Brian Seay, CFA | Founding Partner, Capital Stewards
Here's a question worth thinking about. If you gave $10,000 to your church last year, and you give the exact same $10,000 this year, will you get the same tax deduction?
For a lot of people, the answer is no. And most won't find that out until they sit down with their CPA next spring, when it's too late to do anything about it.
If you've followed Capital Stewards for any length of time, you know my soapbox this time of year: tax time is NOW. Not March. Not April. Right now, in the fourth quarter. Once the calendar flips to January, your 2026 return is mostly a history report. Until December 31, you can still change the story.
This year it matters more than usual. 2026 is the first year most of the One Big Beautiful Bill Act (OBBBA), the tax law passed in July 2025, actually lands on your return. Some of it is good news. Some of it is a new set of cliffs and phaseouts hiding in the tax code.
I covered all of this in the latest episode of The Capital Stewards Podcast. Watch the episode or read on.
Key takeaways
Start with a tax projection. 2026 introduces several income thresholds where deductions and credits switch off. You can't manage a cliff you can't see.
Charitable giving rules changed. Itemizers lose the first 0.5% of AGI in gifts, top-bracket deductions are capped at 35%, and non-itemizers can deduct up to $1,000 ($2,000 for couples) of cash gifts.
401(k) catch-ups are Roth-only for high earners. If your 2025 wages exceeded $150,000, 2026 catch-up contributions must be Roth.
Retirees get a new $6,000 senior deduction, but it phases out between $150,000 and $250,000 of income for couples, which changes Roth conversion math.
Trump Accounts: take the free $1,000, then put additional savings in a 529 or custodial Roth IRA first.
The classics still work: max out retirement and HSA contributions, take RMDs, harvest losses, and rebalance.
Why should a 2026 tax projection come before any other year-end move?
A tax projection shows exactly where your 2026 income lands relative to the new thresholds, so every other decision gets made with the map in front of you. If you have significant assets, or your household income is above roughly $250,000 to $300,000, you need one before December 31.
A projection is simple in concept. We take everything that's happened so far this year (paychecks, bonuses, gains and losses in your brokerage account, business income) and estimate what your 2026 return will look like. Then we ask: where exactly do you land, and what's just above and just below you?
The new law didn't just set tax rates. It created income thresholds where something switches on or off:
The SALT phasedown zone. The state and local tax deduction is now up to $40,400, but between about $505,000 and $600,000 of income you lose 30 cents of it for every extra dollar you earn. Your real marginal rate in that zone is much higher than your bracket.
The senior deduction phaseout. If you're 65 or older, the new $6,000 deduction starts phasing out at $150,000 of income for married couples. A Roth conversion that looks like a 22% decision might really cost closer to 28%.
The ACA subsidy cliff. The enhanced marketplace subsidies expired at the end of 2025. For a couple, going one dollar over roughly $84,600 of income can cost the entire premium tax credit, often $15,000 to $20,000.
One more thing: check your withholding. If you had a large bonus or stock vest this year, default withholding often falls short. You generally avoid underpayment penalties if you've paid in 100% of last year's tax, or 110% if your 2025 income was over $150,000.
What tax changes are new for 2026?
Six changes matter most for year-end planning in 2026: Roth-only catch-up contributions, a tougher AMT, the senior deduction, the return of the ACA subsidy cliff, Trump Accounts, and the Opportunity Zone deferral coming due. For each one, here's who it affects and what to do before December 31.
1. 401(k) catch-up contributions are now Roth-only for high earners
For 2026, the 401(k) limit is $24,500, the catch-up for those 50 and older is $8,000, and ages 60 to 63 get a larger catch-up of $11,250. The change: if your wages from that employer were over $150,000 in 2025, your catch-up contributions must go in as Roth. You lose the deduction on that money, and if your plan has no Roth option, you can't make the catch-up at all.
Is that bad? Not necessarily. Many people in their 50s already have too much in pre-tax accounts, so a little forced Roth money isn't the worst outcome. But your take-home pay and tax bill are different than you expected, so make sure your projection reflects it.
2. The AMT is back on the radar
The Alternative Minimum Tax went quiet for most people after 2017. Starting in 2026, the AMT exemption begins phasing out at $1 million of income for married couples ($500,000 for singles) and phases out twice as fast as before. The people most exposed are those exercising incentive stock options (ISOs), anyone with a large capital gain, and households with big state and local tax deductions. If you hold ISOs, don't exercise them in December without running the AMT math first.
3. The new $6,000 senior deduction
If you're 65 or older, you get an extra $6,000 deduction ($12,000 for a couple) for 2025 through 2028, whether or not you itemize. It phases out between $150,000 and $250,000 of income for couples, and between $75,000 and $175,000 for single filers.
For retirees, this year's question is: how large should my Roth conversion be? Sometimes the answer is to stop just short of the phaseout. Sometimes it's to convert right through it because the long-term math wins. That's exactly why we model it.
