August Tax Moves Can Trim 2026 Bills Before Year-End

August is the optimal window for taxpayers to project 2026 income and adjust withholding, harvest capital losses, and time charitable donations, with capital gains rates at 0%, 15%, or 20% this year.

"You're far enough into the year that you've got a pretty good handle on what your year is going to look like," said Tim Steffen, director of tax planning at Baird. "But you've got enough time left to make adjustments."

Mark Steber, chief tax officer at Jackson Hewitt, recommends doubling the June 30 paystub for a first-half snapshot. Investors should identify portfolio losses to offset gains, with up to $3,000 in leftover losses available to offset regular income.

With the stock market near record highs, the window for loss harvesting and appreciated-stock charitable donations is open now. The One Big Beautiful Bill Act introduced new deductions and equipment expensing rules that could meaningfully reduce 2026 tax liability for those who act before year-end.

Steber's method for projecting annual income is straightforward: take the June 30 paystub and double it. "You can run your numbers and get a pretty good approximate guess of what your 2026 taxes will look," he said. For side-gig income not subject to withholding, estimate annual earnings and set aside funds for the April 2027 filing to avoid a cash crunch.

A banner year for stock investors means sizable capital gains on winning positions in memory-chip stocks and AI plays. The IRS says most Americans pay 15% on stock gains, though rates range from 0% to 20% depending on income. Scour portfolios for losers now — losses can offset gains, and up to $3,000 in leftover losses can offset regular income. "Start identifying if there's any losses in the portfolio," said Steffen. "Is there an opportunity to maybe take advantage of a loss to help offset the impact of your other gains?"

Roth Conversions and Retirement Distributions

Recent retirees who are no longer earning a paycheck are best positioned for Roth conversions. "They're in the golden zone of having very low income," said Steber. Dollars converted from traditional retirement plans are taxed as ordinary income, so running the numbers now determines the right conversion amount. Retirees must also include distributions from traditional 401(k)s and IRAs in their tax bill — after-tax dollars fund these accounts, so the IRS gets its cut on penalty-free withdrawals after age 59-1/2.

Large, unplanned distributions can shift income significantly. A $100,000 401(k) withdrawal in January could result in a $28,205 tax bill and potentially push the taxpayer into a higher bracket. Steffen advises keeping cash on the sidelines to pay taxes at filing time rather than having them withheld at distribution. "You don't have to pay your taxes any sooner than you have to," he said. "You can keep the use of your cash a little bit longer by waiting."

New OBBBA Deductions for Charitable Giving and Equipment

Donating highly appreciated stocks held longer than a year directly to charity avoids capital gains tax and may be deductible at fair market value, up to 30% of adjusted gross income for noncash donations. The OBBBA set a floor for itemizers — only gifts above 0.5% of AGI qualify. For a $250,000 AGI, only gifts above $1,250 are eligible. New rules allow non-itemizers to claim $1,000 (single) or $2,000 (married joint) for charitable giving. "There are some wonderful tax rules in the new tax code," said Steber.

The OBBBA also allows many businesses to deduct all of a qualifying equipment purchase in the year it was put into service, rather than depreciating it over several years. "If you're a small business, take advantage of these new rules and buy equipment and expense it this year," said Steber.

Steffen recommends donating appreciated stock when markets are in bull mode. "You want to do it when the stock is at its highest value because you can give away fewer shares for the same size tax deduction," he said. With the market near record highs, selling this summer rather than waiting until year-end may be prudent.

Tax rates, deduction thresholds, and rules cited here reflect the current 2026 tax code as of August 2026. Readers should verify against the latest IRS guidance and official announcements before making decisions.

This article is for informational purposes only and does not constitute investment advice.