Tax planning: How wealthy people aim to reduce their IRS bills in 2026

A version of this article first appeared in CNBC’s Inside Wealth newsletter by Robert Frank, a weekly guide for high-net-worth investors and consumers. Sign up to receive future editions directly to your inbox.

For seven years, wealthy Americans have been under a deadline to take advantage of tax provisions that are set to expire at the end of 2025. The One Big Beautiful Bill Act alleviated much of the uncertainty by making most of the cuts permanent, but lawyers and tax accountants argue that ever-changing tax laws require ongoing planning.

Now that this year’s tax day is over, here are five of the most important planning strategies that high-net-worth investors and high-income earners are considering for next year and beyond.

Last year’s tax bill permanently increased the estate tax exemption from $13.99 million to $15 million per person. (It was originally planned to be halved by the end of 2025.)

The increased threshold shifts the focus from minimizing federal estate taxes to reducing taxes on income and capital gains. Mitchel Drosman, head of national wealth strategy in Bank of America’s chief investment office, said minimizing capital gains has become important after years of strong market gains. The S&P 500 index has risen more than 75% since the beginning of 2023.

“The biggest tax story for me is the capital gains and investment story,” Drosman said. “We have a lot of clients who are making significant gains.”

Investors are increasingly turning to long-short tax loss recovery, an aggressive form of the popular strategy, to minimize capital gains, Drosman said. In traditional loss recovery, investors sell assets that have incurred losses to offset realized gains on other assets. On the other hand, a long-short tax strategy borrows against the portfolio to buy short positions that are expected to decline and maintain long positions that are expected to increase.

“When there are natural fluctuations in the market, you have a much larger asset base to choose from in terms of harvesting losses,” he said. “But if you look at the entire portfolio, you’re still in a neutral position.”

The 2025 tax bill updates bonus depreciation, allowing businesses to deduct the entire cost of eligible assets such as machinery, computers, and vehicles in their first year of use.

Adam Rudman, head of tax strategy at JPMorgan Private Bank, said many of his business clients invest with bonus depreciation in mind, such as when buying a private jet.

Real estate developers and investors are trying to maximize profits by evaluating which parts of their properties can be depreciated faster, Rudman said. For example, a commercial building may take 39 years to depreciate, but a parking garage can depreciate in 15 years, allowing owners to recover their costs more quickly.

A wave of blue states are considering new taxes on high earners and the wealthy to offset cuts in federal aid. California’s one-time millionaire tax proposal could remain on the November ballot, while Maine and Washington recently passed millionaire taxes.

Jane Ditelberg, chief tax strategist at Northern Trust Wealth Management, said as these proposals gain traction, more clients are asking how they can change their tax status. In some states, such as Delaware, which has favorable trust income laws, residents can avoid state-level taxes by forming a trust.

BNY Wealth’s Jere Doyle says the easiest way to avoid council tax is to change your address, but that’s easier said than done. The senior estate planning strategist, based in Massachusetts, which is subject to the millionaire tax, said he has had clients move to New Hampshire and establish residency before selling their businesses.

But customers are often reluctant to take the necessary steps to establish their intention not to return, Doyle said. For example, if you refuse to sell your Martha’s Vineyard home, moving to Florida may not be enough to avoid Massachusetts taxes, he said.

“Everyone thinks that if you spend 183 days in another state, you’re a resident of that state. That’s not necessarily true. Each state is a little different,” he says. “You have to change where you vote, where you register your car, where your doctor is located, where you belong to your club, your golf club, your country club.”

One notable shortcoming of last year’s tax bill was that it reduced the tax benefits of charitable giving for high earners.

The bill restricts high-value donors in two ways. First, starting this year, itemized donors will only be able to deduct charitable contributions that exceed 0.5% of their adjusted gross income (AGI).

Second, taxpayers in the 37% tax bracket will have their itemized deductions reduced by 2/37. This cap reduces the effective tax effect from 37% to 35%.

Ditelberg said many of his clients accelerated their philanthropy last year before these new rules went into effect. He said he would trigger the 0.5% haircut only once through foundations and donor-advised funds because he expects clients will continue to “bundle” their giving by donating larger amounts in one year rather than spreading it out over multiple years.

The tax bill also provided incentives for business owners and property owners to postpone asset sales. The bill made permanent the Qualified Opportunity Zone program, which allows investors to defer capital gains by rolling them over to funds that invest in low-income areas.

The Opportunity Zone Fund, created under the first Trump administration, still exists, but it can only defer tax payments until the end of the year. The new Opportunity Zones, which have not yet been designated, will bring even greater benefits to investors, especially in rural areas. For example, if you hold an investment in a qualified rural opportunity fund for five years, your capital gains will be reduced by 30% for tax purposes.

However, Ditelberg noted that there is only a 180-day window in which benefits can be rolled over, and the new Opportunity Zone rules won’t take effect until 2027.

“If you’re looking to make a significant profit and want to take advantage of the Opportunity Zone deferral, you might be better off delaying it until August or September instead of doing it in May or June,” he said. “I think there will be people who will benefit in the second half of this year.”

That said, investors are waiting to see what the new fund means. Drosman said some clients are reluctant to invest in opportunity zones again because their previous investments have underperformed.

“This is a classic example of why you can’t let the tax tail swing around because it needs to be a sound investment,” he said. “As with any investment, there is an element of risk and return.”