For many people, taxes become a priority sometime between receiving a W-2 and the April filing deadline.
Documents are gathered, information is sent to an accountant, and a tax return is prepared. Once the return is filed, taxes often fade into the background until the process begins again the following year. What is that phrase from Benjamin Franklin about two certainties in life?
But your tax return is not created in April; your 2026 tax return is being crafted right now.
Every paycheck, investment sale, retirement contribution, charitable gift, and portfolio distribution may eventually become part of that return. By the time tax season (really tax preparation season) arrives, most of the decisions that shaped the outcome have already been made.
That is the difference between tax preparation and tax planning. Tax preparation looks backward and reports what happened, while tax planning looks forward and considers what may still be changed.
At Members’ Wealth, we evaluate these decisions through our Wealth Done R.I.T.E. framework: Risk, Investments, Taxes, and Estate.
Tax risk is not simply the possibility of an audit. It may be an unexpected balance due, an underpayment penalty, or a financial decision that creates a larger tax consequence than anticipated.
A bonus, stock-option exercise, business distribution, or realized investment gain could materially change someone’s tax liability. Retirees may also find that additional income affects the taxation of Social Security benefits or future Medicare premiums.
Reviewing income, withholding, and estimated payments during the year may help identify a potential shortfall before the return is filed. The goal is not to predict the final tax bill perfectly. It is to understand what is changing and reduce the likelihood of a preventable surprise.
Investment decisions are often viewed primarily through the lens of performance. Taxes add another layer. A phrase we often say is, 'it's less about how much you make, more about how much you keep'.
Selling an investment at a gain may create a capital-gains liability. Selling at a loss could potentially offset other realized gains, subject to applicable rules. Interest, dividends, and mutual-fund distributions may generate taxable income even when money is not withdrawn from the account.
That does not mean taxes should drive every investment decision. Holding a concentrated position solely to avoid a gain may introduce more risk than the potential tax savings justify.
The investment and tax decisions should be evaluated together. By the time a tax return is prepared, it is too late to change which investments were sold or whether a tax-loss-harvesting opportunity was available.
For 2026, employees may contribute up to $24,500 to a 401(k), 403(b), or most governmental 457 plans. Individuals age 50 or older may also be eligible for additional catch-up contributions.
Knowing the limits, however, does not answer the planning questions.
Should contributions be pre-tax or Roth? Should additional savings go into a workplace plan, IRA, HSA, or taxable investment account? Does a lower-income year create an opportunity to consider a Roth conversion or realize capital gains?
Charitable giving also provides choices. Depending on the circumstances, someone may consider giving cash, donating appreciated investments, using a donor-advised fund, or making a qualified charitable distribution from an IRA.
These decisions may affect more than one year. A Roth conversion could increase taxes today but provide additional flexibility later. Deferring income may reduce this year’s bill while creating more taxable income in the future. The objective should not always be to pay the least tax possible in a single year. It should be to evaluate taxes over time and within the context of the broader financial plan.
Some important tax decisions may not be obvious when reviewing an income-tax return.
How assets are titled can affect estate administration. Beneficiary designations may influence how inherited retirement accounts are distributed and taxed. Gifting assets during life may produce a different result than transferring them at death.
Estate and tax planning should therefore be coordinated. A decision intended to help a child, support a charity, or simplify an estate may have consequences for the person making the gift and for the eventual recipient.
The federal estate-tax exemption is significant, but that does not make estate planning irrelevant. Income taxes, state inheritance or estate taxes, cost basis, account registrations, and beneficiary rules may still influence how efficiently assets pass to the next generation.
As the year progresses, parts of your 2026 tax return have already been determined. Income has been earned, contributions have been made, and investments may have been bought or sold, but the year is not over. There may still be time to review withholding, evaluate retirement contributions, consider charitable plans, assess realized gains and losses, or coordinate an upcoming financial decision with an advisor and tax professional.
Not every strategy will be appropriate for every person, and tax laws and individual circumstances can change. The purpose of planning is not to find a clever deduction or eliminate taxes altogether. It is to avoid discovering next April that an opportunity has passed, or that a preventable surprise has already become part of the return.
Your accountant may prepare your 2026 tax return in 2027, but you have been dictating what it will say all year.
Investment strategies, including rebalancing, do not guarantee improved performance and involve risk, including potential loss of principal. Past performance does not guarantee future results.
The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon.
All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.
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