The First Quarter Tax Moves That Matter Most

First quarter tax planning is one of the most impactful ways to shape your financial year ahead. As the new year begins, early tax strategies can provide more flexibility, reduce your overall liability, and help you stay proactive rather than reactive.

Too often, taxpayers wait until late in the year (or even until filing season) to think seriously about tax strategy. But by that time, many of the most effective planning tools are no longer available. Acting now means more options and greater control.

Here are three essential first quarter tax planning strategies to consider in Q1:

First Quarter Tax Planning with Roth Conversions and Bracket Management

A Roth IRA conversion involves transferring funds from a traditional IRA into a Roth IRA and paying income taxes on the converted amount. While that may sound counterintuitive, paying taxes now instead of later can be a powerful long-term move.

Why act in Q1? You have more clarity on your income expectations for the year, and more time to spread conversions over multiple months to avoid pushing into higher tax brackets. Early conversions also maximize the time your funds can grow tax-free in the Roth.

Consider these bracket management tips:

• Estimate your 2026 income early to determine how much room remains in your current marginal tax bracket.
• Convert just enough to “fill up” your existing bracket, avoiding the next one up.
• If your income is lower this year due to retirement, a career change, or business fluctuations, that could make 2026 ideal for a larger conversion.

Strategic Roth conversions can also serve as a hedge against potential future tax rate increases, adding flexibility to your long-term retirement income plan.

Learn more about Roth IRA conversion rules and tax implications from the IRS.

Capital Gains Strategies in First Quarter Tax Planning

Reviewing your investment portfolio early in the year provides an opportunity to make intentional decisions about gains and losses. This is a crucial part of first quarter tax planning that can significantly influence your after-tax investment returns.

Capital gains harvesting involves selling appreciated investments to realize gains in a year when your capital gains tax rate is favorable, such as when you’re in a lower income bracket. You can then reinvest in similar assets (mindful of wash sale rules) to maintain your market exposure.

Capital gains deferral, on the other hand, means holding onto investments to delay realizing gains. This can make sense if:

• You expect your income to drop in future years
• You’re planning a move to a lower-tax state
• You’re coordinating with other one-time income events

A balanced approach: Tax-aware investing isn’t about avoiding gains entirely, it’s about timing. In Q1, you have the advantage of time to model multiple scenarios and make adjustments without the pressure of a year-end deadline.

Charitable Giving and First Quarter Tax Planning

Charitable contributions can be a meaningful way to support causes you care about while also achieving tax benefits. Yet, many people wait until December to start thinking about giving. Planning charitable strategies in the first quarter allows you to:

• Align your giving with tax strategy, not just the calendar
• Use tools like Donor-Advised Funds (DAFs) early to benefit from immediate tax deductions
• Spread donations throughout the year while still capturing a full-year deduction

Here are three high-impact tactics to consider:

Using Donor-Advised Funds in Q1

DAFs offer a way to contribute a lump sum to a charitable account, receive a deduction now, and decide later which charities to support. This can help when you want to time a large deduction but still want flexibility in your giving.

Donating Appreciated Securities for Tax Efficiency

Instead of donating cash, consider giving long-term appreciated investments. You may be able to deduct the full fair market value while avoiding the capital gains tax on the appreciation, creating a double benefit.

Bunching Contributions for Greater Tax Impact

With standard deductions relatively high, many taxpayers no longer itemize each year. By “bunching” several years’ worth of charitable gifts into one year, you may exceed the standard deduction threshold and benefit from itemizing. This is particularly effective when paired with a DAF.

Start Early for Stronger Tax Efficiency

First quarter tax planning gives you more tools and time to tailor your strategy. With moves like Roth conversions, capital gains optimization, and early charitable giving, you can position yourself for stronger financial outcomes in 2026.

The earlier you start, the more opportunity you have to make informed, strategic choices that align with your goals.

Explore our year-round tax planning guide to stay ahead in every season.

Always consult with your financial advisor or tax professional to ensure strategies align with your overall financial picture.