Most people think about taxes in April. By then almost every decision that could have lowered the bill is already closed. That is the gap we work in.
District Capital Management is a fee-only fiduciary financial planning firm in Washington, DC. We build tax strategy into the financial plan itself rather than treating it as a filing-season exercise, so the decisions that determine your tax bill happen while they can still be made. We do not prepare returns. We work alongside the CPA who does, and we can refer you to one if you need one.
Below is what that looks like in practice, followed by the full 2026 guide to the strategies themselves. Whether any of this lowers your specific tax bill depends on facts we would need to see, which is what the first call is for.
We start with the whole picture: your income, your accounts, your benefits elections, and what you are trying to do over the next few years. Then we work the levers in order. These are the strategies that come up most often for the professionals we work with in DC, Maryland, and Virginia.
| Strategy | Who it tends to fit | What we actually do |
|---|---|---|
| Roth conversions | Anyone with a low-income year: a sabbatical, a job gap, a business loss, or early retirement before Social Security starts | Model the conversion against your bracket now and later, the five-year clocks, the pro-rata rule, and the two-year Medicare IRMAA lookback, then decide how much to convert and when |
| Backdoor Roth IRA | High earners above the direct Roth income limits, which for 2026 start at $153,000 single and $242,000 joint | Check for pre-tax IRA balances that would trigger pro-rata tax, plan how to clear them, and sequence the contribution and conversion correctly |
| Health savings accounts | Anyone on a qualifying high-deductible health plan | Set the contribution, decide whether to spend from it or invest it, and coordinate it with the rest of the plan |
| After-tax 401(k) and the mega backdoor Roth | People already maxing the standard accounts whose employer plan allows after-tax contributions and in-plan conversions | Confirm the plan actually permits it, then work out the space between your deferral plus match and the $72,000 total additions limit |
| Deferral strategy across 401(k), TSP, and Roth | Everyone with a workplace plan, and federal employees in particular | Decide pre-tax versus Roth by bracket, check the employer match and true-up, and account for the Roth catch-up rule above $150,000 of prior-year wages |
| Itemizing, SALT, and charitable structure | DMV homeowners and anyone who gives regularly | Run itemize versus standard under the $40,400 SALT cap and structure giving around the new 0.5% floor, including donor-advised funds and appreciated stock |
| Portfolio-level tax work | Anyone with a taxable brokerage account | Tax-loss harvesting, asset location across account types, and timing realized gains into the right year |
| Equity compensation | Tech and public-company professionals with RSUs, ESPP, or options | Plan around vesting and exercise dates, concentration risk, and which year the taxable event lands in |
The value is rarely in any single item on that list. It is in the sequencing, because the levers interact. Lowering your AGI can pull you under a phaseout you did not know you were near. Bunching charitable gifts only works if you know which year your income will be highest. Harvesting a loss in December changes what a Roth conversion costs. A large conversion at 63 changes your Medicare premium at 65. None of those connections show up on a single form, and none of them are visible to someone looking only at last year’s return.
Probably yes if you are a high earner with more than one account type, equity compensation, federal benefits, a business, or a year where your income is unusual. Probably not, at least not yet, if your situation is one W-2, a 401(k), and the standard deduction. We will tell you which one you are on the call.
Our financial planning fees are based on the complexity of your situation, not on a sales conversation. For individuals they typically run $6,000 to $9,600 a year, and for couples $6,000 to $14,400, with the exact figure confirmed before you commit. Full detail is on our pricing page.
Tax planning is not sold separately. It is part of comprehensive financial planning, alongside investment management, retirement projections, and the rest of the plan. Because we are fee-only and a fiduciary, we take no commissions and sell no products.
A discovery call is a conversation, not a pitch. We ask what your income looks like, what accounts you already have, and what you are trying to do over the next few years. If tax planning is the main gap, we will tell you what we would look at first. If you do not need a planner, we will tell you that too. It takes about 30 minutes and there is no cost.
Here is exactly what to expect on the call, and who we typically work with if you want to check the fit first.
Schedule a free discovery call
What follows is the detail behind everything above: the 2026 numbers, the rules that changed, and the order we work through them. Start with the six strategies that come up most often, then read on for the full picture.
