As 2026 draws to a close, year-end financial planning decisions can have a meaningful impact on tax liability and an overall financial plan. A good income projection is an important first step, providing a clearer picture of where a taxpayer is likely to land for the year and which tax brackets and thresholds may come into play. That information can help drive decisions, for example, of whether it makes sense to accelerate income into 2026, defer it to a future year, or take steps to reduce taxable income before the end of the year.
A solid income projection may answer two important questions:
- What is your marginal income tax bracket?
- How much room do you have before reaching the next higher bracket or potentially dropping into the next lower tax bracket?
Here are some examples of key income thresholds to consider:
|
Income |
|
|
|
|
Single filer |
Married Couples |
Income Phase-out or Threshold Item |
Definition of Income |
|
$25,000 |
$32,000 |
Social Security benefits may become taxable above this threshold |
Provisional income |
|
$49,450 |
$98,900 |
Taxation of long-term capital gains and qualified dividends (zero percent tax rate applies below these thresholds) |
Taxable income |
|
$75,000 |
$150,000 |
Phase-out for additional senior deduction |
Modified adjusted gross income |
|
$80,000 |
$160,000 |
Phase-out for education tax credits (American Opportunity + Lifetime Learning) |
Modified adjusted gross income |
|
$100,000 |
$200,000 |
Phase-out for qualified auto loan interest deduction |
Modified adjusted gross income |
|
$109,000 |
$218,000 |
Income Related Monthly Adjustment Amount (IRMAA) resulting in higher Medicare Part B premiums |
Modified adjusted gross income |
|
$150,000 |
$300,000 |
Phase-out for qualified tips deduction |
Modified adjusted gross income |
|
$150,000 |
$300,000 |
Phase-out for qualified overtime deduction |
Modified adjusted gross income |
|
$153,000 |
$242,000 |
Roth IRA contribution eligibility |
Modified adjusted gross income |
|
$200,000 |
$250,000 |
Net investment income surtax (3.8%) and additional Medicare payroll tax (0.9%) |
Modified adjusted gross income |
|
$200,000 |
$400,000 |
Phase-out for the Child Tax Credit (CTC) |
Modified adjusted gross income |
|
$505,000 |
$505,000 |
Phase-out for the maximum state and local tax (SALT) deduction |
Modified adjusted gross income |
Source: IRS 2026 figures. Provisional income includes modified adjusted gross income plus tax-exempt interest income plus half of Social Security benefits. Income dollar figures represent the beginning of income phase-out thresholds for each tax provision. The definition of modified adjusted gross income may differ depending on the specific tax provision.
Beyond these income-based phaseouts and thresholds, managing taxable income within brackets themselves is another important consideration for year-end planning. While moving from one bracket to the next may have a relatively modest impact in some cases, larger increases in the marginal tax rate can make income management strategies particularly valuable before year-end. Looking closer at the current tax brackets, two meaningful “jumps” stand out:
Jump #1 - 12% bracket to 22% bracket
|
Single filers |
Marginal tax bracket increases from 12% to 22% once taxable income exceeds $50,400 |
|
Married couples filing a joint tax return |
Marginal tax bracket increases from 12% to 22% once taxable income exceeds $100,800 |
Jump #2 - 24% bracket to 32% bracket
|
Single filers |
Marginal tax bracket increases from 24% to 32% once taxable income exceeds $201,775 |
|
Married couples filing a joint tax return |
Marginal tax bracket increases from 24% to 32% once taxable income exceeds $403,550 |
2026 tax rates, schedules and contribution limits
In concert with considering key income thresholds, understanding where a taxpayer falls within the tax brackets can help drive year-end planning decisions, such as:
- Could a partial Roth IRA conversion make sense while remaining within the current tax bracket?
- Could a tax-deferred retirement plan contribution help reduce your taxable income or the applicable marginal tax bracket?
- Could accelerating or deferring income or deductions before year-end make sense?
- For business owners, could accelerating or deferring expenses before year-end make sense?
Seek Guidance
Year-end planning is not simply about minimizing taxes today; it is about making informed decisions that may support broader financial planning goals. Understanding where your income is likely to fall, and how close you may be to key tax thresholds, can help identify opportunities to manage the timing of income and deductions. Because every taxpayer’s circumstances are different, working with a qualified tax professional and financial advisor can help determine which strategies may make sense for your situation.
Follow Bill Cass, CFP®, CPWA®
WHAT ARE THE RISKS?
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Any information, statement or opinion set forth herein is general in nature, is not directed to or based on the financial situation or needs of any particular investor, and does not constitute, and should not be construed as, investment advice, forecast of future events, a guarantee of future results, or a recommendation with respect to any particular security or investment strategy or type of retirement account. Investors seeking financial advice regarding the appropriateness of investing in any securities or investment strategies should consult their financial professional.
Franklin Templeton, its affiliated companies, and its employees are not in the business of providing tax or legal advice to taxpayers. These materials and any tax-related statements are not intended or written to be used, and cannot be used or relied upon, by any such taxpayer for the purpose of avoiding tax penalties or complying with any applicable tax laws or regulations. Tax-related statements, if any, may have been written in connection with the “promotion or marketing” of the transaction(s) or matter(s) addressed by these materials, to the extent allowed by applicable law. Any such taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor.