Tax planning in 2026 looks different than it did just a year ago. Recent federal tax legislation introduced meaningful changes that affect deductions, credits, retirement strategies, and income planning.

At our recent Inner Circle Workshop, Brad Gotto, CEO of Fiat Wealth Management, and Carly Carlson, CEO of Fiat Tax, discussed how these updates may impact individuals, retirees, and business owners. Below are key takeaways to help you understand what changed and why proactive tax planning matters.

SALT Deduction Changes in 2026

One of the most discussed updates is the temporary increase to the State and Local Tax (SALT) deduction cap.

The SALT deduction cap increased from $10,000 to $40,000. The higher cap is subject to income phaseouts, and the provision is temporary and scheduled to sunset in four years.

For taxpayers in higher tax states, this change may increase the likelihood of itemizing deductions instead of taking the standard deduction. However, income thresholds still apply. Once adjusted gross income exceeds certain levels, the benefit begins to phase out and can return to the lower cap.

Because this change is temporary, year-by-year tax modeling is important.

Income Phaseouts and Tax Planning

Many tax deductions and credits are subject to income limits. As income increases, certain benefits may phase out or become unavailable.

Examples include student loan interest deductions, college tuition credits, Medicare premium adjustments, certain vehicle and energy efficiency credits, and adjustments to charitable deduction calculations beginning in 2026.

Understanding your projected income before year-end can influence decisions related to Roth conversions, capital gains, retirement distributions, and business income. Tax planning is not only about filing accurately. It is about managing taxable income proactively.

Filing Extensions and Tax Payments

A common misconception is that filing a tax extension provides more time to pay taxes owed.

An extension provides additional time to file your return, but taxes owed are still due by the original filing deadline. Interest and penalties may apply if payment is not made on time.

Extensions can still be useful in situations such as waiting on investment forms or K-1s, major life events, or complex business reporting. Used properly, an extension can allow for thoughtful preparation rather than rushed filing.

Roth IRAs and Tax-Free Withdrawals

Roth IRAs allow for qualified tax-free withdrawals if certain requirements are met, including holding period rules.

Roth distributions generally do not increase taxable income in the year withdrawn. This may provide flexibility in retirement income planning, especially when coordinating with Social Security benefits, Medicare premium thresholds, and capital gains.

Because eligibility rules and timing requirements apply, individualized review is important before making withdrawal decisions.

Why December 31 Matters for Tax Planning

Most tax planning decisions must be completed before December 31 to impact that calendar year.

This includes capital gains planning, charitable contributions, business expense timing, and income acceleration or deferral strategies. Certain retirement contributions and HSA contributions may be made up until the tax filing deadline. However, most strategic moves must occur before year-end.

Once the calendar turns, the opportunity to change the prior year’s outcome is generally limited.

Looking Ahead to 2026 and Beyond

Some tax provisions took effect immediately, while others phase in over time. Certain energy credits and vehicle incentives have already sunset or are scheduled to expire. Adjustments to charitable deduction calculations for higher income taxpayers are expected to begin in 2026.

Legislative changes often include expiration dates. Planning strategies may need to adapt as those provisions evolve.

Final Thoughts

Tax law changes create both complexity and opportunity. Each family’s situation is different based on income, retirement stage, business ownership, and investment structure.

Proactive tax planning throughout the year can help identify available strategies before deadlines pass. If you would like to review how current tax law changes may affect your financial plan, you can visit www.fiatwm.com and click “Contact Us” to meet with someone on our team!

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Important Disclosure

This article is for informational purposes only and should not be construed as tax, legal, or investment advice. Tax laws are subject to change. Individual circumstances vary. Consult your tax professional or financial advisor regarding your specific situation.

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