US Individual Tax Planning Strategies for CPA TCP

What TCP expects

The Tax Compliance and Planning (TCP) Discipline goes beyond computing tax: it asks what the taxpayer should do to reduce tax legitimately. Its first area covers compliance and planning for individuals, including personal financial planning. The strategies below come up repeatedly.

1. Timing income and deductions

• Cash-method taxpayers can often defer a December bonus or invoice to January, or prepay deductible expenses before December 31.
• If next year's marginal rate will be higher (a promotion, a spouse returning to work), do the opposite: accelerate income.
• Remember the constructive receipt rule — income made available without restriction is taxable even if not collected.

2. Bunching and the 2026 charitable rules

With a $32,200 joint standard deduction in 2026, many households gain nothing from itemising each year. Bunching two years of charitable gifts (or property tax payments, within the SALT cap) into one year can push itemised deductions above the standard deduction, with the standard deduction taken in the alternate year.

From 2026, the OBBBA changes the arithmetic:

• Itemisers can deduct charitable contributions only to the extent they exceed 0.5% of the contribution base (broadly, AGI).
• Non-itemisers can deduct up to $1,000 ($2,000 joint) of cash gifts to qualifying charities. Gifts to donor-advised funds don't qualify.
• For taxpayers in the 37% bracket, the tax benefit of itemised deductions is capped.

3. Retirement and health savings

• 2026 limits: 401(k)/403(b)/457 deferrals $24,500 (catch-up $8,000 at 50+, or $11,250 at ages 60–63); IRA $7,500 (catch-up $1,100).
• Traditional contributions reduce taxable income now; Roth contributions give tax-free withdrawals later. The right choice depends on today's rate versus the expected rate in retirement.
• Health savings accounts (HSAs) are triple-advantaged: deductible contributions, tax-free growth and tax-free withdrawals for medical costs. From 2026, bronze and catastrophic marketplace plans are HSA-compatible.

4. Investment planning

• Tax-loss harvesting — sell losers to offset gains and up to $3,000 of ordinary income; avoid buying substantially identical securities within 30 days before or after.
• Gain harvesting — in a low-income year, realise long-term gains taxed at 0% and reset basis higher.
• Asset location — hold tax-inefficient investments (taxable bonds) in tax-deferred accounts, and equities with qualified dividends in taxable accounts.
• Qualified small business stock (Section 1202) — for stock issued after July 4, 2025, the OBBBA allows a 50%, 75% or 100% exclusion after three, four or five years.

5. Roth conversions

Converting a traditional IRA to a Roth IRA is taxable now, but future growth is tax-free and Roth IRAs have no required minimum distributions for the original owner. Conversions are attractive in low-income years — for example, between retirement and the start of required distributions.

6. Family and wealth transfer

• Annual gift exclusion: $19,000 per recipient in 2026 ($38,000 for a married couple electing gift splitting).
• Estate and gift tax basic exclusion: $15,000,000 per person in 2026.
• Gift appreciated assets to family members in lower brackets — subject to the kiddie tax for children's unearned income.
• Hold appreciated assets until death to get a stepped-up basis for heirs.
• Fund 529 plans for education — earnings are tax-free when used for qualified expenses.

See also retirement accounts and tax planning and charitable contributions and itemized deductions.

Sources

• IRS — Tax inflation adjustments for tax year 2026 (IR-2025-103)
• IRS — Working Families Tax Cuts (One, Big, Beautiful Bill) provisions
• IRS — 401(k) limit increases to $24,500 for 2026, IRA limit increases to $7,500
• IRS — Publication 550, Investment Income and Expenses
• AICPA & CIMA — CPA Exam Blueprints