For 2026 you can defer $24,500 into a 401(k), 403(b), 457(b), or the federal Thrift Savings Plan, plus another $8,000 if you are 50 or older, or $11,250 if you are 60 to 63. Every pre-tax dollar comes straight off your taxable income. If the full amount is out of reach, contribute at least enough to capture your full employer match first. One catch: above $150,000 of prior-year Social Security wages, the catch-up portion has to go in as Roth.
An HSA is the only account with three tax advantages at once: deductible going in, tax-free growth, and tax-free withdrawals for qualified medical expenses. For 2026 you can contribute $4,400 with self-only coverage or $8,750 for a family, plus $1,000 more at 55 or older. You need a qualifying high-deductible health plan to be eligible. If you can pay current medical costs from cash flow, invest the balance and leave it alone.
The state and local tax deduction cap rose from $10,000 to $40,000 for 2025 and $40,400 for 2026. A couple paying $14,000 in state income tax and $12,000 in property tax could previously deduct $10,000 of it and can now deduct the full $26,000. Against a $32,200 standard deduction, households that have taken the standard deduction since 2018 may be better off itemizing again. The benefit phases down above $505,000 of modified AGI.
The dependent care FSA limit rose to $7,500 for 2026, up from the $5,000 it sat at for decades ($3,750 if married filing separately). Contributions come out pre-tax, so for a household paying for daycare or after-school care this is one of the largest straightforward reductions available. Your employer's plan has to have adopted the higher cap, and the election usually happens at open enrollment, months before you see the benefit.
Selling a position at a loss offsets realized gains, and up to $3,000 of net loss can offset ordinary income each year ($1,500 if married filing separately), with the rest carrying forward. It is one of the few levers that turns a down position into something useful. The wash sale rule blocks buying a substantially identical security within 30 days, which is where most people get tripped up. Buy the replacement inside an IRA and the loss is gone permanently, not just deferred.
Charitable giving changed in both directions this year. If you take the standard deduction, you can now deduct up to $1,000 of cash gifts on a single return or $2,000 on a joint return, but only for gifts made directly to public charities. Donor-advised funds do not qualify. If you itemize, only giving above 0.5% of your AGI is deductible, so on $300,000 of income the first $1,500 of gifts produces no benefit. Bunching several years of giving into one year, often through a donor-advised fund, is how most people work around that floor.
Those six are the most common levers, not the whole set. Also below: the Tax Stack and the order to work in, the 2026 changes in full, which income thresholds are cliffs, whether Roth belongs in your plan, what DC, Maryland, and Virginia change, and what closes on December 31.
2026 is a harder year than usual to get right, because the One Big Beautiful Bill Act changed the individual code in two waves. Some of it landed on your 2025 return. The rest starts now. The state and local tax deduction cap, raised to $40,000 for 2025, is $40,400 for 2026. Charitable giving got a floor under it this year that did not exist before. The dependent care FSA limit moved for the first time in decades. If your plan is the one you built in 2019, it is out of date in both directions.
Every federal figure below is the 2026 number unless a year is stated. Nothing here is tax advice for your specific return, and it does not replace your CPA.
Almost every strategy works through one of three mechanisms, and everything else is an application of one of them. You can reduce the amount of income that is subject to tax, change the character of income so it is taxed at a lower rate, or shift income and deductions between tax years so they land where your rate is lowest. Tax credits are the fourth and separate case: they reduce the tax itself rather than the income it is calculated on, which is why they are usually worth more per dollar.
| Mechanism | What it does | Examples | Who it helps most |
|---|---|---|---|
| Reduce taxable income | Removes dollars from the income the IRS taxes this year | 401(k) and TSP deferrals, HSA, health and dependent care FSAs, deductible IRA, SEP or solo 401(k), itemized deductions | Anyone with earned income, strongest in the 24% bracket and above |
| Change the character of income | Moves a dollar from a higher tax rate to a lower one | Long-term versus short-term capital gains, qualified dividends, municipal bond interest, asset location across account types | People with meaningful taxable brokerage balances |
| Shift timing between years | Puts the income or the deduction in the year where your rate is lowest | Roth conversions in a low-income year, bunching charitable gifts, deferring a bonus, accelerating or delaying a sale, harvesting losses | People with uneven income: business owners, equity comp, sabbaticals, the year you retire |
| Claim credits | Reduces the tax owed directly, dollar for dollar, regardless of bracket | Child tax credit, education credits, energy and dependent care credits | Anyone eligible; worth more per dollar than a deduction of the same size |
The reason this framing matters is that the mechanisms interact. Lowering your AGI to stay eligible for a credit can be worth more than the deduction itself. Shifting a gain into a year you already have losses can be worth more than either. Most people only ever pull mechanism one.
