5 Ways to Lower Your Taxable Income Before the End of 2026

1. Increase Your Retirement Contributions

One of the most common ways to reduce taxable income is to contribute more to a tax-advantaged retirement account.

For 2026, employees can contribute up to $24,500 to a 401(k), 403(b), most 457 plans, or the federal Thrift Savings Plan. The general catch-up contribution limit for participants aged 50 and older is an additional $8,000.

Traditional 401(k) contributions are generally made with pre-tax dollars. This means increasing your contribution before the end of the year may reduce the amount of wages subject to federal income tax while allowing you to save more for retirement.

You may also want to consider a traditional IRA. The IRA contribution limit for 2026 is $7,500, or $8,600 for taxpayers age 50 and older. Unlike a workplace retirement plan, you generally have until the tax-filing deadline to make an IRA contribution for the previous tax year. Keep in mind, however, that eligibility to deduct a traditional IRA contribution can depend on your income and whether you or your spouse are covered by a retirement plan at work.

Year-end tip: Check your most recent pay stub and retirement contributions. If you haven’t reached your workplace plan’s annual limit and your budget allows it, consider increasing your contribution percentage for your remaining 2026 paychecks.

2. Take Advantage of an HSA or FSA

If you’re eligible for a Health Savings Account (HSA), contributing additional money can offer valuable tax benefits while helping you prepare for future healthcare expenses.

For 2026, the HSA contribution limits are $4,400 for self-only coverage and $8,750 for family coverage. To contribute to an HSA, you generally must meet eligibility requirements, including coverage under a qualifying high-deductible health plan.

HSA contributions can generally be deducted from your taxable income, and money in the account can be withdrawn tax-free when used for qualified medical expenses. If contributions are made through an eligible employer’s cafeteria plan, they can provide additional payroll tax advantages as well.

If your employer offers a Flexible Spending Account (FSA), that’s another opportunity to pay eligible healthcare expenses with pre-tax dollars. For plan years beginning in 2026, employees can contribute up to $3,400 to a health FSA.

Just remember that HSAs and FSAs have different eligibility, contribution, carryover, and spending rules. Review your employer’s plan before making year-end decisions.

3. Make Tax-Deductible Charitable Contributions

Planning to donate to charity during the holiday season? Your generosity could potentially provide a tax benefit, too.

Traditionally, taxpayers generally need to itemize deductions to claim a charitable contribution deduction. Beginning with the 2026 tax year, however, taxpayers who don’t itemize may be able to deduct up to $1,000 in qualifying cash contributions, or up to $2,000 for married couples filing jointly.

Taxpayers who itemize may also be able to deduct qualifying cash or property contributions, subject to applicable limits and rules. Donations must be made to eligible organizations, and proper documentation should be retained to substantiate the deduction.

For a contribution to count for the 2026 tax year, it generally must be made by December 31, 2026.

Before donating, consider verifying the organization’s tax-exempt status through the IRS Tax Exempt Organization Search tool and keeping receipts or other documentation for your records.

4. Review Your Investments for Tax-Loss Harvesting Opportunities

If some of your investments have declined in value, selling them before year-end may provide an opportunity to offset taxable investment gains. This strategy is commonly referred to as tax-loss harvesting.

Capital losses generally offset capital gains. If your losses exceed your gains, you may be able to use up to $3,000 of net capital losses to reduce other income for the year, or $1,500 if married filing separately. Losses beyond the annual limit can generally be carried forward to future tax years.

For example, suppose you realized $8,000 in capital gains during 2026 but also sold another investment for a $5,000 capital loss. That loss could potentially offset a portion of your gains, leaving a smaller net capital gain subject to tax.

However, investment tax rules can get complicated quickly. The wash-sale rule, holding periods, cost basis, and whether a gain or loss is short- or long-term can all affect the tax outcome. Don’t sell an investment solely for a tax deduction without considering how the decision fits into your overall investment strategy.

5. Review the Deductions Available to You

Reducing taxable income isn’t always about making an additional contribution or selling an investment. Sometimes, it simply means making sure you aren’t overlooking deductions available to you.

For 2026, the standard deduction is $16,100 for single filers and married individuals filing separately, $32,200 for married couples filing jointly, and $24,150 for heads of household.

Because most taxpayers choose between taking the standard deduction and itemizing, it can be helpful to estimate your potential itemized deductions before year-end. Depending on your circumstances, deductible expenses could include qualifying charitable contributions, certain medical expenses, mortgage interest, and eligible state and local taxes, subject to applicable rules and limitations.

Self-employed taxpayers and business owners should also take a closer look at their records before December 31. Legitimate ordinary and necessary business expenses may be deductible and could reduce taxable business income.

A year-end tax review can help you determine which deductions you may qualify for and whether there are any actions you can still take before the calendar closes.

Final Thoughts

Taking time to review your finances before the end of the year could help you identify opportunities to lower your taxable income and potentially reduce your overall tax liability. Increasing eligible retirement or HSA contributions, making qualified charitable donations, reviewing investment losses, and taking advantage of available deductions are all strategies worth considering before year-end.

If you’re worried about owing the IRS or already have unresolved tax debt, addressing the issue sooner rather than later may give you more options. At Top Dog Tax Relief, we can help you understand your situation, explore available resolution options, and determine the best path forward.

This article is for general informational purposes and should not be considered tax, legal, or financial advice. Tax rules and eligibility requirements vary based on individual circumstances. Consider consulting a qualified tax professional regarding your specific situation.