCJA) of 2017. These rates — 10%, 12%, 22%, 24%, 32%, 35% and 37% — are generally lower than those before the TCJA.
Tax brackets are adjusted annually for inflation, but the 2027 adjustments are expected to be relatively modest. So, with your tax advisor's help, you can plan with a relatively strong sense of certainty about how next year's brackets will compare to this year's.
One particular area of tax planning to focus on is your deductible expenses. Waiting until the end of the year to look at these may limit your options. Size up your deductible expenses now to help answer a key question for all individual filers: Should I take the standard deduction or itemize?
For 2026, the basic standard deduction amounts are $16,100 for singles and married couples filing separately, $24,150 for heads of household, and $32,200 for married couples filing jointly. These will be adjusted for inflation for 2027 and beyond.
Important: In 2026, taxpayers who are age 65 or older or blind can claim an additional standard deduction of $2,050 ($1,650 per spouse if married). The amount is doubled for taxpayers both over 65 and blind.
Itemizing saves tax only if your total itemized deductions exceed your standard deduction. As you ponder whether itemizing on your 2026 return will be beneficial, review how much you expect to pay in state and local taxes (SALT), including property taxes and state income or sales taxes. Beginning in 2025, the OBBBA temporarily increased the SALT deduction limit through 2029. For 2026, the cap is $40,400 per return (half that for separate filers), though the allowable deduction begins to phase down for higher-income earners. The elevated SALT cap could make itemizing more beneficial for some taxpayers.
If it's looking like your total itemizable deductions for this year will be close to your standard deduction, determine whether you could incur enough additional itemized deduction expenditures between now and year end to surpass your standard deduction. If so, you can reduce your 2026 federal income tax liability.
Of course, you won't be able to claim those accelerated payments as itemized deductions on your 2027 tax return. But the 2027 standard deduction will be bigger than the 2026 one, thanks to the annual inflation adjustment. So, claiming the standard deduction can potentially save you more tax in 2027 than it would in 2026. (And if you still end up with enough itemized deductions in 2027 to exceed your standard deduction, you can itemize for that tax year, too.)
Important: Starting in 2026, taxpayers in the top 37% bracket face a new limitation that diminishes the tax benefit of itemized deductions. If you're likely to land in this bracket, ask your tax advisor whether income-reduction strategies or timing moves could help.
For many itemizers, the easiest deductible expense to prepay this year is a January 2027 mortgage payment. Assuming you have one, accelerating it into this year will give you 13 months of 2026 itemized home mortgage interest deductions. Although the TCJA put stricter limits on this write-off, which were retained under the OBBBA, you may not be subject to them. (Check with your tax advisor to be sure.)
Plus, beginning in 2026, mortgage insurance premiums may be deductible as mortgage interest expense. You may also be able to prepay your property tax bill that's due in early 2027 and deduct it on your 2026 return. (Ask your tax advisor about the applicable rules for both strategies.)
Do you typically give to charities? If so, look into making bigger charitable donations between now and year end to IRS-approved organizations. You can compensate by making smaller donations next year, if you wish.
Important: Bear in mind that, beginning in 2026, nonitemizers can deduct up to $1,000 ($2,000 for joint filers) of eligible cash donations. Meanwhile, itemizers face a new floor of 0.5% of adjusted gross income (AGI) on deductible charitable contributions. This generally means that only charitable donations exceeding 0.5% of your AGI are deductible if you itemize. So, if your AGI is $100,000, your first $500 of charitable donations for the year won't be deductible.
Another potential option, if feasible, is to accelerate elective medical procedures, dental work or vision care expenditures into this year. So long as you itemize, you can deduct many medical and dental expenses to the extent they exceed 7.5% of your AGI. Other eligible expenses include health insurance premiums, long-term care insurance premiums (limits apply) and prescription drugs.
If you're an investor, midyear is an excellent time to determine where you stand in terms of gains and losses. That way, you can make more informed investment decisions for the rest of the year.
The stock market has generally been up in 2026. Therefore, you've probably already collected some gains in your portfolio. But you may have sustained some losses as well. Gains and losses typically don't have a current tax impact until you realize them — that is, sell an investment held in a taxable account (not in a tax-advantaged retirement account) at a gain or loss.
What to do? If you hold investments in taxable brokerage firm accounts, consider the tax-saving advantage of selling appreciated securities that you've held for more than 12 months vs. those you've held for a shorter period. The federal income tax rate on net long-term capital gains recognized this year is 15% for most people. However, it can reach a maximum rate of 20% at high income levels.
The additional 3.8% net investment income tax also kicks in for taxpayers with modified AGI over $200,000 ($250,000 for joint filers and $125,000 for separate filers). So, the actual effective federal income tax rate on long-term capital gains can be 18.8% (15% plus 3.8%) or 23.8% (20% plus 3.8%) at higher income levels. Still, that's much better than the 40.8% maximum effective rate that can apply to net short-term capital gains (top 37% ordinary income rate plus 3.8%).
If your taxable brokerage accounts hold investments that are currently worth less than you paid for them, consider whether it makes sense to sell and realize capital losses. Under a strategy often called "harvesting losses," realized capital losses are first used to offset realized capital gains, which can reduce your capital gains tax liability.
So, if you've already realized gains for 2026 or expect to realize some before year end, harvesting losses may allow you to reduce or eliminate tax on those gains. Doing so can be especially valuable when losses offset short-term capital gains, because of the higher ordinary income rate that applies.
Should harvesting losses cause your 2026 realized capital losses to exceed your 2026 realized capital gains, the result would be a net capital loss for the year. In this situation, you can deduct up to $3,000 ($1,500 for married taxpayers filing separately) of losses per year against ordinary income. Furthermore, you can carry forward excess losses until death, and building up losses for future use could be beneficial.
To succeed at midyear tax planning, you don't have to predict every detail of your financial circumstances from now until year end. You just need to gain some degree of greater visibility, so you can make smarter decisions while there's still plenty of time to act. Contact your tax advisor to discuss which tax-saving opportunities are shaping up to be right for you.
Did you know that eligible teachers and other educators now have two federal tax-deduction options to consider? The first, which has been around for a while, is available whether or not you itemize deductions on your income tax return. It's intended for kindergarten through 12th-grade classroom teachers who incur unreimbursed out-of-pocket expenses related to their teaching activities.
For 2026, the write-off is limited to $350 ($700 for married couples filing jointly if both are eligible educators). Examples of qualified expenses include books, classroom supplies, computer equipment (including software), other classroom materials and professional development courses. For courses in health and physical education, supply costs are qualified expenses only if related to athletics.
The second is a new itemized deduction — with no dollar cap — established by last year's One Big Beautiful Bill Act. Under this tax break, qualifying expenses also include nonathletic supplies for health and physical education courses. And interscholastic sports administrators and coaches can qualify as eligible educators.
If you're an eligible educator, you may be on summer break right now. Although you certainly deserve a rest, set aside some time (if you haven't already) to total up your teaching-related, out-of-pocket expenses incurred so far in 2026.
Although the nonitemized deduction is relatively modest, every little bit helps. The itemized deduction may be more substantial, but bear in mind that it's useful only if your 2026 itemizable deductions will exceed the standard deduction. (See "Start Weighing the Standard Deduction vs. Itemizing" above.) Also, additional rules apply to both breaks. Your tax advisor can provide further details.
Get in touch today and find out how we can help you meet your objectives.