4. The ACA subsidy cliff is back
If you retired before 65 and buy health insurance on the marketplace, this may be the most important item on the list. The enhanced subsidies expired at the end of 2025, so premium tax credits again stop at 400% of the federal poverty level. A December mutual fund distribution, a Roth conversion, or even starting Social Security can push you over. If you land over the line, you repay every dollar of the advance subsidy.
Congress may revisit the enhanced credits in its lame-duck session, but don't plan on it. Plan on current law and treat any extension as a bonus.
5. Trump Accounts: take the free $1,000
Trump Accounts launched on July 4, 2026, as a new tax-advantaged account for children. My advice is simple: take the free $1,000, and put your additional savings somewhere better.
If you have a child born between 2025 and 2028, the U.S. Treasury will deposit a one-time $1,000 into the child's Trump Account. You just need to open the account and make the election on IRS Form 4547. If your employer offers to contribute to your child's account, take that too. It's free money.
Should you add your own money, up to the $5,000 annual limit? For most families, no, because better options exist. Growth in a Trump Account is taxed as ordinary income when it comes out. Compare that with:
A 529 plan, which grows tax-free and comes out tax-free for education. Alabama residents also get a state tax deduction for contributions to the state's CollegeCounts plan.
A custodial Roth IRA, if your child has earned income from a summer job or the family business. It grows tax-free for life.
A regular custodial or taxable account, which offers flexibility and capital gains rates instead of ordinary income rates.
So open the account, collect the $1,000, let it grow, and point your additional dollars at the 529 or the Roth first.
6. The Opportunity Zone tax bill comes due
This one is narrow but important. If you rolled a capital gain into a Qualified Opportunity Fund under the original program, that deferred gain is recognized on December 31, 2026. The tax shows up on this year's return whether or not you sold anything. Make sure the cash is set aside and your estimated payments reflect it.
Other new deductions to know about
Several smaller deductions started in 2025 and run through 2028: no tax on qualified tips (up to $25,000), a deduction for qualified overtime pay (up to $12,500 single or $25,000 married), and up to $10,000 of interest on a loan for a new, U.S.-assembled car. All three phase out at higher incomes. If you have adult children in the service industry or working a lot of overtime, make sure they know these exist.
How did charitable giving change in 2026?
Three things changed in 2026: itemizers can no longer deduct the first 0.5% of AGI in gifts, top-bracket donors get 35 cents of deduction value per dollar instead of 37, and people who take the standard deduction can now deduct up to $1,000 ($2,000 for couples) of cash gifts.
Before getting into tactics, let me say what I say every year. Be generous: to your church, to your family, and to your community. Your giving goal should drive the plan, not the tax code. But once you've decided where and how much to give, it's good stewardship to give in the smartest way possible. Give generously, but give smartly.
The three changes
New for itemizers. Only gifts above 0.5% of your adjusted gross income are deductible. With $300,000 of household income, the first $1,500 you give doesn't count, so a $10,000 gift produces an $8,500 deduction instead of $10,000.
cap for top earners. If you're in the 37% bracket, itemized deductions are now worth only 35 cents on the dollar.
Deduction for non-itemizers. If you take the standard deduction, you can deduct up to $1,000 ($2,000 for married couples) of cash gifts. It must be cash to a public charity, so gifts to donor-advised funds don't count.
Three strategies that still work
Bunching with a donor-advised fund. Instead of giving the same amount every year, combine two or three years of giving into one year. You clear the 0.5% floor once, itemize big that year, and take the standard deduction in the off years (where you can still use the new $2,000 deduction for cash gifts). A donor-advised fund makes this easy: contribute several years of giving in December, take the deduction now, and send grants to your church and charities on your normal schedule. Your church never sees a difference.
Give appreciated stock, not cash. If you hold investments that have grown significantly for more than a year, give the shares directly. You avoid capital gains tax and still deduct the full market value. If you like the investment, buy it back with the cash you would have given, which resets your cost basis higher. Most churches and charities accept stock; call their finance office. Start early, because transfers can take a week or more.
Qualified Charitable Distributions (age 70½ and older). You can give up to $111,000 in 2026 directly from your IRA to charity. It counts toward your required minimum distribution and never shows up in your income, so it sidesteps both the new floor and the 35% cap. Keeping income lower can also help with Medicare premiums and the senior deduction. For retirees who give, the QCD is usually the first dollar we use.
For larger charitable goals or a business sale on the horizon, consider charitable remainder trusts (income to you, remainder to charity) or charitable lead trusts (the reverse). Those take time to set up, so start the conversation now rather than in December.
Which year-end tax strategies still work in 2026?
The fundamentals haven't changed: maximize retirement and HSA contributions, take required distributions, plan Roth conversions, harvest losses, avoid surprise fund distributions, rebalance, and time business income. If you read our 2025 year-end post, these will look familiar. That's the point.
