New Year, New Tax Bracket? Plan Now for Better Outcomes
Your income may change this year—but your tax strategy should change with it.
January is a natural time to reset goals, review your business, and look ahead to what’s next. But while you’re thinking about growth, don’t forget to think about the tax bracket you might land in by year-end—and what that means for your planning today.
Whether your income is trending up (more taxes) or dipping temporarily (hello opportunity), making smart decisions early in the year can lead to better financial outcomes come filing season.
Here’s how to stay one step ahead.
Why Your Tax Bracket Matters
Your tax bracket determines the rate at which your next dollar of income is taxed. But it also impacts:
How much you’ll owe or get back in April
Whether you qualify for certain credits or deductions
How aggressively you should contribute to tax-advantaged accounts
How you time income, investments, and large business expenses
The earlier you understand where you’re headed, the better you can adjust along the way.
Common Situations That Can Shift Your Bracket
You may move into a different bracket this year if you:
Are expecting significant business growth
Recently changed jobs or added a second income stream
Plan to sell real estate or a business
Are taking required minimum distributions or capital gains
Are expecting a temporary dip in income due to life events (parental leave, sabbatical, scaling back)
It doesn’t take a huge change to tip into a new bracket—especially if you’re near the cutoff points. That’s where intentional planning makes all the difference.
What to Do if You're Moving Up a Bracket
If you expect higher income this year, consider:
Maxing out retirement contributions earlier in the year (401(k), SEP IRA, Solo 401(k), etc.)
Bunching deductions (e.g., charitable giving or medical expenses) into one tax year
Accelerating business expenses that can offset taxable income
Exploring entity structure changes (like switching to an S corp) if you’re self-employed
Making estimated tax payments to avoid underpayment penalties
What to Do if You're Moving Down a Bracket
Lower income this year? That opens up new planning opportunities:
Convert traditional IRA to Roth IRA while in a lower tax bracket
Harvest capital gains while you’re subject to a lower rate
Time income-generating moves (like a bonus or asset sale) into lower-tax years
Claim deductions that might phase out at higher income levels
Remember: lower-income years are a great time for proactive planning—not just coasting.
The Power of Early-Year Planning
Tax planning isn’t just for Q4. In fact, the most powerful moves happen in Q1, when you have the full year ahead of you to implement decisions gradually—and strategically.
At Trail CPA, we help clients forecast their income and tax bracket early so they can:
Avoid underpayment penalties
Take advantage of timing opportunities
Align their tax decisions with personal and business goals
Let’s Build a Smarter 2026—Now
Not sure where you’ll land this year? That’s exactly the right time to talk.
We’ll help you map out your potential income, model different scenarios, and create a tax plan that works with your financial trajectory—not against it.
Schedule a tax planning session here
Your future self will thank you.