Tax Planning
Three Tax Planning Strategies Amid Inflation Adjustments in the U.S.
With the IRS’s recent inflation adjustments for tax year 2026, taxpayers have fresh opportunities—and pitfalls—to optimize deductions, shelter income, and plan ahead.
By NomadicTax Research Team • 5-8 min read • April 18, 2026
## Understanding the New Inflation Adjustments
In October 2025, the IRS released **Revenue Procedure 2025-32**, detailing the inflation adjustments for over 60 tax provisions for tax year 2026, including enhanced standard deductions, upward-adjusted rate brackets, and higher exclusion thresholds.([irs.gov](https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill?utm_source=openai)) Significant increases include: the standard deduction rising to $32,200 (MFJ), $24,150 (HoH), and enhanced exemption for estates to $15 million.([irs.gov](https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill?utm_source=openai))
## Strategy 1: Review Income Timing and Bracket Placement
With rate brackets shifting upward, some income that would have pushed you into a higher tax bracket now may not. Consider:
* **Accelerating or delaying income** (bonuses, capital gains) to fall into lower brackets where possible.
* **Harvesting capital losses** to offset gains, especially if you expect the tax rates in higher brackets to bite less due to inflation indexing.
## Strategy 2: Itemize Deductions When Helpful
The standard deduction has increased, making itemizing less attractive—but still valuable under certain circumstances:
* If you have high state and local taxes (SALT), mortgage interest, or charitable giving, itemizing may exceed the standard deduction.
* Consider “bunching” deductions (e.g., charitable gifts) into one year to exceed the new standard deduction.
## Strategy 3: Maximize Credits and Exclusions
Some inflation-indexed items offer dollar limits that affect phase-outs and eligibility:
* **Foreign Earned Income Exclusion** rose to $132,900 in 2026. U.S. expats or nomadic workers abroad should ensure their housing and foreign housing deductions are optimized.([irs.gov](https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill?utm_source=openai))
* **Adoption Credits** and **Childcare-related credits** have increased, boosting value for eligible taxpayers.([irs.gov](https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill?utm_source=openai))
## Practical Example
Jane, a married couple filing jointly, expects $40,000 in charitable giving, $40,000 in mortgage interest & SALT, totaling $80,000 itemized deductions. With the 2026 standard deduction at $32,200, itemizing clearly benefits them. Pandemic era timing (bunching giving in alternate years) could further amplify savings.
## Action Points
- If you expect income to spike, consult with a tax advisor early to determine if accelerating or deferring income makes sense.
- Review your deductions to see whether traditional itemization still beats the standard deduction.
- Expats should re-examine FEIE eligibility and make sure housing costs are properly documented for deductions.
- High earners should be aware of phase-outs—for example, the Alternative Minimum Tax exemption thresholds have been raised, but with phase-outs starting at higher income levels.([irs.gov](https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill?utm_source=openai))