The One Big Beautiful Bill Act made the current rate structure permanent and added or expanded a set of deductions, some of which began with 2025 returns and several of which begin in 2026. The practical effect for a DC-area professional is that itemizing is back on the table, charitable giving needs more deliberate structuring, and families with childcare costs have a materially bigger pre-tax bucket starting this year.
| Item | Starts | 2026 detail | What it means for you |
|---|---|---|---|
| SALT deduction cap | 2025 | $40,400, phasing down above $505,000 of modified AGI at 30 cents per dollar, never below $10,000 | Itemizing is worth checking again for most DMV homeowners |
| Standard deduction | Ongoing | $16,100 single, $32,200 married filing jointly, $24,150 head of household | This is the bar your itemized deductions have to clear |
| Charitable deduction floor (itemizers) | 2026 | Only giving above 0.5% of AGI is deductible | On $300,000 of AGI, the first $1,500 of gifts produces nothing |
| 35% cap on itemized deductions | 2026 | For 37%-bracket filers, the value of every itemized deduction is capped at 35 cents per dollar | Changes the bunching math at the top bracket |
| Charitable deduction for non-itemizers | 2026 | Up to $1,000 single / $2,000 joint, cash gifts made directly to public charities only | Donor-advised funds and private foundations do not qualify |
| Dependent care FSA | 2026 | $7,500, or $3,750 married filing separately, up from $5,000, if your employer's plan has adopted the higher limit | One of the largest straightforward reductions available to families |
| Child tax credit | 2025 | $2,200 per qualifying child, $1,700 refundable | A credit, so it cuts tax dollar for dollar, not just taxable income |
| Senior deduction (age 65+) | 2025–2028 | Extra $6,000 per eligible person, up to $12,000 if both spouses are 65 or older, phasing out above $75,000 single / $150,000 joint at 6 cents per dollar | Temporary, and it stacks on the existing age-65 standard deduction add-on |
| Tips and overtime deductions | 2025–2028 | Deductible whether or not you itemize, but claimed on Schedule 1-A and does not reduce AGI; tips up to $25,000, overtime premium up to $12,500 single / $25,000 joint; phases out above $150,000 single / $300,000 joint MAGI | Most readers of this guide will be phased out |
| Car loan interest deduction | 2025–2028 | Up to $10,000 of interest on a new, US-assembled personal vehicle; phases out above $100,000 single / $200,000 joint MAGI | Most readers of this guide will be phased out |
| Mortgage interest and PMI | 2026 | The $750,000 acquisition-debt cap is permanent, and certain mortgage insurance premiums are treated as qualified interest for tax years beginning after 2025 | Relevant to recent DMV buyers who are paying PMI |
| Estate and gift exemption | 2026 | $15,000,000 per person, $30,000,000 per married couple, no sunset | Removes federal estate pressure for nearly everyone reading this |
| Annual gift exclusion | 2026 | $19,000 per recipient | Gifting is not a deduction, but it is how money leaves an estate cleanly |
Source: IRS Rev. Proc. 2025-32, IRS Notice 2025-67, and the One Big Beautiful Bill Act. As of September 2026.
One change that gets less attention than it deserves, and that hits high earners directly: if your prior-year Social Security wages from the employer sponsoring your plan were above $150,000, your 401(k) catch-up contributions must be made as Roth, not pre-tax. That is not optional, and it means catch-up dollars you were counting on to reduce this year’s taxable income no longer do. If the plan does not offer a Roth option at all, affected high earners cannot make catch-up contributions. If you are 50 or older and above that wage line, rebuild the assumption.
Use the levers in the order of how much certainty they give you per dollar, not in the order you heard about them. I call this the Tax Stack, and it is the sequence we work through with almost every new client before we look at anything clever.
The order is not arbitrary. Steps one and two are the same for nearly everyone and require almost no analysis. Steps four and five require knowing your actual numbers, and doing them out of order is how people end up making a charitable bunching decision before they know which bracket they will land in.
