A year-end bonus, a stock sale or a larger charitable gift can change more than one line on your tax return. For executives, business owners and families with complex finances, effective tax planning starts with understanding how those decisions work together.
The One Big Beautiful Bill Act (OBBBA), enacted in July 2025, made the individual tax rate structure permanent under current law. It also changed deductions and estate tax provisions. The old concern about tax rates expiring after 2025 has given way to a different set of planning questions.
Want to put your 2026–2027 tax plan into action?
Get LBMC’s Tax Planning Guide for detailed explanations, charts and examples covering income, investments, charitable giving, retirement and estate planning. Complete the form below to download the PDF and identify questions to discuss with your tax advisor.
What changed for individual taxpayers in 2026
Several provisions may affect your year-end decisions:
- Charitable giving: Itemizers generally can deduct otherwise eligible contributions only to the extent they exceed 0.5% of adjusted gross income (AGI), subject to other limits.
- Itemized deductions: A new limitation generally caps the federal tax benefit of affected deductions at 35% for taxpayers in the 37% bracket.
- State and local taxes: The 2026 deduction cap is $40,400, or $20,200 for married taxpayers filing separately, with reductions at higher incomes.
- Estate and gift taxes: The federal basic exclusion is $15 million per individual in 2026. Prior taxable gifts reduce the exclusion remaining for future transfers.
These rules can interact. Additional income may increase your tax bill and reduce the deductions available to offset it.
Six tax planning priorities before year-end
1. Update your income projection and tax payments
Start with what has changed since your last return. Include bonuses, equity compensation, investment gains, retirement distributions and income from a business or trust. Compare your projected tax with withholding and estimated payments already made.
For example, selling stock to fund a home purchase can create a tax obligation beyond the cash needed at closing. A business can also report taxable income to an owner without making a matching cash distribution.
Ask your advisor to project both 2026 and 2027 before accelerating or deferring income you can control. Deferral may help, but recognizing income during a lower-income year can sometimes produce a better result. Payment deadlines and underpayment penalty rules deserve a separate review.
2. Check how much of your itemized deductions you can use
The higher state and local tax (SALT) cap does not mean every household gets a $40,400 deduction. For 2026, the cap begins to decline above modified AGI of $505,000, or $252,500 for married taxpayers filing separately. The cap cannot fall below $10,000, or $5,000 for separate filers.
Compare eligible state and local income or sales taxes, property taxes, mortgage interest and charitable gifts with your standard deduction. Tennessee residents may still have eligible sales and property taxes to consider even without a state individual income tax.
If you moved, purchased another home or began working across state lines, review your filing obligations as well. Establishing residency for state tax purposes involves more than changing your mailing address.
3. Revisit how and when you make charitable gifts
The new charitable deduction floor gives you another reason to review planned gifts alongside your income projection. Before deciding when to give, ask your advisor how much of the contribution you could deduct and how the gift fits with other decisions on your return.
Consider whether combining several years of planned gifts into one year fits your charitable goals. Donating appreciated assets or contributing to a donor-advised fund may also be worth discussing. The right choice depends on the asset, recipient, timing and your overall tax position.
Eligible IRA owners can consider qualified charitable distributions, which follow separate rules and do not generate an itemized deduction. For people who do not itemize, a separate deduction begins in 2026 for eligible cash gifts, up to $1,000 or $2,000 for married couples filing jointly. Gifts to donor-advised funds and noncash gifts do not qualify for that deduction.
Review charitable contribution deduction rules before arranging a gift. Allow time for transfers, appraisals when required and written acknowledgments.
Want a closer look at the rules behind these decisions?
Download LBMC’s 2026–2027 Tax Planning Guide for detailed explanations, tax charts and examples covering charitable giving, investments, retirement and more. Keep the PDF handy as you review your options with your advisor.
4. Coordinate investment and retirement decisions
Review realized gains, available losses and planned portfolio changes with your tax and investment advisors. Selling an investment at a loss may offset gains, but wash-sale rules can restrict the deduction when substantially identical securities are purchased too close to the sale. If capital losses exceed capital gains for the year, an individual may deduct up to $3,000 of the remaining net capital loss against ordinary income ($1,500 if married filing separately). Any unused net capital loss is carried forward to future tax years until used; however, capital loss carryovers generally expire at death and do not transfer to beneficiaries.
