Summer is a good time to review whether your income, deductions, and investment activity are lining up as expected. Taking a closer look now can help you identify planning opportunities while there is still time to make adjustments before year-end.

Your tax bracket

The legislation commonly known as the One Big Beautiful Bill Act (OBBBA), which was signed into law on July 4, 2025, retained federal income tax rates ranging from 10% to 37%. For tax planning purposes, it is important to understand your marginal rate, which is the rate that generally applies to your next dollar of taxable income after adjustments, deductions and exclusions.

For single filers, the brackets above the 10% rate begin at the following income levels:

  • 12% bracket: $12,401
  • 22% bracket: $50,401
  • 24% bracket: $105,701
  • 32% bracket: $201,776
  • 35% bracket: $256,226
  • 37% bracket: $640,601

For head-of-household filers, the brackets begin at the same income levels as those for singles — except that the first two brackets above the 10% rate begin at the following income levels:

  • 12% bracket: $17,701
  • 22% bracket: $67,451

For married couples filing jointly, the brackets above the 10% rate begin at the following income levels:

  • 12% bracket: $24,801
  • 22% bracket: $100,801
  • 24% bracket: $211,401
  • 32% bracket: $403,551
  • 35% bracket: $512,451
  • 37% bracket: $768,701

For married taxpayers filing separately, the brackets begin at half the amount for joint filers. (They’re the same as those for singles except for the 37% bracket.)

If you expect this year’s income to be near the threshold for a higher bracket, consider whether strategies to reduce taxable income may help you stay within your current bracket. For example, you may be able to accelerate certain deductible expenses.

Before taking action, consider how the OBBBA may affect your deductions this year. For instance, it kept the standard deduction at high levels, and itemizing deductions saves you taxes only if your total itemized deductions for the year exceed the standard deduction for your tax bracket. For 2026, the standard deduction is $16,100 for singles (and separate filers), $24,150 for heads of household and $32,200 for joint filers.

The OBBBA also affects itemized deductions. Some deductions may offer greater potential benefits, such as the state and local tax deduction, while others may be more limited, such as the charitable deduction.

In addition, the OBBBA created some new deductions that can be claimed whether or not you itemize. These include deductions for qualified tips and overtime, the “senior” deduction for taxpayers age 65 or older, and the deduction for qualified auto loan interest.

Medical expenses

If you expect to benefit from itemizing on your 2026 return, review whether accelerating deductible medical expenses into this year could provide a tax benefit. You can deduct only medical expenses that exceed 7.5% of your adjusted gross income (AGI). AGI is your income from taxable sources after certain “above-the-line” adjustments but before the standard deduction, itemized deductions and certain other deductions, such as the new OBBBA deductions noted earlier, are applied.

Deductible medical expenses may include:

  • Health insurance premiums,
  • Long-term care insurance premiums,
  • Medical and dental services and prescription drugs, and
  • Mileage driven for health care purposes.

If your deductible medical expenses are close to exceeding the 7.5% of AGI floor, you may be able to time additional medical expenses so they fall in 2026 and help you exceed the floor. If your expenses already exceed the floor, bunching additional medical expenses into 2026 can maximize your deduction.

But if it looks like you won’t be itemizing for 2026 or your medical expenses will be far from exceeding 7.5% of your AGI this year, you may want to take the opposite approach: Bunch medical expenses into 2027.

Of course, your health and your family’s health should come before tax savings. So don’t accelerate or delay medical services if it would be harmful health-wise. Also consider how the timing will affect what’s covered by health insurance, especially if you have a high deductible.

Investment gains (and losses)

The OBBBA didn’t change the long-term capital gains rates, so they remain at 0%, 15% and 20%. The long-term gains rate applies to gains on investments held for more than one year. Short-term gains are subject to your ordinary-income tax rate, which may be substantially higher. However, be aware that the top long-term gains rate kicks in before the top ordinary-income tax rate.

For singles, the long-term gains brackets above the 0% rate begin at the following income levels:

  • 15% bracket: $49,451
  • 20% bracket: $545,501

For heads of household, the brackets above the 0% rate begin at the following income levels:

  • 15% bracket: $66,201
  • 20% bracket: $579,601

For joint filers, the brackets above the 0% rate begin at the following income levels:

  • 15% bracket: $98,901
  • 20% bracket: $613,701

For separate filers, the brackets begin at half the amount for joint filers.

If you have realized, or expect to realize, significant capital gains this year, consider whether selling certain depreciated investments could generate losses to help offset those gains. In some cases, you may be able to repurchase those investments if you wait at least 31 days to avoid the “wash sale” rule.

You also may need to plan for the 3.8% net investment income tax (NIIT). It can affect taxpayers with modified AGI (MAGI) over $200,000 for singles and heads of household, and over $250,000 for joint filers (half that for separate filers). You may be able to lower your tax liability by reducing your MAGI, reducing net investment income or both.

Don’t wait until year end

Planning opportunities often become more limited as the end of the year approaches. Reviewing your tax picture now gives you more time to evaluate steps that may help reduce or defer taxes. If you would like help reviewing these or other midyear tax planning strategies, contact your Kemper advisor.

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