Pre-tax payroll deferrals are the fastest and largest lever for most high earners, and the 2026 limits are higher than 2025 across the board. Here is the full set in one place.
| Account | 2026 limit | Catch-up | Reduces this year's taxable income? |
|---|---|---|---|
| 401(k), 403(b), 457(b), TSP employee deferral | $24,500 | $8,000 at 50+, or $11,250 at 60 to 63 | Yes, if pre-tax. No, if Roth. |
| Total 401(k) annual additions (employee + employer + after-tax) | $72,000 | $80,000 at 50+, $83,250 at 60 to 63 | Employer and after-tax portions do not reduce your income |
| Traditional IRA | $7,500 | $1,100 at 50+ | Only if you clear the deductibility rules below |
| Roth IRA | $7,500 | $1,100 at 50+ | No |
| HSA, self-only coverage | $4,400 | $1,000 at 55+ | Yes |
| HSA, family coverage | $8,750 | $1,000 at 55+ | Yes |
| Healthcare FSA | $3,400 (carryover up to $680) | None | Yes |
| Dependent care FSA | $7,500 ($3,750 married filing separately), if your employer's plan adopted the higher limit | None | Yes |
| SEP IRA | $72,000, up to 25% of compensation (roughly 20% of net self-employment earnings for an unincorporated owner) | None | Yes |
| SIMPLE IRA | $17,000 | $4,000, or $5,250 at 60 to 63 | Yes |
Source: IRS Rev. Proc. 2025-32 and IRS Notice 2025-67. As of September 2026.
A detail worth knowing if you are a high earner: only the first $360,000 of compensation counts for retirement plan purposes in 2026, and you are treated as a highly compensated employee above $160,000 of prior-year pay, which can limit what you are allowed to defer if your plan fails its nondiscrimination testing. If your plan has ever handed you a refund check in March, that is what happened.
If neither you nor your spouse is covered by a workplace retirement plan, the deduction has no income limit at all. If either of you is covered, it depends on the phaseouts below, and for most DMV professionals with a workplace plan, income is above them.
| Situation | Phaseout begins | Fully phased out |
|---|---|---|
| Traditional IRA deduction, single, covered by a workplace plan | $81,000 | $91,000 |
| Traditional IRA deduction, married filing jointly, you are covered | $129,000 | $149,000 |
| Traditional IRA deduction, married, only your spouse is covered | $242,000 | $252,000 |
| Roth IRA contribution, single | $153,000 | $168,000 |
| Roth IRA contribution, married filing jointly | $242,000 | $252,000 |
| Roth IRA contribution, married filing separately | $0 | $10,000 |
Source: IRS Rev. Proc. 2025-32. As of September 2026.
If you are over the Roth limit, you are not out of options. See our walkthrough of the backdoor Roth IRA, step by step. The pro-rata rule is where most do-it-yourself backdoor Roth conversions go wrong. People forget an old rollover IRA even exists until the tax bill shows up.
It is worth rerunning the math, because for many DMV households the answer changed when the cap rose. The state and local tax deduction cap went from $10,000 to $40,000 for 2025 and $40,400 for 2026, which means state income tax and property tax that used to be stranded above the cap are now deductible. Against a standard deduction of $32,200 for a married couple filing jointly, that can be enough to tip a household back into itemizing for the first time since 2018.
The deductions that count toward the itemized total are state and local taxes up to the cap, mortgage interest on up to $750,000 of acquisition debt, certain mortgage insurance premiums for tax years beginning after 2025, charitable gifts above the new floor, and medical expenses above a percentage-of-AGI threshold that most people never clear.
Hypothetical and illustrative example. Priya and Marcus are a married couple in Arlington, Virginia. They pay $16,000 in Virginia state income tax and $11,000 in property tax, and they have $9,000 of mortgage interest. Their SALT total is $27,000, which is fully deductible because it is under the $40,400 cap. Add mortgage interest and they are at $36,000 of itemized deductions against a $32,200 standard deduction. Itemizing is the better answer for them by $3,800 of deductions, which at a 24% marginal federal rate is roughly $912 of federal tax, before any state effect. Under the old $10,000 SALT cap, the same couple would not have come close and would have taken the standard deduction without thinking about it. This example is hypothetical and illustrative only, is not based on any actual client, and does not reflect any individual’s results.
