What You Need to Know Before Filing Your 2026 Taxes

Tax season often brings stress and confusion for many Americans. Most people approach their taxes chaotically.  They scramble to gather documents, hand them off to their tax preparer or enter them into tax software and pray their refund will be substantial or their bill manageable. 

Taking a strategic approach to tax planning throughout the year can save you money and eliminate unpleasant surprises when April rolls around.  

I love my CPA.  I think he is a superhero.  But he can only work with the tax forms he’s been provided.  Unless you own a business, all the tax planning you could do should have been done last year.  Your CPA is handcuffed by your previous actions as evidenced by your tax forms:  1099’s and W-2’s.

Essential Steps for Tax Planning

Start by reviewing last year's tax return. Look at your adjusted gross income, understand whether you itemized or took the standard deduction, and identify your tax bracket. Most Americans have no idea what their tax bracket is.  Heck, most people I encounter think we still have a 15% bracket even though it was reduced to 12% almost a decade ago!

Understanding your tax bracket is vital to your tax planning.  If you are close to the next tax bracket, deferring income into the following year could save you thousands.  If you’re close to the previous bracket – especially the 12 and 10% brackets – finding additional deductions can buy you some flexibility.

Using last year’s return as a proxy for this year, we can glean much more than just our bracket.  This helps us make informed decisions about IRA contributions, 401(k) adjustments, and other financial moves throughout the year.

For instance, you may be in such a low tax bracket that a 401(k) contribution is meaningless.  Likewise, you might be working hard to maximize your interest deduction but aren’t even itemizing your deductions.  You’re paying extra in interest and receiving no tax benefits!

The 2018 Tax Act changed itemization rules significantly, meaning most Americans no longer need to save receipts for charitable contributions or other deductions. Understanding these changes helps you avoid unnecessary paperwork and focus on what matters for your tax situation.

Investment Income and Year-End Planning

If you have investment accounts, understanding your 1099 form, typically called a 1099 Composite, is critical. This document combines information about interest, dividends, and capital gains from your financial services provider all in one place. Reviewing this form helps you anticipate what your tax bill might look like and make adjustments before year-end.

For many clients, we review their taxable investment events (interest, dividends, capital gains, etc.,) in November to anticipate tax liability come April of the following year.  A good year in the market could cost you a few hundred to a few thousand dollars the following Spring.  Knowing that early can help you prepare for that event, whether that’s with some portfolio modifications, finding additional deductions or deferring other income into the coming year, or just ensuring we have the resources to pay an excess tax.

None of this work will take more than a half hour.  I promise.  You will need your 2024 taxes, along with your favorite search engine.  Compare your Taxable Income (that’s line 15 on your 2025 Form1040) to the tax tables. Are you itemizing?  That’s line 12e and/or Form Schedule A.  Then look at your 1099 Composite.  Compare it to this year’s form.  Are they significantly different? A difference will likely mean a difference in your tax liability.

You’ve never really looked or understood your tax return? It might be time to change that.  We’re here to help when we can.  Also, check out our deeper dive on this subject on this week’s podcast on your preferred platform below.

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