Smart Tax Planning for High Earners in 2026

As a result, many Americans are experiencing the return of pre-2018 tax rules at the start of this year. That means higher marginal tax rates for many high earners, reduced deductions, a lowered estate and gift tax exemption, and the loss of certain planning benefits that individuals and business owners had come to rely on. In this environment, proactive tax strategy is essential to preserving long-term wealth. 

Understand the Impact of Higher Marginal Rates 

 With the TCJA sunset now in effect, the top federal marginal rate has reverted from 37% to 39.6%, and tax brackets have compressed across income levels. This shift may significantly impact after-tax cash flow for executives, business owners, and high-earning professionals. 

It is essential to revisit your expected 2026 income and evaluate how the new rules affect your tax liability. That includes reviewing the timing of bonuses, business distributions, and compensation structures. The goal remains minimizing unnecessary tax drag while keeping flexibility in case Congress revisits tax policy later this year. 

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Maximize Tax-Advantaged Savings and Employer Benefits  

Even with higher marginal rates, tax-advantaged savings opportunities continue to be effective tools for long-term planning.

High earners should ensure they are:  

• Maximizing 2026 contributions to 401(k), 403(b), and 457(b) plans
• Using backdoor Roth contribution strategies when eligible 
• Leveraging employer plans that support mega backdoor Roth contributions
• Coordinating contributions and planning between spouses or partners

With today’s higher tax environment, both tax-deferred growth and Roth strategies play an increasingly important role in optimizing lifetime tax outcomes.  

Reassess Roth Conversion Strategies  

Roth conversions were a focal point of year-end planning in 2025, and many high earners acted ahead of the sunset. With higher marginal rates now in place, the analysis changes.  

There are still scenarios in 2026 where Roth conversions may be beneficial—for example, in unusually low-income years, during business transition periods, or in early retirement. As always, careful modeling is critical, particularly when considering the impact on Medicare premiums, required minimum distributions, and long-term estate goals.  

Reevaluate Entity Structures and Business Tax Strategy  

Business owners are now officially operating without the 20% Qualified Business Income (QBI) deduction that was available through 2025. This change may materially increase taxable income for pass-through entities.  

As 2026 begins, business owners should:

• Reassess whether their current entity structure remains optimal under the new rules
• Review owner compensation frameworks and profit distribution strategies
• Evaluate advanced retirement plan options, including cash balance plans
• Consider the timing of equipment purchases or other capital expenditures now that certain depreciation rules have changed

These adjustments can significantly influence long-term tax efficiency and business value. 

Clarify and Modernize Charitable Planning

With higher tax rates in place, charitably inclined individuals may find enhanced benefits in strategic giving.  

Key strategies include:

• Using Donor-Advised Funds (DAFs) to maximize flexibility
• Bunching charitable gifts to increase itemized deductions
• Donating appreciated securities to avoid capital gains tax
• Evaluating charitable trusts to support income smoothing and legacy goals  

Strengthen Estate and Wealth Transfer Strategy  

As of January 1, 2026, the federal estate and gift tax exemption has reverted to roughly half of its 2025 level. Families who did not take advantage of the elevated exemption before year-end will now need to plan under this more restrictive framework.  

There are still powerful strategies available—trusts, intrafamily loans, gifting programs—but each requires careful coordination across financial, tax, and legal advisors.  

At WHZ Strategic Wealth Advisors, we understand that navigating a year like 2026 requires clarity, strategy, and a steady partner by your side. Our team is here to help you adjust to the new tax landscape and move forward with confidence. Absolute Confidence. Unwavering Partnership. For Life.

To discuss your personalized tax strategy for 2026, schedule a complimentary discovery session at whzwealth.com or call (860) 928-2341.

Authored by WHZ Strategic Wealth Advisors Associate Vice President, Lead Wealth Advisor Logan Lum. AI may have been used in the research and initial drafting of this piece. Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. 697 Pomfret Street, Pomfret Center, CT 06259 and 392-A Merrow Road, Tolland, CT 06084, 860.928.2341. http://www.whzwealth.com. These materials are general in nature and do not address your specific situation. For your specific investment needs, please discuss your individual circumstances with your financial advisor. WHZ Strategic Wealth Advisors does not provide tax or legal advice, and nothing in the accompanying pages should be construed as specific tax or legal advice.