If you are like most Americans, you just finished up filing your 2025 taxes and you don’t want to think about taxes again until 2027. While I totally understand that sentiment, it may be wise to talk with your financial advisor about the results of your 2025 return and how you can plan for 2026 taxes.
There is a big difference between filing taxes (reactive) and planning for tax efficiency (proactive). Planning can make a world of difference.
If you simply rent and have a single W-2, there may not be much planning you can do, but almost everyone can do something to impact the outcome of their 2026 taxes now, so they are optimized when you file in 2027. Here, I’ll share a few insights into how I look at tax returns and ideas I share with my clients. I encourage you to make sure you are doing comprehensive planning with your financial advisor. If they don’t do planning, reach out to one who does, like our firm.
Optimizing Retirement Savings
Many Americans aren’t saving enough, and that can negatively impact your current life as well as future retirement. Saving is a huge benefit because putting away more money in a 401(k) or IRA, can get you a tax deduction, which lowers your taxes. As a general rule, people should be saving about 15% of their income for the future; most are only saving 7–12%, depending on their generation.
It’s important to understand how your retirement savings can best support your goals and how it impacts your taxes today.
Health Savings
One of the most overlooked opportunities is the Health Savings Account. If you are familiar with it, you may not be using it efficiently. If you qualify, you can put money away each year into an HSA and you get a tax deduction. You can allow that money to grow for years without taking it out, and in later years when you take the money out you pay no taxes if you use it for qualified medical expenses. This is something you should be talking to your advisor about, because this account can be even more efficient than an IRA or Roth IRA if done correctly.
Mid-Year Review
If you are like most people, you aren’t looking at your tax situation in the middle of the year, but you should be. An experienced advisor can help you look at your current-year tax picture and model out what your liability will be for the remainder of the year and determine if you have made the right amount of payments, if you have paid too much or too little. While a $6,000 refund next April may sound great, wouldn’t it be better to have $500 per month extra now? There can be things you can do to optimize your financial situation that you may not be aware of, but collaborating with a financial advisor can help you with that.
Time Makes Changes
As you may be aware, in 2025 we had a new tax law called the One Big Beautiful Bill Act. For most people that means lower taxes, but there are important provisions that you need to be aware of or plan for in order to qualify for some of the opportunities. It’s a shame if you miss out on a benefit because you didn’t know about it. One example is investment accounts for children with a free contribution available to you from the government. Wouldn’t you like your child to get a free $1,000 from your tax dollars? You might qualify, but not if you don’t apply for the account. If you are a senior citizen, you could be eligible for an extra $6,000 deduction, but only if you have an income under a certain threshold. What if planning can help with that?
If you have a child turning 17, a child born, or one moving out on their own, any of these situations could leave you with a surprise come tax filing time. Knowing and planning will help you avoid the pitfalls that cost you money. Work with a qualified financial advisor who can guide you through these scenarios.
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Disclaimer: This article is for informational purposes only and is not tax, legal or financial advice. Everyone’s situation is different, so consult a financial advisor.
If you would like to connect with me, please call 615-619-6919 or email me at smoran@redbarnfinancial.com. Learn more at redbarnfinancial.com.
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Photo, top, courtesy of Tinia Moroshnichenko / Pexels
