Tax planning is about organizing your income, expenses, and savings to pay the least amount of tax legally.

Tax rules change every year. In 2026, the IRS updated many numbers for inflation, including tax brackets, deductions, and credits. For example, the standard deduction is $16,100 for single filers and $32,200 for married couples filing jointly. Retirement contribution limits and some tax credits have also changed.

Tax planning is not only for high earners. It applies to anyone who earns income, claims deductions or credits, or has more than one source of income. Taking time to understand these changes can help you make better decisions during the year. Here are seven simple tax planning strategies for 2026.

Strategy 1: Review Your Withholding and Estimated Tax Payments

Many individuals rely on their employer to withhold the right amount of tax from their paycheck. However, withholding is based on estimates and may not always match the actual tax owed.

Changes in income can create problems. A raise, bonus, second job, or side income increases total taxable income. If withholding does not adjust, the individual may owe more tax when filing.

The IRS updated tax brackets for 2026. This means income may fall into a different bracket than in prior years. Reviewing withholding helps ensure the correct amount of tax is paid throughout the year.

Individuals with freelance or investment income may need to make estimated tax payments. These payments help cover taxes that are not withheld automatically. Missing or underpaying estimated taxes can lead to penalties.

Reviewing withholding early allows time to make adjustments. It helps spread tax payments evenly instead of facing a large bill later.

Strategy 2: Maximize Retirement Contributions

Contributing to retirement accounts like a 401(k) or IRA can reduce your taxable income. For 2026, the IRS increased the contribution limits:

• 401(k)and 403(b): $23,000
• Traditional and Roth IRA: $7,500

If you are 50 or older, catch-up contributions are allowed.

Retirement contributions not only save taxes today but also grow tax-deferred. Planning contributions early in the year gives you more flexibility and reduces your taxable income before filing.

Tip: If your employer offers a match, try to contribute at least enough to get the full match—it’s free money.

Strategy 3: Plan Capital Gains and Investment Income

Selling investments can trigger capital gains tax. For 2026, the long-term capital gains rates are the same as prior years, but income thresholds are adjusted for inflation.

• Short-term gains (assets held less than a year) are taxed at your normal income rate.
• Long-term gains (assets held more than a year) are taxed at lower rates.

You can plan when to sell investments to minimize taxes. For example, if you have gains and losses, you can use losses to offset gains, a strategy called tax-loss harvesting.

Tip: Keep track of your investment income throughout the year to avoid surprises in April.

Strategy 4: Claim Deductions That Lower Your Taxable Income

Deductions reduce your taxable income, which can lower the amount you owe. In 2026, the standard deduction increased to $16,100 for single filers and $32,200 for married couples filing jointly.

Above-the-line deductions, like health savings account (HSA) contributions or student loan interest, reduce taxable income even if you do not itemize.

Itemized deductions, such as mortgage interest, charitable contributions, and medical expenses, are still useful for those who qualify.

Tip: Keep receipts and records for all deductible expenses. Proper documentation is required if the IRS asks.

Strategy 5: Manage Side Income and 1099 Earnings Properly

Freelance work, consulting, or gig jobs are considered self-employment income. Taxes are not withheld automatically from this income, so you may owe both income tax and self-employment tax.

Estimated tax payments are required if you expect to owe $1,000 or more in taxes at the end of the year.

Tip: Track your expenses carefully. Business expenses like home office costs, supplies, and travel can reduce taxable income.

Strategy 6: Use Tax Credits to Reduce Your Overall Tax Bill

Tax credits reduce your tax bill dollar for dollar, which can save more than deductions. Some credits are refundable, meaning you can get money back even if you don’t owe taxes.

Common credits for individuals include:

• Earned Income Tax Credit (EITC)
• Child Tax Credit
• Adoption Credit
• Education credits

The IRS has updated limits and income thresholds for these credits in 2026. Knowing if you qualify can save you hundreds or even thousands of dollars.

Tip: Check IRS tables to see if you are eligible for any credits this year.

Strategy 7: Plan Early Instead of Waiting for Tax Season

Most people wait until the end of the year or tax season to think about taxes. Planning early gives you more options. You can adjust withholding, contribute to retirement accounts, or time income and deductions for maximum benefit.

For example, if you expect a bonus or side income, planning when to receive it can help keep you in a lower tax bracket.

Tip: Review your tax situation at least once mid-year and again before December 31.

Conclusion

Tax planning is not complicated if you break it down. Understanding the IRS updates for 2026 and using these seven strategies can help you reduce your tax bill and avoid surprises.

Even small steps, like checking your withholding or contributing to a retirement account, add up. Whether you earn a salary, have side income, or invest, planning now makes filing your taxes easier and more predictable.

Start early, stay organized, and use these strategies to make the most of your 2026 taxes. Book Your 2026 Tax Planning Consultation with Sproutax Today!