Major Tax Change Coming in 2026 — What High Earners Must Do Now

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High earners face a ticking clock: Major provisions of the Tax Cuts and Jobs Act will expire after 2025, potentially raising income tax rates, lowering estate and gift exemptions, and changing deductions. Acting now could save thousands and protect long-term wealth.

“Many households could face higher marginal income tax rates, a meaningfully lower estate and gift tax exemption, and changes to itemizing and deductions,” said Bill Harris, founder and CEO at Evergreen Wealth.

Here are six smart moves to make before year-end.

Maximize Deductions by Lumping Charitable Gifts

Charitable planning is an area where timing matters. Under the new rules, deductions apply only after charitable contributions exceed 0.5% of adjusted gross income (AGI), and individuals can deduct up to 35% of AGI for gifts.

“For high-income families who want to maintain tax efficiency, 2025 is shaping up to be a prime year to ‘lump’ charitable gifts or use tools like a donor-advised fund (DAF),” said David Elder, wealth manager at Merit Financial Advisors. “You can capture a larger deduction in 2025, then distribute the money to charities over time, preserving both flexibility and intent.”

However, Elder noted that your charitable purpose should always come first.

“The tax math should enhance a giving plan, not dictate it,” he said.

Shift Income Into 2025 To Lock in Lower Rates

“If your tax rate may be higher in 2026, you may want to pull some income into 2025,” Harris said. “Get paid before Dec. 31, 2025, instead of in 2026, so that it’s taxed at potentially lower 2025 rates.”

He offered a few common, practical ways this can be done:

• For any employee: Ask whether a year-end bonus can be paid in December instead of January.
• For business owners and independent contractors: Send invoices earlier to collect receivables before year-end, or delay certain deductible expenses so more net income lands in 2025.
• Retirement distribution planning (if you have flexibility): Taking an IRA distribution in late 2025 rather than early 2026 shifts the taxable income into 2025.

Use Roth Conversions To Reduce Future Tax Burden

A partial Roth conversion can help reduce future required distributions and lock in today’s rates.

“You pay income tax on the amount you convert now, and in exchange, the money can potentially grow and be withdrawn tax-free later,” Harris said.

Here’s how to do it methodically:

• Estimate your 2025 income so you know your current tax bracket.
• Pick a “max bracket” you don’t want to exceed.
• Convert only enough to stay within that bracket.
• Complete the conversion by year-end from a pretax IRA to a Roth IRA.

Harvest Gains Before Year-End

For taxable portfolios, review gains and losses for tax-loss harvesting and decide whether realizing gains sooner makes sense.

“If you expect you’ll be in a higher bracket in 2026 or later, realizing gains in 2025 may be a better solution,” Harris said.

Donate Appreciated Assets for Tax-Efficient Giving

“By donating appreciated securities to a donor-advised fund, you can typically avoid paying capital gains tax on the appreciation and receive a tax deduction for the donation,” Harris said.

To do this, Harris said to take the following steps:

• Open a DAF.
• Leverage a tax-gain harvesting strategy to identify securities with large amounts of appreciation.
• Transfer them from a brokerage account into the DAF.
• Recommend grants to charities when ready.

Update Estate Plans Before Exemptions Drop

If estate planning is on your horizon, review your plan while exemptions remain higher.

“The key ‘higher’ exemption is the federal estate and gift tax exemption, which was temporarily increased under the Tax Cuts and Jobs Act and is scheduled to sunset after 2025,” Harris said.

“This is a potential window to use more of the currently higher exemption through lifetime gifting, updating trust strategies, and reviewing beneficiary designations and core documents so asset transfers happen as intended if the exemption is reduced.”

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