How to prepare for Tax Day 2026

A little planning goes a long way

Tax Day comes every year, whether we like it or not. Proactive tax planning may help you manage your tax liability and support your financial goals. Here are some tips for how you can do that.

Save and invest in a tax-advantaged way

There are many ways to save and invest your money that may help cut down on your tax bill. Here are some of the main ones:

Contribute to an IRA

IRAs are tax-advantaged retirement accounts for individuals. The two main types of individual retirement accounts (IRAs), which have different tax implications, are traditional IRAs and Roth IRAs. With a traditional IRA, you may be able to make tax-deductible contributions, within limits, subject to eligibility. If you are not eligible to deduct your contribution, you may still be able to make a non-deductible contribution. Under current IRS rules, investment growth within the IRA is tax-deferred until withdrawal.

Conversely, with a Roth IRA, contributions are never tax-deductible (meaning they are after-tax contributions), but withdrawals may be withdrawn tax-free as part of a “qualified distribution” (as defined by the Internal Revenue Code). It is also worth noting that any returns made on contributions are not taxable, either.

Generally, a traditional IRA may be appropriate for people who anticipate being in a lower tax bracket after they retire. A Roth IRA may be appropriate for people who expect to be in a higher tax bracket once they retire compared to when they are working. Note that some or all of these benefits are subject to limitations on contributions and deductions that may be phased out or unavailable for those in higher income brackets.

Put money into a 401(k)

A 401(k) is a retirement savings plan sponsored by an employer. Contributions to a 401(k) are generally made with pre-tax money that your employer takes directly out of your paycheck; under current IRS rules, these contributions are generally not subject to income tax until withdrawal. Once in the account, the assets can be invested and no income taxes will be paid until you withdraw the funds.

Most 401(k) plans also permit Roth contributions that are made with after-tax dollars. These 401(k) contributions, including any investment earnings, may be withdrawn tax-free, if qualified (as defined by the IRS).

Take advantage of your HSA

A health savings account (HSA) is a tax-advantaged savings account available to those enrolled in a qualifying high-deductible health plan (HDHP) and is used to save and pay for qualified health care costs. HSA contributions and withdrawals are not subject to U.S. federal income tax provided the money is used for qualified health care expenses. Some employers offer HSAs, and non-employer HSA accounts are also available through banks and other financial services providers.

Set aside money for college tuition

If you’re putting money aside for a child or grandchild’s college education, this may help you reduce your tax bill. A 529 plan is an investing account. Earnings grow tax-free, and whenever you take the money out of a 529, as long as you’re paying for a qualified educational expense, there are no income taxes to be paid on the withdrawal.  Some states also provide a state income tax deduction for 529 contributions, generally limited to contributions to the 529 plan(s) the state sponsors.

Keep track of deductions

If you decide to itemize your taxes, be sure to keep track of all potentially deductible expenses including, subject to qualifications and limitations, property taxes and mortgage interest, charitable donations, educational expenses and unreimbursed medical bills. If you do not itemize your taxes, you will generally receive the standard deduction, which is $15,750 for single filers, $23,625 for heads of households and $31,500 for married couples filing jointly for tax year 2025. For tax year 2026, the standard deduction is $16,100 for single filers, $24,150 for heads of households and $32,200 for married couples filing jointly.

Don’t forget the tax implications of selling investments

If you’re thinking about selling assets, it’s important to understand how this could affect your tax bill. If you sell most investment and personal-use assets within one year of when you purchased it, you will likely be subject to short-term capital gains taxes on profits you make.

In contrast, if you sell an investment you have owned for more than a year, you will generally pay long-term capital gains taxes on your profit from the sale. Long-term capital gains rates are typically lower than short-term capital gains rates. Also, if you incur losses on the sale of an investment asset – subject to certain qualifications and limitations and the possible application of the “wash sale” rule – you may be able to deduct the loss to lower your tax bill, either for the current year or in future years, when you might have more net gains that you can offset. Losses from the sale of personal-use property, such as your home or car, are not deductible.

Work with a tax professional

Preparing your taxes can be overwhelming, but it doesn’t have to be. A tax professional can help you make sure you are taking advantage of available deductions and will also be up to date on changes to the tax code, which might mean that you should alter your tax plan from the previous year. A little planning, research and help from a professional can go a long way when it comes to doing your taxes.

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