Act now: 14 ways to lower your tax bill

What you owe in taxes is not set in stone. Rather, the amount due is influenced by a number of variables, including your state of residence, age, charitable and gift-giving activities, and whether you can (and do) benefit from available tax breaks.

Given this fluidity, we strongly recommend you meet with your tax advisors as soon as possible to:

• Finalize 2025 income tax returns
• Determine how tax payments will be funded
• Plan for 2026’s tax landscape

Here are 14 potential tax optimization strategies to explore with your professional advisors.

Finalize 2025 U.S. tax returns

It may not be too late to lower your 2025 taxes. Consider taking one or more of these five actions before this April 15th:

1. Contribute to IRAs

If you earned income last year, you can make contributions to your individual retirement accounts (IRAs) for the 2025 tax year up until the return filing deadline, excluding extensions:

• Traditional IRA—You can contribute up to $7,000 (up to $8,000 if you were 50 years or older in 2025). Moreover, these contributions are potentially tax-deductible. Even if they are not, the entire IRA balance can be transferred to a more tax-efficient Roth IRA through a Roth conversion, albeit with potential tax consequences. Note: A non-working spouse can contribute to an IRA if, as is likely, the working spouse had sufficient earned income in 2025
• Roth IRA—You may be able to make non-deductible contributions up to the same limits as for traditional retirement accounts. The benefits: all growth, and future distributions, will generally be tax-free¹
• SEP or SIMPLE IRA—If you own a business that offers a Simplified Employee Pension (SEP) plan or a Savings Incentive Match Plan for Employees (commonly known as a SIMPLE IRA), you have a grace period for making contributions to these accounts based on the due date of the business’s tax return, including extensions.

2. Distribute trust income

Generally, trustees and executors are allowed a grace period, this year until March 6, to distribute income to beneficiaries if they wish to have these distributions treated for tax purposes as if they were made in 2025.

If a trustee has discretion to decide whether distributions are made, their decision must always be informed by the terms of the trust; the trust’s income and transfer tax characteristics; and the beneficiaries’ best interests. 

After weighing these factors, trustees must then decide whether a distribution makes economic sense. Generally, it does. The marginal U.S. income tax rate for many trust beneficiaries (even for some whose income exceeds $500,000) is often well below the top tax rate of 37%. (This is generally the rate the trust would pay: The top tax rate on trust income—also 37%—begins to apply to income of around $15,000)².

There is some uncertainty regarding whether the overall limitation on itemized deductions introduced by the One Big Beautiful Bill Act (OBBBA) should apply to distributions made by trusts and estates, starting in 2026. If so, this new limitation would reduce the deductibility of such distributions by roughly 5.4% for trusts and estates subject to the top income tax bracket.

3. Consider a SALT election for pass-throughs

The 2018 introduction of the $10,000 state and local tax (SALT) deduction cap effectively increased taxes for individuals in high-tax states, as well as for individual owners of real estate subject to significant property taxes.

In 2025, the OBBBA made the SALT deduction cap a permanent feature of the U.S. tax code, with a temporary increase of the cap to $40,000, from 2025 through 2029, and inflation adjustments, starting in 2026. However, the OBBBA also includes a phase-down for most households making more than $500,000 (less for married couples filing separately), with higher-income taxpayers effectively limited to the $10,000 cap.

Several years ago, the IRS issued a notice of its intention to issue regulations exempting pass-through entities (e.g., partnerships and S corporations) from the deductibility cap on SALT imposed at the entity level, which can mitigate the negative effect of the individual SALT deduction cap for some owners³.

Many pass-through entities whose owners have benefitted from the so-called workaround of the SALT deduction cap may continue to elect to benefit from it.

If you have a pass-through entity, we recommend you check your state’s laws, or speak with your tax professional, to determine whether you can—and should—elect to use this deduction. Many states require these generally annual elections to be made by March 15 for calendar-year partnerships; ordinarily, these elections apply only for the tax year in which the election is made.

4. Invest in a QOF to defer qualified gains

Investors in a Qualified Opportunity Zone Fund (QOF) can benefit from special rules regarding the tax treatment of short- or long-term capital gains realized before the QOF investment is made. Under these rules, you may have 180 days from the date of realization to invest the gains in a QOF and defer payment of taxes otherwise due. These rules apply to gains realized either directly or indirectly (e.g., through a pass-through entity, such as a partnership).

The OBBBA made permanent a new round of Qualified Opportunity Zone investment incentives, beginning in 2027. The bill also modified the definition of low-income communities and created new criteria, emphasizing rural areas, for QOZ designations.

If you own an interest in a pass-through entity that realized gains even early in 2025, the date of realization for that sale may have been December 31, 2025; or it could be March 15, 2026. You could also consider whether gains realized in 2026 qualify for the new round of incentives available in 2027. Speak with your tax advisors to determine the relevant date of realization, and how to measure the 180-day period in your circumstances.

