Wealthy taxpayers are changing their plans to handle their 2026 tax bills. Lawyers and accountants say the tax code keeps changing, so planning is ongoing.

Why capital gains are centre stage

For many high-net-worth individuals the tax battleground has shifted. The estate tax exemption was raised to $15 million per person under last year's legislation, up from $13.99 million and avoiding a scheduled halving at the end of 2025. That change means estate planning is less urgent for a subset of wealthy households.

Tax lawyers and wealth strategists now focus on income and capital gains. Mitchell Drossman, head of national wealth strategies in Bank of America's chief investment office, told advisers that "the biggest tax story to me is a capital gains and investing story." Markets have helped make that story more acute: the S&P 500 climbed more than 75% from the start of 2023 through recent weeks, leaving many portfolios sitting on large unrealised gains.

Those unrealised gains create a timing decision. Realising profits triggers capital gains tax. Waiting can defer the tax bill but may also expose owners to future rate changes or market reversals. This trade-off is shaping much of the current planning.

Long-short tax-loss harvesting: a more aggressive twist

Tax-loss harvesting has been around for a while. The basic idea is simple: sell investments that have fallen to lock in losses, and use those losses to offset taxable gains elsewhere in the portfolio.

Wealthy investors are taking that idea further with long-short tax-loss harvesting, a strategy some advisers describe as more aggressive and more technical.

Under the long-short approach, managers may borrow against the portfolio to establish short positions in securities they expect to fall, while holding long positions in names they expect to rise. The goal is to crystallise losses on the short leg that offset gains on the long side, but to keep the overall market exposure roughly neutral.

Drossman said investors now have a bigger asset base from which to harvest losses. "If there's natural volatility in the markets, you have, now, a greater amount of an asset base to choose from for harvesting losses," he said, adding that the overall portfolio can still be kept broadly neutral. That mix makes the tactic attractive after a multi-year market rally.

This method is more complex. It typically involves margin borrowing, borrowing costs and extra trading. Those costs can erode tax benefits if not managed carefully. Wealth managers caution that long-short harvesting is best handled within a disciplined framework run by experienced teams.

Mastheads

Bonus depreciation is back in play for businesses

The 2025 tax bill renewed bonus depreciation, a provision that lets businesses deduct the full cost of qualifying assets in the first year they're used. Because of this change, some business owners are speeding up capital spending to get tax write-offs.

Adam Ludman, head of tax strategy at J.P. Morgan Private Bank, said many clients with operating businesses are buying assets with bonus depreciation in mind — private jets were cited as one example. For capital-intensive firms, accelerated depreciation can materially reduce taxable income soon and free cash for other uses.

Real estate developers and property investors are also re-evaluating how they classify costs. By identifying components of buildings and improvements that qualify for faster depreciation, owners can bring deductions forward — lowering taxable income sooner rather than later. That requires careful tax engineering and, in some cases, changes to accounting or project timing.

Practical limits, timing and administrative risk

All strategies come with trade-offs. Accelerating deductions or harvesting losses now reduces tax bills in 2026 but can leave less shelter later. Borrowing to carry short positions raises interest expense and can increase portfolio volatility. Reclassifying assets for depreciation can invite closer scrutiny from tax authorities if the treatment is aggressive.

Executing these plans also involves practical challenges. Corporate and personal taxpayers must co‑ordinate timing with accountants, appraisers and legal advisers. With Tax Day now behind the filing season, advisers are already mapping moves to take effect in the 2026 tax year.

The tax-collection system's strain adds another complication. The Internal Revenue Service cut staff in recent years and announced a restructuring that will remove about 6,700 roles. While proponents of planning note that the IRS's capacity can affect audit risk and processing speed, the presence of fewer staff makes thorough documentation and conservative positions more attractive for taxpayers who want to avoid disputes.

Who is best placed to use these tactics?

Aggressive harvesting or front-loaded depreciation isn't right for every investor or business. The main beneficiaries tend to be high earners who have sizeable unrealised gains, ample liquidity to tolerate margin and borrowing, and access to specialised wealth managers or tax teams.

Smaller owners and widespread retail investors may find the costs — both financial and administrative — outweigh the tax benefits. For those clients, simpler approaches such as targeted sale of specific holdings or slower, staged depreciation choices may be more appropriate.

How advisers are framing the conversation

Advisers present clients with different scenarios instead of fixed advice. They model expected tax bills under different asset paths, incorporate projected cashflow needs, and stress-test plans against shifts in tax law and market returns. The aim is to weigh near-term tax savings against longer-term economic outcomes.

That modelling often starts with the question of whether to realise gains at all. Given the higher estate exemption, some families are less worried about transfers at death and more focused on minimising income and capital gains taxes during their lifetimes.

That rebalancing of priorities is shaping conversations in private banks and family offices.

What advisers are watching next

Advisers say they're monitoring market volatility, interest rates for borrowing, and any further legislative moves that might alter deductions or capital gains treatment. They're also watching IRS guidance on recently renewed provisions, since formal rules and interpretations can affect which tactics are workable.

Clients who can benefit from complex strategies are working with teams that span tax, investment and legal disciplines. That co‑ordinated approach is the backbone of plans that attempt to reduce 2026 tax bills without creating unforeseen liabilities down the line.

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"The biggest tax story to me is a capital gains and investing story," said Mitchell Drossman, head of national wealth strategies in Bank of America's chief investment office.

This article was created with AI assistance.