5 Ways to Avoid Bumping Your Income into a Higher Tax Bracket

Updated for tax year 2026.

If your income level fluctuates from year to year, you may find yourself paying more than you expect at tax time. This is because when your income increases, you may be pushed into a higher tax bracket, resulting in higher tax rates for higher income levels.

So, how can you avoid paying higher tax rates when you have a year with more income than usual? Let’s look at some options. Remember, federal income tax brackets use marginal tax rates, meaning only the portion of your taxable income that falls into a higher bracket is taxed at that higher rate.

At a glance:

Moving into a higher tax bracket doesn’t mean all your income is taxed at the higher rate.
Contributing to pre-tax accounts, timing income and deductions, and spreading out asset sales may help manage your taxable income.
Review the 2026 federal income tax brackets below to see how tax rates apply to your filing status.

Federal income tax brackets for tax year 2026

Tax brackets undergo inflation adjustments each year. The following chart shows your marginal income tax rates for 2026 at different income levels based on your filing status. Tax brackets are based on your taxable income, which is generally your income after applicable tax deductions, rather than your total gross income.

Tax rate	Single filers	Married filing jointly	Married filing separately	Head of household
10%	$0–$12,400	$0–$24,800	$0–$12,400	$0–$17,700
12%	$12,401–$50,400	$24,801–$100,800	$12,401–$50,400	$17,701–$67,450
22%	$50,401–$105,700	$100,801–$211,400	$50,401–$105,700	$67,451–$105,700
24%	$105,701–$201,775	$211,401–$403,550	$105,701–$201,775	$105,701–$201,750
32%	$201,776–$256,225	$403,551–$512,450	$201,776–$256,225	$201,751–$256,200
35%	$256,226–$640,600	$512,451–$768,700	$256,226–$384,350	$256,201–$640,600
37%	$640,601 or more	$768,701 or more	$384,351 or more	$640,601 or more

source: IRS Publication 505

Find out which IRS tax bracket you are in: Estimate your tax year 2026 tax rates with our tax bracket calculator.

Why higher tax brackets shouldn’t scare you

As you can see from the table above, the tax rate jumps as much as 10 percentage points from one level to the next, which can be significant when your earnings spike during the year. But you can’t always avoid moving into a higher tax bracket, nor would you want to.

Deliberately embracing a higher tax bracket might sound counterintuitive, but this strategy can be beneficial in the long run. For example, staying in the lowest 10% tax bracket requires having $12,400 or less in taxable income (after tax deductions), which is hardly ideal for most. Inevitably, as you ascend the income ladder, you’ll end up paying more in taxes.

However, the real challenge comes when your income varies from year to year.

Dealing with variable income

Is your taxable income much higher in some years than others? If so, you may be paying more income tax than you would if your tax liability were spread out more evenly over the years. Those years with a spike in income may cost you plenty in higher income taxes.

But don’t worry — there are tax strategies you can use to balance out your taxable income over time and avoid higher tax brackets. For example, you can delay paying tax on certain income until retirement or move income and deductions around. By being proactive, you can take control of your finances and feel confident about your tax situation.

Tax Tip: Don’t forget to consider state tax as well if you live or work in a state with income tax.

5 ways to avoid spiking into a higher tax bracket this year

Here are our top financial planning tips to avoid getting bumped into a higher tax bracket if you anticipate earning more income than usual this year.

1. Contribute to retirement plans or other pre-tax accounts.

Putting pre-tax money into your traditional IRA, 401(k) plan, or other retirement account reduces your income now when you may be in a higher tax bracket.

Sure, you’ll pay tax on distributions when you take money out in retirement. But if you’re in a lower tax bracket after you retire, you’ll pay far less income tax that way.

For example, say you are in the 24% tax bracket now while working. You contribute to a traditional IRA, reducing your taxable income by up to $7,500 in 2026 if you are under age 50 (married couples can essentially double that to $15,000 for both of you combined). When you withdraw the money after retirement, you may only be in a 12% or 22% tax bracket, meaning you’ll pay less tax when you withdraw the money than you would have if you were taxed on your contribution immediately.

Keep in mind that your ability to deduct traditional IRA contributions may depend on your income and whether you or your spouse are covered by a retirement plan at work.

You can also contribute to a pre-tax health savings account (HSA) or medical savings account (MSA). Distributions from these accounts are typically tax-free as long as you spend the money on qualified medical expenses. For 2026, eligible individuals can contribute up to $4,400 to an HSA with self-only coverage or $8,750 with family coverage.

2. Avoid selling too many assets in one year.

Say you have a stock that’s gone up in a short period, and you’d like to sell it and cash in on those capital gains.

If investment income from selling the stock would put you in a higher tax bracket, consider selling some of the shares one year and some the next year. This approach could preserve your position in a lower tax bracket while unlocking the potential for long-term capital gains tax rates, which are typically lower than regular income tax rates.

Keep in mind that short-term capital gains and long-term capital gains are taxed differently, so the timing of your asset sales can affect how much tax you owe.