5. Make timely distributions of private foundation assets

As a general rule, to avoid penalties, private non-operating foundations must distribute at least 5% of their assets annually to public charities. However, if needed, the foundation may be able to use a 12-month grace period to make distributions.

Thus, a private foundation with a December 31 fiscal year that is determined to have had $1 million of assets—and therefore a minimum distribution requirement of $50,000—as of December 31, 2025, would have until December 31, 2026, to distribute that $50,000. A donor-advised fund (DAF) can be the recipient of the required distribution amount.

Check with your tax advisors to confirm your private foundation’s final distribution deadline.

Determine how 2025 tax payments will be funded

While tax returns are often filed on extension, tax payments, in all but the rarest of circumstances, must be made by the mid-April deadline.

6. Borrow—or sell select holdings

Borrowing against a portfolio of marketable securities can be a handy solution, especially if you expect an influx of cash in the relatively near future. The associated costs of borrowing may be outweighed by other considerations, such as not having to sell securities or other assets you would prefer to keep.

You can’t deduct the interest on funds borrowed to pay taxes; however, you can deduct the interest if you’re borrowing to invest—to the extent of net investment income. Thus, you might borrow in an unrelated transaction to fund an investment, deducting the interest paid on those borrowings, and use cash from other sources to pay any taxes due.

Alternatively, if you don’t want to borrow, review your publicly held assets. If your portfolio has both unrealized gains and unrealized losses, consider selling holdings in a manner that produces no net capital gains and use the proceeds to pay the taxes due.

Plan for 2026’s tax landscape

There are some issues and opportunities particular to this year you may want to consider:

7. Contribute more to tax-deferred accounts

In 2026, you can contribute up to $24,500 to your 401(k) account if you are under 50, $32,500 if you are 50 or older, or $35,750 if you turn 60, 61, 62 or 63 at any time during the calendar year. The amount your employer and you can contribute in the aggregate has risen to $72,000, $80,000 or $83,250, respectively, depending on your age. 

Any so-called catch-up contributions—i.e., those made by individuals aged 50 or older in excess of the standard annual limitation amount—must be treated as after-tax contributions to a Roth 401(k), rather than a pre-tax traditional 401(k), if the individual earned more than $150,000 in 2025.

Also, you may designate your employer’s matching contributions as Roth IRA contributions—as long as 1) the retirement plan offers a Roth option, and 2) you are 100% vested in any employer contributions.

Employer-designated Roth matching contributions are treated as income and reported on Form 1099-R. And because payroll taxes are not withheld from these contributions, be sure the withholdings from your pay are properly calibrated to account for these changes. The limits noted above also apply to self-employed defined contribution accounts. One relatively new option for SEP and SIMPLE IRAs: You can designate up to 100% of your contribution to a Roth account. This is significant, given the relatively higher contribution limits for these plans.

In addition, if you expect to receive a bonus (or other performance-based compensation) to set aside in a deferred compensation account, you may have only until June 30, 2026, to do so. Check with your employer to confirm your deadlines to make elections and to identify the maximum you might defer under the plan. Then, based on your expected cash flow needs now and in the future, decide the appropriate amount to defer.

8. Follow key guidelines for RMDs and QCDs

• Required minimum distributions (RMDs)—The mandatory starting age for distributions from your own traditional IRA is 73. Generally, RMDs must be taken by December 31, but if you turn 73 in 2026, you are not required to take your first RMD until April 1, 2027. Any subsequent annual RMDs must be taken by December 31.
  
  Roth IRAs are not subject to the RMD rules during the owner’s lifetime and, thanks to a law change that became effective in 2024, designated that Roth accounts in a 401(k) plan (and certain other qualified plans) are not subject to the RMD rules while the owner is still alive.
  
  RMD rules are based on two factors: your age and the balances in your tax-deferred accounts on December 31 of the previous year. We think it’s generally a good idea to wait until near the end of the year to take RMDs because asset values tend to rise. (Always check with your financial and tax advisors to plan for when you should—and must—take your RMDs.)

• Qualified charitable distributions (QCDs)—Before taking your RMD this year, decide whether you want to make a QCD from your IRA to a public charity. Individuals are eligible to make QCDs when they turn 70½. This inflation-adjusted amount is $111,000 for 2026.
  
  A QCD counts toward the RMD amount. (Taxpayers can make a one-time election to contribute $55,000 of a QCD to charitable remainder trusts or charitable gift annuities.) And unlike the rest of an RMD, the QCD amount is excluded from your gross income. Also, the QCD cannot be made to a donor-advised fund (DAF) or any kind of private foundation.
  
