Max Out Tax Advantaged Accounts First
The classics still punch above their weight. In 2026, IRAs, 401(k)s, and HSAs continue to deliver unmatched value for smart savers. Tax advantaged accounts aren’t flashy, but they do one job very well: protect more of your money from the IRS. With higher contribution limits and ongoing tax perks, these vehicles are still your first line of defense.
Take the Roth vs. Traditional debate. If you expect to be in a higher bracket later, Roth wins pay taxes now, enjoy tax free withdrawals down the road. If your income today is sky high and you want to lower your immediate bill, Traditional contributions offer that breathing room. It’s not about one being better it’s about matching the tool to your timeline and tax outlook.
Then there’s the HSA. Don’t sleep on it. It may have started as a medical savings account, but it’s evolved into a stealth retirement workhorse. Tax deductible going in, tax free growth, and tax free withdrawals for qualified medical expenses? That’s a three for three benefit you won’t find elsewhere. And since medical costs tend to rise with age, using HSA funds in retirement is a solid play.
In short: if you’re not maxing out these accounts every year, you’re leaving money and compounding power on the table.
Optimize Capital Gains Timing
Smart investors know taxes eat into returns sometimes more than you’d think. One of the most direct ways to stay tax efficient? Use your losses. It’s called tax loss harvesting, and it means selling investments that have declined in value to offset gains you’ve made elsewhere. If you sold a stock and pocketed a hefty gain, offsetting it with a losing position can reduce sometimes erase your tax bill for that transaction. Just make sure you’re not bailing on long term winners just for a short term tax perk.
Speaking of long term, holding an investment for over a year before selling unlocks lower capital gains tax rates. That one year line can save you thousands if you’re selling appreciated assets. It’s not always easy to wait, but discipline here pays off in real dollars.
Now, don’t trip over the wash sale rule. If you sell a losing stock and buy it or something substantially identical within 30 days, the IRS says “nice try” and disallows the loss. The fix: make a clean break, wait 31 days, or swap for a similar but not identical security in the meantime.
Know the rules, use the timing, and trim the tax fat.
Asset Location, Not Just Allocation
How and where you hold your investments can be just as important as what you invest in. Asset allocation focuses on what percentage of your portfolio goes into stocks, bonds, etc. but asset location maximizes tax efficiency by placing specific asset types in the most favorable accounts.
What Belongs in Tax Sheltered Accounts
Certain asset types generate taxable income or frequent distributions, making them better suited for tax sheltered accounts like IRAs or 401(k)s:
Actively managed mutual funds that distribute capital gains yearly
REITs (real estate investment trusts), which pay out income taxed at higher ordinary rates
High yield bonds and bond funds, which generate steady interest income
Keeping these in tax deferred or tax exempt accounts prevents unnecessary annual tax hits.
Best Assets for Taxable Accounts
Taxable brokerage accounts are ideal for investments designed to generate long term capital gains and minimal annual income:
Tax efficient ETFs, especially those with low turnover and favorable capital gains treatment
Municipal bonds, which often provide tax free income at the federal (and sometimes state) level
Individual stocks you plan to hold for over a year, benefiting from lower long term capital gains rates
Real World Example: Smarter Asset Placement
Consider this sample two account portfolio:
401(k): REIT index fund + actively managed bond fund
Taxable brokerage account: S&P 500 ETF + municipal bond fund
In this example, the investor minimizes taxable income in their brokerage account while preserving tax deferred growth where it’s most beneficial.
By thinking beyond allocation and focusing on where your assets reside, you can preserve more gains over time and reduce your tax drag year after year.
Strategic Charitable Giving
Donor advised funds (DAFs) are having a moment and with good reason. Simple to set up, flexible to manage, and powerful from a tax perspective, these accounts let you make a charitable contribution, get an immediate tax deduction, and choose the timing of your actual grants later. It’s giving on your own terms, minus the administrative headaches of starting your own foundation.
What’s driving the surge? Markets have rallied, and investors looking to give are sitting on appreciated assets. Rather than donating cash, many are contributing stocks or other long term investments directly to a DAF. Doing so avoids capital gains tax and still unlocks the full fair market value for deduction purposes. Translation: you give more and get more back on your taxes.
This kind of tax smart philanthropy doesn’t have to be complicated. You can set up a DAF with most major brokers in under an hour, and the impact over time on causes and your portfolio is real. Whether you’re giving big or just getting started, tools like DAFs let you build generosity into your long term planning without losing financial control.
Estate Planning with a Tax Focus
In 2026, high net worth investors are facing a different estate planning landscape than even just a few years ago. The lifetime gift and estate tax exemption once hovering near $13 million is now reduced, shrinking the margin for error and making strategic gifting more important than ever. If you’re waiting to make large transfers, you’re burning daylight.
The move now is to use what’s left of your exemption before tighter caps take full effect. That means front loading gifts to heirs, leveraging trusts like spousal lifetime access trusts (SLATs) or grantor retained annuity trusts (GRATs), and seriously considering gifting appreciated assets now instead of cash. Done right, you remove future growth from your estate and cut down eventual tax hits.
Timing and intent matter. The IRS doesn’t look kindly on sloppy transfers or value understatement. Work with estate planners who understand current thresholds and can tailor tools to your situation. Don’t let fear of complexity delay execution clarity and decisive planning go a long way.
For a deeper dive into how to pass on wealth without unnecessary headaches, check out Estate Planning 101: Wealth Transfer Without Hassles.
Stay Nimble with Yearly Tax Changes
Waiting until April to fix your tax mess isn’t a strategy it’s damage control. Proactive tax planning means fewer surprises, lower bills, and more control over your investments and income. Tackling this in Q4 gives you time to shift strategies, realize gains or losses, max out deductions, or contribute to the right accounts before it’s too late.
Every fall, smart investors loop in their tax advisor or CPA not to file, but to plan. Whether it’s adjusting withholdings, forecasting income, or reevaluating charitable gifts, this is the window to act, not react. Those without a pro? At the very least, use software like TurboTax Premier, TaxAct, or tools like NewRetirement and Holistiplan to stress test different scenarios.
The best part? Streamlining this process just once a year pays off every year. Good planning doesn’t require constant tinkering just consistency and a willingness to look ahead.
Bottom Line: Keep More of What You Earn
Everyone talks about the magic of compounding. But compounding only works if you don’t leak value along the way and taxes are one of the biggest leaks. A 7% return taxed too heavily isn’t really a 7% return. Over 20 or 30 years, that makes a massive difference. It’s not just about how much you make it’s about how much you get to keep and reinvest.
A disciplined tax strategy isn’t flashy, but it’s easily as strong as chasing big returns. Tax loss harvesting, account location strategy, and smart use of tax advantaged accounts all grind out cleaner gains over time. Consistency beats timing, and structure beats luck.
The takeaway? High investment returns are great, but they’re only half the equation. Control your taxes, and you control your future.