3. Time your income and business expenses.

If you’re self-employed, you have some control over when you get paid and make expenditures. Using the cash method of accounting, for example, you claim revenue in the year you receive it, even if you did the work in the previous year.

Let’s say you have a banner year and need to buy equipment for your business. You might consider purchasing the equipment by the end of the year so you can turn right around and deduct that expense in the coming tax year, further reducing your taxable income. Just keep in mind that equipment deductions depend on the applicable depreciation rules and when the equipment is placed in service.

On the other hand, if you’ve had a slow year and expect to be in a higher tax bracket next year, you may want to postpone business expenditures until Jan. 1 or later.

4. Pay deductible expenses and make contributions in high-income years.

Planning to make significant contributions to a charitable organization? Make sure you write that check or put it on your credit card in the year you’re in the highest tax bracket.

To put it into perspective, a fully deductible $100 charitable contribution can save you $32 in federal income taxes when you are in the 32% tax bracket and already claiming itemized deductions. However, if you make the same fully deductible $100 contribution in a year when you’re in the 24% tax bracket, it only saves you $24 in federal income taxes.

Even if you don’t itemize, you may qualify for a charitable contribution deduction starting in 2026. Eligible taxpayers can deduct up to $1,000 in qualifying cash donations (or $2,000 for married couples filing jointly) when taking the standard deduction, subject to IRS requirements.

You can also opt to make your January mortgage payment by Dec. 31 if your income is higher this year. Your January mortgage payment covers December interest expense, so you may as well pay it in December and take the mortgage interest deduction if that applies to you.

5. If you’re a farmer or fisherman, use income averaging.

Some taxpayers are allowed to smooth their income out over a three-year period, using a process called income averaging. This can help keep income spikes from pushing you into a higher tax bracket.

Prior to 1987, all taxpayers could use income averaging. Now, you must be in a farming business or working as a fisherman to benefit from it.

Frequently asked questions about tax brackets

How do tax brackets work?

Federal income tax brackets use a progressive tax system, meaning different portions of your taxable income are taxed at different rates. If your income increases enough to move you into a higher tax bracket, only the income that falls within that bracket is taxed at the higher rate, not your entire income.

What is my tax bracket?

Your federal income tax bracket depends on your taxable income and filing status. For tax year 2026, there are seven federal income tax rates ranging from 10% to 37%. You can use the 2026 tax bracket table above or our tax bracket calculator to estimate which bracket you fall into.

Do capital gains push you into a higher tax bracket?

Yes, capital gains can increase your taxable income and potentially push you into a higher tax bracket. However, how your gains are taxed depends on how long you held the asset. Short-term capital gains are generally taxed at ordinary income tax rates, while long-term capital gains typically qualify for lower tax rates.

Does overtime put you in a higher tax bracket?

Earning overtime pay can increase your taxable income and potentially push part of your income into a higher tax bracket. However, only the income within that higher bracket is taxed at the higher rate. For 2026, eligible workers may also qualify for a federal income tax deduction on certain overtime compensation.

Can you make less money in a higher tax bracket?

No, moving into a higher federal income tax bracket doesn’t mean you’ll take home less money simply because of the higher tax rate. Only the portion of your taxable income that falls into the higher bracket is taxed at that rate. However, earning more may affect your eligibility for certain tax credits and deductions.

What if I can’t avoid bumping into the next tax bracket when my income rises?

Sometimes getting bumped into a higher tax bracket is inevitable. Just remember, all else being equal, you’re still better off making more money and paying a slightly higher tax on it than you would be making less! Don’t forget these are marginal tax rates — the higher tax bracket only applies to your taxable income that exceeds the last tax bracket limit.

To better understand how tax brackets work, check out How Tax Brackets Work: Examples and Myth Busting.

How can I avoid moving into a higher tax bracket?

You may be able to avoid moving into a higher tax bracket by reducing or managing your taxable income. Strategies include contributing to eligible pre-tax retirement accounts, spreading out asset sales, timing business income and expenses, maximizing eligible deductions, and using income averaging if you’re a qualifying farmer or fisherman.

The bottom line

Managing your income to avoid jumping into a higher tax bracket can save you money and help you feel more in control of your tax situation. By contributing to retirement accounts, timing your income and expenses, and being strategic with asset sales, you can minimize your tax burden in high-income years. Remember, planning ahead is key to making the most of your finances while keeping your tax obligations in check!

Want to see where your income falls? Use the TaxAct® tax bracket calculator to estimate your federal income tax bracket for 2026. And when you’re ready to file, TaxAct can help you determine which tax breaks you qualify for and walk you through your return.

Still have more questions? Ask us on Reddit!

Join the r/TaxActCommunity to ask questions, share tips, and hear from other filers and the TaxAct team.

This article is for informational purposes only and not legal or financial advice.

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Tags: Business ExpensesContributionsDeductionsFederal Income TaxFinancial PlanningIncomeInvestmentsSelf-EmployedTax BracketTax RatesUpdated for tax year 2026

Meghen Ponder: Meghen Ponder is an editorial writer for TaxAct who specializes in writing content about finance and taxes. She enjoys decoding the intricacies of the tax world and helping others answer their tax questions.