Three conditions to watch. The higher cap phases down above $505,000 of modified AGI at 30 cents per dollar, with a floor of $10,000, so very high earners get a reduced benefit or none of the increase. The threshold is the same for single and joint filers, and half that for married filing separately. And the increase is temporary: the cap rises 1% a year through 2029 and reverts to $10,000 in 2030 under current law, so this is a planning window rather than a new permanent baseline.
If you itemize, only the charitable gifts that exceed 0.5% of your AGI are deductible starting in 2026, so small annual gifts now produce nothing. On $300,000 of AGI, the first $1,500 of giving is absorbed by the floor. On $500,000 of AGI, the first $2,500 is. That is a structural change, not a rounding error, and it makes the timing of your giving matter more than the amount.
The workaround is bunching: instead of giving $8,000 a year for three years, give $24,000 in one year, clear the floor once instead of three times, and itemize in that year while taking the standard deduction in the others. A donor-advised fund makes this practical, because you take the deduction in the funding year and grant the money out to charities on whatever schedule you like afterward.
If you are in the 37% bracket, OBBBA also caps the value of every itemized deduction, including charitable gifts, at 35 cents per dollar. That does not eliminate the case for bunching, but it changes the arithmetic, and it is worth modeling before a large gift.
Three refinements that matter more than they used to:
Hypothetical and illustrative example. Sam is a DC tech professional with $320,000 of AGI who gives about $6,000 a year to two charities. Because Sam’s DC income tax alone puts Sam well over the $16,100 single standard deduction, Sam itemizes every year either way. Under the new floor, the first $1,600 of each year’s giving is not deductible, so $4,800 of the $18,000 given across three years produces nothing. If Sam instead funds a donor-advised fund with $18,000 of long-held appreciated employer stock in a single year, the floor is absorbed once rather than three times, $16,400 is deductible, and the capital gain on the stock is never realized. Sam grants the money out to the same two charities on the old schedule. This example is hypothetical and illustrative only and is not based on any actual client.
Bunching rarely backfires once you know what the income picture looks like. Spreading gifts thin across years where they produce nothing is the more common regret. If you want to work out the size question first, we wrote a separate piece on how much to give to charity.
Selling an investment at a loss generates a realized loss that offsets realized gains dollar for dollar, and a limited amount of net loss can offset ordinary income, with anything left over carrying forward indefinitely. It is one of the few strategies that converts an unpleasant market into something with a use.
The mechanics, in order:
The trap is the wash sale rule. If you buy a substantially identical security within 30 days before or after the sale, the loss is disallowed and added to the basis of the replacement (IRS Publication 550). Three things catch people: the window runs both directions, not just forward; it applies across your accounts, including an IRA and, in practice, a spouse’s accounts; and an automatic dividend reinvestment inside the window is the single most common way an otherwise clean harvest gets disallowed. One version is worse than the rest. If the replacement is purchased inside an IRA, the loss is not added to basis at all. It is permanently lost (Rev. Rul. 2008-5).
Worth being honest about the limits. Harvesting does not make you money. It defers tax by lowering your cost basis, which means a larger gain later. It is genuinely valuable when you expect a lower rate in the future, when you have gains to offset now, or when the carryforward gets used against something meaningful. It does very little if you are in the 0% capital gains bracket already, and for 2026 that bracket runs up to $49,450 of taxable income for a single filer and $98,900 for a married couple filing jointly. Our deeper piece on how tax-loss harvesting works and when it pays off covers the edge cases.
Then the remaining levers are the ones that take a plan rather than a form, and they are where the larger numbers live. In rough order of how often they apply to the people we work with:
The full run-through of this tier lives in what to do after maxing out your 401(k) and Roth IRA.
Your marginal bracket is not the only thing your income controls. A dozen separate thresholds turn on and off at specific income levels, and crossing one can cost more than the extra income was worth. This is the part of tax planning that generic advice never covers, and it is the reason adding to the 401(k) is sometimes worth far more than the bracket math alone suggests.