A Roth conversion also needs a projection. The taxable portion increases income in the conversion year and may affect deduction phaseouts and income-based Medicare premiums. Compare those costs with the expected long-term benefit and how you would pay the tax.
Catch-up contributions have changed for some employees. Beginning in 2026, certain participants in covered employer plans must make catch-up contributions on a Roth basis if their 2025 wages from the plan sponsor exceeded $150,000. Confirm your plan’s requirements and payroll treatment.
Bring these questions into your broader wealth planning conversation so investment decisions and tax projections use the same assumptions.
5. Bring business ownership into your personal tax plan
An owner’s personal return and the business tax forecast need to agree. Review expected pass-through income, compensation, distributions and retirement contributions together, particularly before a sale or ownership transfer. Owners with businesses operating across state lines should also review their state and local tax obligations.
The Section 199A qualified business income deduction remains available under current law, subject to eligibility and limitations. Your income level and type of business can affect the benefit.
If you expect a major transaction in 2027, begin the discussion now. The structure and timing of a transaction can affect the tax result, and some choices become harder to change once an agreement is signed. For related business considerations, see LBMC’s tax planning strategies for Southeast businesses.
6. Review estate plans and family financial changes
The higher federal estate and gift tax exclusion removes the previous sunset concern. Your estate plan still needs to reflect your assets, family circumstances and intentions.
Review prior gifts, beneficiary designations, trust provisions and business succession plans with your tax and legal advisors. Estate or inheritance taxes at the state level can also matter, even when federal estate tax is not expected. Families considering a transfer of appreciating assets may also want to compare GRAT and IDGT estate planning strategies with their advisors.
If you or a family member has inherited a retirement account, include inherited IRA distribution and tax planning considerations in that review.
For families balancing charitable goals with income needs, charitable remainder trusts may warrant a separate discussion. Their requirements and tradeoffs call for careful tax and legal review.
If you plan to help a family member financially, review the tax effects of interest-free family loans before setting the terms.
Household changes can create tax responsibilities, too. Hiring a nanny, housekeeper or other household worker may bring employment tax and reporting obligations. Review those requirements when hiring rather than waiting until filing season.
Prepare for your tax planning conversation
Bring your latest tax return, current pay and withholding information, realized investment gains and losses, projected business income and details of planned gifts or major transactions. Tell your advisor about changes expected in 2027, including retirement, a business sale or a move.
Confirm deadlines for each action. Calendar-year Roth conversions and charitable gifts intended for 2026 generally must be completed by December 31. Some retirement contributions have later deadlines. Financial institutions and charities may need processing time before the legal deadline.
The downloadable guide brings these topics together in one reference, with additional coverage of executive compensation, real estate, family and education planning, and tax rates. Save a copy to review before your next tax planning meeting.
Individual tax planning questions
Should higher-income taxpayers automatically defer income until 2027?
No. Compare your projected tax position in both years. Deferral may help, but accelerating income can make sense in a lower-income year. Include the effect on deductions and other income-based rules.
Can I deduct charitable gifts if I take the standard deduction?
Beginning in 2026, eligible cash gifts to qualifying organizations may qualify for a separate deduction of up to $1,000, or $2,000 for married couples filing jointly. Donor-advised fund contributions and noncash gifts do not qualify.
Does the higher estate tax exclusion mean my estate plan can wait?
No. Prior gifts, asset ownership, state taxes, beneficiaries and succession goals still matter. Review the plan when your finances or family circumstances change.
Which tax planning opportunities deserve a closer look?
Get LBMC’s 2026–2027 Tax Planning Guide to review strategies for your income, investments, charitable gifts and estate plan. Download the PDF for detailed explanations, charts and examples you can use to prepare questions for your tax advisor.
Download the 2026–2027 Tax Planning Guide
Prefer to read online? Access the web-based tax planning guide.
Have a question about your situation? Connect with LBMC’s Individual & Private Client Tax team.
April Mitchell, CPA, is a Tax Shareholder with LBMC’s Wealth Advisors team in Knoxville. Learn more about LBMC’s Knoxville tax services.
LBMC tax tips are provided as an informational and educational service for clients and friends of the firm. The communication is high-level and should not be considered as legal or tax advice to take any specific action. Individuals should consult with their personal tax or legal advisors before making any tax or legal-related decisions. In addition, the information and data presented are based on sources believed to be reliable, but we do not guarantee their accuracy or completeness. The information is current as of the date indicated and is subject to change without notice.