Max out retirement accounts
You can defer $24,500 into a 401(k) in 2026, plus catch-ups if you're 50 or older. That's only your piece: total contributions from you and your employer can reach $72,000. If you have a side business or rental income, you may be able to contribute as the employer too. Most new retirement plans must be set up by December 31, so don't wait.
Take your required minimum distributions
If you're 73 or older, take your RMDs before year-end. If you inherited an IRA, check whether you owe an annual distribution under the 10-year rule. The penalty for missing one is real, though it can be reduced if corrected quickly.
Plan Roth conversions as a campaign
Think of conversions as a series, not a one-time event. Filling a lower bracket today keeps required distributions in your 80s from pushing you into a higher one later. This year, size conversions with the senior deduction, Medicare premiums (IRMAA), and the ACA cliff in mind.
Use your HSA and FSA
The HSA is still the only triple-tax-advantaged account: deductible going in, tax-free growth, and tax-free withdrawals for medical costs. The 2026 limits are $4,400 for individuals and $8,750 for families, plus $1,000 if you're 55 or older. New this year: Bronze and Catastrophic plans bought on the ACA marketplace now qualify for HSA contributions. Your FSA, on the other hand, is often use-it-or-lose-it, so check the balance now.
Harvest losses, and maybe gains
Sell investments that are down to offset gains and up to $3,000 of ordinary income, and watch the 30-day wash-sale rule across all your accounts. In a low-income year, you may be in the 0% long-term capital gains bracket and can realize gains tax-free.
Avoid "phantom" mutual fund distributions
Mutual funds in a taxable account can pay out capital gains in December even if you didn't sell anything, which means a tax bill without the cash. ETFs largely avoid this. If a fund keeps doing this to you, especially one that's underperforming, it may be time to switch.
Rebalance
Whatever markets did this year, your portfolio has likely drifted from its targets. "Buy low, sell high" only works if you actually sell high sometimes. Trim what's grown, add to what's lagged, and get your risk back where it belongs for 2027.
Business owners: time your income
In a high-income year, push invoices into January and buy needed equipment now. 100% bonus depreciation is now permanent, as long as the equipment is in service by December 31. In a lighter year, pull income forward to fill lower brackets. You can also contribute up to $2,500 per child, tax-free to the employee, into your employees' children's Trump Accounts.
Frequently asked questions about 2026 year-end tax planning
When is the deadline for 2026 year-end tax moves? Most moves must be completed by December 31, 2026, including Roth conversions, required minimum distributions, charitable gifts, tax-loss harvesting, and Trump Account contributions. HSA and IRA contributions for 2026 can be made until April 15, 2027. Start stock gifts and account openings by early December, because they take time to process.
Are charitable donations still tax-deductible in 2026? Yes, but the rules changed. Itemizers can deduct only gifts above 0.5% of their AGI, and those in the 37% bracket receive a 35% benefit. Taxpayers who take the standard deduction can now deduct up to $1,000 ($2,000 for married couples) of cash gifts to public charities.
What is the Roth catch-up rule for 2026? If you are 50 or older and earned more than $150,000 in FICA wages from your employer in 2025, all 2026 catch-up contributions to that employer's 401(k), 403(b), or governmental 457(b) plan must be Roth contributions. If your plan has no Roth option, you cannot make catch-up contributions.
Who qualifies for the $6,000 senior deduction? Taxpayers age 65 or older qualify for an extra $6,000 deduction for tax years 2025 through 2028, whether they itemize or not. It phases out for modified AGI between $75,000 and $175,000 for single filers and between $150,000 and $250,000 for married couples filing jointly.
Should I open a Trump Account for my child? If your child was born between 2025 and 2028, open the account to claim the free $1,000 Treasury deposit. For additional savings, a 529 plan or custodial Roth IRA is usually a better choice, because Trump Account earnings are taxed as ordinary income when withdrawn.
Is a Roth conversion a good idea in 2026? It depends on your projected income. Conversions work best when they fill a lower tax bracket today. In 2026, also check whether a conversion would reduce your senior deduction, raise Medicare premiums two years from now, or push you over the ACA subsidy cliff.
Do I need a tax projection? If your household income exceeds roughly $250,000 to $300,000, or you have significant assets, a projection is the best way to see where you land relative to 2026's new thresholds before making year-end decisions.
Take the next step
If you remember three things from this post, make it these:
1. Tax time is now. You have until December 31 to change your 2026 taxes, and some moves need lead time.
2. 2026 is full of new cliffs and phaseouts. A projection is how you see them before you step off one.
3. Be generous, and be smart about it. Bunching, giving appreciated stock, and QCDs still let you do more good with the same dollars.
Taxes are personal, and this post is a starting point, not a plan. If you're a Capital Stewards client, I'll be reaching out over the next few weeks to schedule your year-end review. If you're not a client and you're looking for a fee-only fiduciary in Huntsville who will build your projection and help you act on it before year-end, start a conversation anytime or call 256-864-3399.
Listen to the full episode on The Capital Stewards Podcast.