| Threshold | 2026 trigger | What happens | Cliff or gradual |
|---|---|---|---|
| Net investment income tax | $200,000 single / $250,000 joint MAGI | Extra 3.8% on investment income | Gradual, applies to the amount over |
| Additional Medicare tax | $200,000 single / $250,000 joint | Extra 0.9% on wages and self-employment income | Gradual |
| Roth IRA contribution | $153,000 to $168,000 single / $242,000 to $252,000 joint | Direct Roth contribution shrinks, then disappears | Gradual |
| QBI deduction | $201,775 single / $403,500 joint | Deduction begins to limit or phase out | Gradual over $75,000 / $150,000 |
| SALT cap | $505,000 of modified AGI | The $40,400 cap phases down 30 cents per dollar toward a $10,000 floor | Gradual |
| Tips, overtime, and car loan deductions | $150,000 / $300,000 MAGI (tips, overtime); $100,000 / $200,000 (car loan) | The deduction reduces, then disappears | Gradual |
| 0% long-term capital gains rate | $49,450 single / $98,900 joint taxable income | Gains move from 0% to 15% | Gradual, gains stack on top of ordinary income |
| 20% capital gains rate | $545,500 single / $613,700 joint | Gains move from 15% to 20% | Gradual |
| AMT exemption phaseout | $500,000 single / $1,000,000 joint | Exemption of $90,100 / $140,200 reduces at 50 cents per dollar | Gradual, and the rate doubled under OBBBA |
| Medicare IRMAA | $109,000 single / $218,000 joint, first tier | Part B and Part D surcharges per person | Cliff One dollar over triggers the whole tier |
| Senior deduction | $75,000 single / $150,000 joint | The $6,000 per-person deduction phases out at 6 cents per dollar | Gradual |
| Roth catch-up requirement | $150,000 of prior-year Social Security wages | 401(k) catch-up must be Roth, so it no longer reduces taxable income | Cliff |
| Social Security wage base | $184,500 | Wages above this stop paying the 6.2% Social Security tax | Cap |
Source: IRS Rev. Proc. 2025-32, IRS Notice 2025-67, and the CMS 2026 Medicare Parts A and B premiums fact sheet. As of September 2026.
IRMAA deserves a specific warning: it is a cliff, and it looks back two years. Your 2026 Medicare premiums are set by your 2024 modified AGI, defined as AGI plus tax-exempt municipal interest. One dollar over a threshold moves you into the entire tier, each spouse on Medicare pays separately, and the standard Part B premium of $202.90 per month jumps to $284.10 in the first surcharge tier. If a large Roth conversion or a home sale is in the plan and you are within two years of 65, that conversation has to happen before the transaction, not after. If your income has since dropped because you retired, Form SSA-44 exists to appeal it.
Credits, and it is not close. A deduction reduces the income you are taxed on, so its value equals the deduction multiplied by your marginal rate. A credit reduces the tax itself, dollar for dollar, regardless of your bracket.
| $2,200 deduction | $2,200 credit | |
|---|---|---|
| Reduces | Taxable income | Tax owed |
| Value at a 22% marginal rate | $484 | $2,200 |
| Value at a 32% marginal rate | $704 | $2,200 |
| Value if you owe no tax | $0 | Up to $1,700 if refundable, as with the child tax credit |
Illustrative only, using 2026 federal rates. Not a projection of any individual's result. As of September 2026.
The practical implication: a move that keeps you eligible for a credit you were about to phase out of is often worth more than a deduction of the same headline size. That is exactly the kind of interaction that only shows up when someone is looking at the whole return rather than one line of it.
Ordinary income is taxed in layers, not all at your top rate. Your marginal rate is the rate on the next dollar, which is the number that matters for every decision on this page. Your effective rate, the one you actually pay across all your income, is always lower.
| Rate | Single | Married filing jointly | Head of household |
|---|---|---|---|
| 10% | $0 to $12,400 | $0 to $24,800 | $0 to $17,700 |
| 12% | $12,401 to $50,400 | $24,801 to $100,800 | $17,701 to $67,450 |
| 22% | $50,401 to $105,700 | $100,801 to $211,400 | $67,451 to $105,700 |
| 24% | $105,701 to $201,775 | $211,401 to $403,550 | $105,701 to $201,775 |
| 32% | $201,776 to $256,225 | $403,551 to $512,450 | $201,776 to $256,200 |
| 35% | $256,226 to $640,600 | $512,451 to $768,700 | $256,201 to $640,600 |
| 37% | $640,601 and above | $768,701 and above | $640,601 and above |
Source: IRS Rev. Proc. 2025-32. As of September 2026.
Roth contributions belong in a lot of plans, but they do not lower this year’s tax bill. A Roth 401(k), Roth TSP, or Roth IRA is funded with after-tax dollars, so it raises what you owe now in exchange for tax-free income later. That is a legitimate trade, just a different one from everything above.
