4 little-known strategies that could shrink your 2026 taxes

A tax expert says your tax return is not just boring paperwork, it is a chance to save money in the future — Alexander Smith, a behavioral economist at Worcester Polytechnic Institute, said people should see taxes as an opportunity to learn and plan better for next year. He says if you study your tax return carefully, you can understand how your income turns into the tax you pay — Smith explained that doing the math helps people change spending habits and reduce future taxes.

Smith believes many people focus too much on last year’s tax breaks instead of planning ahead — He said there is very little you can change about decisions already made in the past year, as stated by USA Today. He also said people don’t feel excited about tax savings even when they could save a lot — Smith compared it to how people quickly react to finding cash on the street but ignore tax-saving opportunities.

This happens because of something called “mental accounting,” where people treat money differently based on where it comes from — Smith explained this concept while teaching students, who react strongly when shown real cash. Tax professionals say people should talk to their accountants earlier in the year — CPA Scot Dobbs said clients should contact them in advance to plan for the coming year.


Experts also say asking many questions can uncover big tax savings — Tax manager Larry Johnson said one question can lead to others and reveal useful strategies. Smith says understanding tax brackets is very important to lowering taxes — He explained that income is taxed in layers, with higher rates applied only to higher portions of income. For example, a single person earning $75,000 in taxable income in 2025 would pay different rates on different portions — The first part is taxed at 10%, the next part at 12%, and the highest portion at 22%, as cited by USA Today.

4 little-known strategies to shrink 2026 taxes

Strategy 1: Put money into retirement accounts like a 401(k) or IRA — Smith said these contributions reduce taxable income and can lead to big tax savings. In 2025, people could contribute up to $23,500 to a 401(k) — Older Americans could contribute even more. Example: Contributing $1,000 could save about $250 in taxes if you are in a higher tax bracket — Smith explained this shows the real value of long-term saving.

Strategy 2: Contribute to a Health Savings Account (HSA) — Like retirement accounts, HSAs use pre-tax money and reduce taxable income. Families could contribute up to $8,550 to HSAs in 2025 — The money can also grow over time and be used tax-free for medical costs, as noted by USA Today.

Strategy 3: Make charitable donations — The IRS allows people to deduct large donations if they follow proper rules. Experts say donors should keep receipts, photos, and correct value records — This helps prove the deduction amount. To get full benefits, taxpayers usually need to itemize deductions instead of taking the standard deduction — For single filers, the standard deduction in 2025 was $15,750.

Strategy 4: Use tax-loss harvesting in investments — This means selling losing investments to offset gains and lower taxes, as per USA Today report. This strategy is commonly used by wealthy investors — It helps reduce tax liability while keeping similar investments.

Overall, Smith’s main message is that people can save a lot on taxes by planning early and understanding how the system works — He said seeing taxes as a learning opportunity can lead to smarter financial choices.

FAQs

Q1. How can I legally reduce my taxes in 2026?

You can lower taxes by using retirement accounts, HSAs, charity donations, and smart investment loss strategies.

Q2. Why should I learn about tax brackets?

Knowing tax brackets helps you plan income and savings so you can pay less tax in the future.