12 Tips for Lowering Your Tax Bill

An unexpected tax bill can ruin anybody's day. To help avoid that unpleasant surprise, here are 12 easy moves many people can make to cut their tax bills throughout 2026.

In some cases, you must itemize rather than take the standard deduction to use these strategies, but the extra effort may be worth it.

The W-4 is a form you fill out to tell your employer how much tax to withhold from each paycheck.

If you’ve received a huge tax bill in the past and don’t want another surprise next year, raise your tax withholding amount so you owe less when it's time to file your tax return.

If you’ve previously received a big refund, do the opposite and reduce your withholding; otherwise, you could be needlessly living on less of your paycheck all year. You can change your W-4 at any time.

Lower taxable income means lower taxes, and 401(k)s are a popular way to reduce tax bills. The IRS doesn’t tax what you divert directly from your paycheck into a 401(k).

In 2026, you can contribute up to $24,500 to your 401(k). Those 50 and older can contribute an additional $8,000, while those ages 60 to 63 can contribute an extra $11,250. (Learn more about how the 401(k) contribution limits work.)

These retirement accounts are usually sponsored by employers, although self-employed people can open their own 401(k)s. And if your employer matches some or all of your contribution, you’ll get free money to boot.

» MORE: Try our retirement calculator

There are two major types of individual retirement accounts: Roth IRAs and traditional IRAs.

You may be able to deduct contributions made to a traditional IRA, though how much you can deduct depends on whether you or your spouse is covered by a retirement plan at work and how much you make.

There are limits to how much you can put in an IRA, too. For 2026, the limit is $7,500 per year ($8,600 for people 50 and older). And note that the contribution limit is a combined limit. So, for example, you would hit the 2026 contribution limit if you put $4,000 into a traditional IRA and $3,500 into a Roth.

Setting aside money for a child's tuition can shave a few bucks off your tax bill, too. A popular option is to make contributions to a 529 plan, a savings account operated by a state or an educational institution.

You can’t deduct your contributions on your federal income taxes, but you might be able to on your state return if you’re putting money in your state’s 529 plan. Be aware that you may have to file a gift tax return if your contributions, plus any other gifts to a particular beneficiary, exceed $19,000 in 2026.

The IRS lets you funnel tax-free dollars directly from your paycheck into a flexible spending account (FSA) every year, so if your employer offers an FSA, you might want to take advantage of it to lower your tax bill.

You’ll have to use the money during the calendar year for medical and dental expenses, but you might also be able to use it for related everyday items such as bandages, prescriptions, and glasses or contacts for yourself and your qualified dependents. Some employers might let you carry money over to the next year.

In 2026, the FSA contribution limit is $3,400, and rollovers are limited to $680^[0]

This FSA, with a twist, is another handy way to reduce your tax bill if your employer offers it. What's covered can vary among employers, so check the details of your plan.

The IRS will allow for an exclusion of up to $5,000 of your pay that you have your employer divert to a dependent care FSA account, which means you’ll avoid paying taxes on that money^[0]

If you have a high-deductible health care plan, you may be able to lighten your tax load by contributing to a health savings account (HSA), which is a tax-exempt account you can use to pay medical expenses.

Contributions to HSAs are tax-deductible, and the withdrawals are tax-free, too, so long as you use them for qualified medical expenses. Your employer may offer an HSA, but you can also start your own account at a bank or another financial institution.

In 2026, the HSA contribution limit is $8,750 for families and $4,400 for self-coverage. If you're 55 or older, you can contribute an extra $1,000.

The rules can get complex, but if you think you'll earn less than $70,224 in 2026, the earned income tax credit might be worth looking into. Depending on your income, marital status and how many children you have, you might qualify for a tax credit of up to $8,231 for taxes filed in 2027.

A tax credit is a dollar-for-dollar reduction in your actual tax bill — as opposed to a tax deduction, which simply reduces how much of your income gets taxed. It’s truly found money because if a credit reduces your tax bill below zero, the IRS might refund some or all of the money to you, depending on the credit.

Charitable contributions are deductible, and they don’t even have to be in cash. If you’ve donated clothes, food, old sporting gear or household items, for example, those things can lower your tax bill if they went to a bona fide charity and you got a receipt.

You may be able to deduct 20% to 60% of your adjusted gross income for charitable donations, but this is if you itemize versus taking the standard deduction.

Many tax software programs include modules that estimate the value of each item you donate, so make a list before you drop off that big bag of stuff at Goodwill — it can add up to big deductions.

» MORE: See our top picks for tax software this year

If you’ve been in the hospital or had other costly medical or dental care, keep those receipts. You can deduct qualified medical expenses that are more than 7.5% of your adjusted gross income.

So, for example, if your adjusted gross income is $40,000, anything beyond the first $3,000 of your medical bills — 7.5% of your AGI — could be deductible. If you rang up $10,000 in medical bills, $7,000 of it could be deductible.

» MORE: How the medical expense deduction works

Knowing you’re getting a tax deduction might make it a little easier to unload some of those bad stock picks that have been weighing down your portfolio.

You can deduct losses on stock sales, which can offset any taxable capital gains you might have. The limit on that offset is $3,000, or $1,500 for married couples filing separately.

One other note: If you decide to buy back your stock within 30 days, the IRS can take back your deduction.

» MORE: How tax-loss harvesting works

From a tax perspective, there’s a huge difference between doing something by Dec. 31 and doing it a day later.

If you know an upcoming expense is going to be tax-deductible, think about whether you can pay for it this year rather than next year. For example, if you had made your January 2026 mortgage payment in December 2025, that could have given you an extra month’s worth of mortgage interest to deduct on your 2025 tax return.

Similarly, if you know you’re near the threshold for the medical expense deduction, moving that root canal up might make the pain more bearable if the cost suddenly becomes deductible, too.