The case for Roth used to rest on an expiration date, the argument that rates would rise when the 2017 law sunset. That deadline is gone, because the current rate structure was made permanent. The real case now is a lower current bracket than you expect to have later, a long runway of tax-free growth, no required minimum distributions on a Roth IRA, and the flexibility of having both account types to draw from so you can control your taxable income in retirement.
A common planning framework is this. In the 22% or 24% bracket with an expectation of a higher bracket later, Roth often looks like the better side of the trade. In the 32% bracket or above with a genuine expected drop in retirement, pre-tax often looks better, with Roth conversions in the low-income years afterward doing the cleanup. Both of those are starting points, not conclusions. The answer turns on assumptions about your own future income that a rule of thumb cannot know, which is why it is worth modeling rather than guessing. Our comparison of Roth versus traditional 401(k) walks through both sides.
One caution that applies above $150,000 of prior-year Social Security wages: your catch-up contributions have to be Roth now, so if you were counting on those dollars to reduce taxable income, that assumption no longer holds.
Hypothetical and illustrative example. Dana is a 61-year-old federal employee earning $168,000. For 2026, Dana can defer $24,500 into the TSP plus an $11,250 catch-up, because the catch-up is larger at ages 60 through 63. But with prior-year Social Security wages above $150,000, the $11,250 catch-up portion has to go in as Roth, so only the $24,500 reduces Dana’s 2026 taxable income. Dana’s plan assumed all $35,750 would be pre-tax. This example is hypothetical and illustrative only and is not based on any actual client.
Federal employees are one of the groups most likely to be leaving the simplest money on the table here, because the catch-up mechanics changed mid-career for a lot of people. If that is you, start with how to maximize your Thrift Savings Plan.
Your state and property taxes are what fill up the $40,400 SALT cap, which means your jurisdiction directly determines whether itemizing is worth it for you. That is the part of the DMV picture national tax content cannot help with, and three things follow from it.
Your state of residence changes whether itemizing is worth it. A household in a higher-tax jurisdiction fills the SALT cap faster and clears the standard deduction more easily. A household with the same income but lower state and property tax may still be better off with the standard deduction. This is why the itemize question has to be answered with your actual numbers rather than a rule.
Crossing a state line is a planning event, not just a move. Living in one DMV jurisdiction and working in another is normal here, and it affects withholding, reciprocity, and which return gets which income. If you are selling a business, exercising options, or taking a large distribution, the year and the state in which that happens both matter.
State-level education and estate rules differ across the three. The District, Maryland, and Virginia each offer a state tax benefit for contributions to their own 529 plans, with different rules and different amounts, and the three also differ on estate tax at the state level, which still matters even though the federal exemption is now $15,000,000 per person. Check your own jurisdiction’s current figures rather than assuming they match a neighboring one.
If you are a federal employee or a federal contractor, the state layer usually matters less than the TSP layer, and the reverse is true for tech and equity compensation.
Almost everything on this page closes on December 31, not at the filing deadline. The filing deadline is when you report; the calendar year is when you decide. I call this the December 31 Line, and it is the most useful single idea in tax planning.
| Closes December 31, 2026 | Open into the filing season |
|---|---|
| 401(k), 403(b), 457(b), and TSP deferrals (payroll-based, cannot be topped up later) | Traditional and Roth IRA contributions for 2026 |
| Health and dependent care FSA elections, and spending (subject to your plan's grace period or run-out window, which varies) | HSA contributions for 2026 |
| Charitable gifts, including donor-advised fund funding | SEP IRA contributions, including extensions |
| Tax-loss harvesting and any realized gains | Solo 401(k) employer contributions, up to the return due date including extensions |
| Roth conversions | Choosing to itemize or take the standard deduction |
| Qualified charitable distributions | |
| Income timing: bonus deferral, invoice timing, exercise dates | |
| Required minimum distributions (your first RMD can be delayed to April 1 of the following year, though that means taking two in one year) |
A working calendar, for anyone who wants one:
The mistake I see most often is not a missed deduction. It is a high earner optimizing in April, when the decisions that mattered closed on December 31. When people tell me they “do their taxes,” they almost always mean they file them. Filing is reporting. Planning is the part that happened months earlier.
These are the patterns that come up repeatedly, and none of them are exotic.