  You can’t claim a QCD as a charitable deduction on your income taxes. Starting in 2026, this actually makes QCDs relatively more attractive to high-income itemizers because of two new limitations on the tax benefit of charitable deductions, introduced by the OBBBA. (See Item # 9.)
  
  Although these new limitations may shift some donors’ charitable giving strategies, one thing hasn’t changed: if you own low-basis public securities held long term in a taxable account, you are likely to be better off donating those securities to charity instead of donating via a QCD.

9. Evaluate your charitable giving strategy

On January 1, 2026, two OBBBA-related rule changes curtailing the itemized deductions of high-income taxpayers went into effect: a 0.5% of adjusted gross income (AGI) floor on charitable deductions and a roughly 5.4% overall haircut on itemized deductions for those in the top rate bracket⁴.

As a result, you might consider consolidating the charitable donations you had planned to make over multiple years into a single-year gift to ensure the total deduction exceeds 0.5% of their AGI, as well as to avoid both haircuts every year in which you donate to charity.

10. Donate appreciated stock

Given the equity market rally from 2023–25, you likely hold some assets at a gain. As noted, it is extremely tax-wise to donate public equities, in kind, to a public charity—or to a DAF, private operating foundation or private non-operating foundation. Here’s why: In addition to receiving a deduction based on the fair market value of the donated stock, you also avoid tax on the equities’ unrealized gains. As mentioned above, you should review any limitations that might apply to the value of the deduction, including the new rules under the OBBBA.

Also beware: Make sure you’ve held the donated stock, unhedged, for more than one year. The holding period may be longer if the securities were received in connection with services performed as a partner in a for-profit investment venture (e.g., at a hedge, venture capital or private equity fund).

Also, be sure the financial firm holding your shares donates the correct lot—and, if that lot has ever been transferred from another firm, that the basis and holding period information is replicated correctly by the new firm.

11. Review quarterly estimated payments

Review both your actual 2025 and anticipated 2026 tax bills to determine your minimum necessary quarterly estimated payments for this year. 

The law allows taxpayers to make estimated payments over the course of a year that are both interest- and penalty-free, up to whichever is less: 110% of the prior year’s taxes (100% for lower-income earners), or 90% of the current year’s taxes.

Thus, if you expect your 2026 income tax liability to be substantially greater than it was in 2025, you may want to base 2026 quarterly estimates on the 2025 total, thereby retaining more of your pre-tax income until the April 2027 tax payment deadline. In the meantime, those funds could be safely invested; for example, in U.S. Treasuries maturing in early April 2027.

12. Evaluate your choice of tax domicile

Many taxpayers have relocated in recent years, with taxes a consideration in some of those moves. It requires a great deal of planning (and sometimes triggers headaches!) to establish domicile in the state where you have moved. Ask your J.P. Morgan team for a copy of our Changing Domicile Checklist.

Also: It may be easier to switch the situs of a trust you’ve created, so review those as well. A trust governed by one state’s laws for administrative purposes may be subject to tax by a different state based on a number of factors, including the residence of the grantor and/or current trustees.

13. Optimize annual exclusion gifts

Consider making tax-free annual exclusion gifts (up to $19,000 per donor, per donee) early in the year so growth on these assets over the course of the year occurs off your balance sheet. One common way to use annual exclusion gifts is to contribute to a 529 account to help fund education for children or grandchildren⁵.

Another way to help your family tax-free: Take advantage of the unlimited exclusions from U.S. transfer taxes when, on behalf of someone else, you pay tuition directly to a school or pay medical expenses directly to a medical provider.

14. Harvest capital losses

Consider implementing a systematic program for harvesting capital losses for your securities portfolios. Doing so may help you take advantage of any market downturns, but be sure to avoid the wash sale rules so adverse to taxpayers. Further, this will allow you to bank those losses to offset capital gains—those already realized, or those you expect in the future⁶.

While you’re reviewing your portfolio with an eye on harvesting losses, be sure to evaluate the tax efficiency of your holdings across all of your family’s accounts, including IRAs and trusts. Asset location can be as important as asset allocation to wealth growth and preservation.

Growing family wealth over time relies, in part, on making sure assets are held in the proper account. Where possible, we recommend holding tax-inefficient assets in tax-deferred accounts and tax-efficient assets in taxable accounts.

The road ahead

As you consider actions to potentially reduce your tax liabilities, we continue to monitor both enacted and potential tax law changes, at the federal and state levels.

We do not expect to see much new federal tax legislation in 2026 that would directly affect individual taxpayers. It appears that some states, notably California, will consider enacting wealth taxes on their high-net-worth residents. Whether those proposals become reality remains to be seen.

We can help

As you weigh your tax planning options, know that your J.P. Morgan team is prepared to work closely with you and your tax advisors to determine which strategies are best suited to your personal circumstances and financial goals. For more information, please contact your J.P. Morgan team.