One caveat worth repeating: the higher dependent care FSA limit is only available to you if your employer amended its plan to adopt it. Confirm your specific plan allows $7,500 before you assume it does.
Both, doing different jobs. A CPA looks backward at a year that already happened and files it accurately. A financial planner looks forward at the year in front of you and makes sure the decisions feeding into that return happen while they can still be made. Neither replaces the other, and the gap between them is where most tax savings are lost.
| CPA or tax preparer | Fee-only financial planner | |
|---|---|---|
| Primary job | Prepares and files the return, represents you before the IRS | Sequences decisions during the year so the return has something good to report |
| Time orientation | Backward, at a closed year | Forward, at an open year |
| Typical trigger | February through April | Open enrollment, a bonus, an equity vest, a job change, December |
| Sees your portfolio? | Usually only what appears on the 1099 | Yes, including asset location and unrealized positions |
| Sees your benefits elections? | Rarely | Yes, including FSA, HSA, and deferral elections |
| Can lower next year's bill? | Limited once the year has closed | Yes, that is the job |
We coordinate with your CPA rather than replacing them. They file the return; we work on making sure the decisions feeding into it happened in time, and we can refer you to a CPA if you do not have one. If you want to think this through further, we wrote about whether you need a financial advisor or an accountant.
The hard part of lowering your taxes is not any single strategy on this page. It is the sequencing, and it is difficult to do alone because the levers interact with thresholds you cannot see from inside one decision.
At District Capital Management, tax strategy is part of the financial plan rather than a filing-season exercise. We are a fee-only fiduciary firm in Washington, DC, working with professionals in their 30s and 40s across DC, Maryland, and Virginia, and with clients nationwide subject to state registration requirements. Because we are fee-only, we take no commissions and sell no products, and our planning fees are published upfront.
The first step is a 30-minute conversation at no cost. If tax planning is your main gap, we will tell you what we would look at first. If you do not need a planner, we will tell you that too.
Schedule a free discovery call
Not ready to talk to someone yet? These go further on the pieces above:
No. District Capital Management is a financial planning firm, not a tax preparer. We build tax strategy into your financial plan and coordinate with the CPA who files your return, and we can refer you to one if you do not have one.
Tax planning is part of comprehensive financial planning rather than a separate product. Planning fees are based on the complexity of your situation and typically run $6,000 to $9,600 a year for individuals and $6,000 to $14,400 for couples. Your exact fee is confirmed before you commit.
Increase your pre-tax payroll deferral. For 2026 you can defer $24,500 into a 401(k), 403(b), 457(b), or TSP, and the change usually takes effect within a pay cycle or two. An HSA is the next lever if you have a qualifying high-deductible health plan, at $4,400 self-only or $8,750 for a family.
More often than it was. The SALT cap rose from $10,000 to $40,000 for 2025 and $40,400 for 2026, which for many DC, Maryland, and Virginia households is enough for state and local taxes plus mortgage interest to clear the $32,200 joint standard deduction. Recalculate even if you have taken the standard deduction every year since 2018.
Credits, dollar for dollar. A deduction reduces the income you are taxed on, so it saves you the deduction times your marginal rate. A credit reduces the tax itself. The child tax credit is $2,200 per qualifying child for 2026, with $1,700 refundable.
$24,500 as an employee deferral, plus $8,000 more at 50 or older, or $11,250 at 60 to 63. If your prior-year Social Security wages exceeded $150,000, the catch-up portion must be made as Roth.
No. Roth contributions are made with after-tax dollars, so they raise your current-year tax in exchange for tax-free withdrawals later. Only pre-tax contributions reduce this year’s taxable income. Both can be right; they solve different problems.
If you itemize, only charitable gifts exceeding 0.5% of your adjusted gross income are deductible starting in 2026. On $300,000 of AGI, the first $1,500 of giving produces no deduction. Bunching multiple years of giving into one, often through a donor-advised fund, is the standard way around it.
December 31 for almost everything: retirement plan deferrals, FSA spending, charitable gifts, tax-loss harvesting, Roth conversions, and income timing. Only IRA and HSA contributions, plus SEP and solo 401(k) employer contributions for business owners, stay open into the filing season.
This article is for educational purposes and is not tax, legal, or investment advice. Consult your CPA or attorney regarding your specific situation. All figures are for tax year 2026 unless another year is stated. Investing involves risk, including possible loss of principal.
Last updated: September 2026
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