Tax management

Tax trends and tactics Q1 2026: Tax season is open

March 25, 2026 - 5 min

Vice President, Investment Strategist – Natixis Investment Managers Solutions

The IRS officially opened the 2026 tax filing season on January 26 and is accepting and processing federal individual income tax returns for tax year 2025. The agency expects roughly 164 million individual returns to be filed by the April 15 deadline. This filing season marks the 40th anniversary of electronic filing, and the IRS is encouraging e-filing combined with direct deposit as the fastest way to receive refunds. Most refunds are issued within 21 days.

As of early March, the IRS has processed over 60 million returns with the average refund at $3,676, up from $3,324 for the same period last year. Early filers tend to be those who expect a refund and with less complicated returns.

Early-year planning: Gain harvesting

The beginning of the year is a good time to be proactive about tax planning. While many investors associate tax strategies like tax loss harvesting with year-end, the first quarter lends itself to seek tax gain harvesting, a strategy that involves intentionally realizing long-term capital gains to take advantage of low tax rates.

By selling appreciated investments and reinvesting the proceeds in the market, investors can reset their cost basis higher, potentially reducing future capital gains tax.

Gain harvesting can be particularly valuable in low income years – such as between jobs, after retiring, or before required minimum distributions – when investors may qualify for the 0% federal long-term capital gains rate (taxable income up to $98,900 for married filing jointly).

We see gain harvesting requests early in the year for direct indexing portfolios that hold concentrated stock positions. By establishing a “capital gains budget,” investors can de-risk and diversify in a disciplined way, often reinvesting proceeds into diversified, tax-aware strategies that can harvest losses throughout the year to help offset earlier gains.

Tax loss harvesting vs. tax gain harvesting

Estimated tax payments

Estimated tax payments are required to avoid underpayment penalties and typically apply when a taxpayer has income that isn’t subject to withholding. Investors, retirees, and sole proprietors often fall into this category, which can put them behind on tax payments and result in penalties. The statutory interest rate on tax underpayments is currently 7%.

Investors who gain harvest early in the year should make estimated payments or, if still working, increase tax withholding.

While reinvesting proceeds into a tax loss harvesting strategy may help reduce net gains by year-end, at a 7% rate, a refund is preferable to a penalty.

2026 retirement plan contribution limits

Following last November’s government shutdown, the IRS released 2026 401(k) contribution limits. Compared to 2025, the regular contribution limit increased by $1,000, the catch-up limit increased by $500, and the super catch-up remained at $11,250.

The “rothification” of the 401(k)

A new rule governing 401(k) catch-up contributions from the SECURE 2.0 Act took effect in 2026. If you’re 50 or older, earned more than $150,000 in Federal Insurance Contributions Act (FICA) wages in 2025, and are making catch-up contributions to your retirement plan: Those contributions must be made as Roth (after-tax) contributions. This means you pay taxes now, but any future growth and withdrawals from those contributions will be tax-free.

Trump accounts: Retirement savings from birth

Trump accounts are a new type of retirement account, similar to an IRA, designed to promote early savings for children and available from birth through the year before age 18. Beginning July 5, eligible children born between January 1, 2025, and December 31, 2028, who open an account and opt in will receive a one-time $1,000 government contribution. Parents can contribute up to $5,000 annually, employers can contribute up to $2,500, and contributions are made with after-tax dollars; investment growth is tax deferred, and distributions are taxable starting at age 59½.

For higher-income families already maximizing retirement and education savings, the incremental benefit may be limited. Restrictions on liquidity, limited investment options, and relatively low contribution limits without deductibility have some questioning whether the juice is worth the squeeze.

Winners and losers: S&P 500^® performance

The S&P 500^® returned 17.9% for the year, with all 11 sectors posting positive returns, though only 27% of index names outperformed the index. As we like to say, tax loss harvesting opportunities exist in all market environments, and even in a strong year like 2025, 36% of index names were down. Tariff-related volatility in March and April created many of the year’s loss harvesting opportunities, particularly in real estate, consumer staples, and materials.

During the fourth quarter, the S&P rose 2.7%, while real estate and utilities finished down for the quarter. Half of index names declined, with 165 falling by 5% or more – levels typically considered attractive for tax loss harvesting.

Winners and losers: S&P 500® performance

Source: FactSet; Natixis Investment Managers Solutions

Tax trends and tactics – Q1 2026

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Tax-efficient investing in SMAs

Direct indexing separately managed accounts (SMAs) can help address key issues facing tax-sensitive investors. All accounts are actively managed to optimize tax loss harvesting while providing beta exposure to an index. Our tax-managed SMAs include:

S&P 500^® Strategy (Large Cap)

S&P 400^®Strategy (Mid Cap)

S&P 600^®Strategy (Small Cap)

S&P 1500^® Strategy (All Cap)

S&P Global 500 Strategy (Large Cap)

S&P ADR/International Strategy

Direct indexing strategies

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Past performance is no guarantee of future results.

Natixis Investment Managers does not provide tax or legal advice. Please consult with a tax or legal professional prior to making any investment decisions.

CFA^® and Chartered Financial Analyst^® are registered trademarks owned by the CFA Institute.

The S&P 500^® Index is a widely recognized measure of US stock market performance. It is an unmanaged index of 500 common stocks chosen for market size, liquidity, and industry group representation, among other factors. It also measures the performance of the large-cap segment of the US equities market.

Exchange‑traded funds (ETFs) trade like stocks, are subject to investment risk, and will fluctuate in market value. Unlike mutual funds, ETF shares are not individually redeemable directly with the fund and are bought and sold on the secondary market at market price, which may be higher or lower than the ETF’s net asset value (NAV). Transactions in ETF shares will result in brokerage commissions, which will reduce returns.

The views and opinions expressed may change based on market and other conditions. This material is provided for informational purposes only and should not be construed as investment advice. There can be no assurance that developments will transpire as forecasted. Actual results may vary.

Any opinions or forecasts contained herein reflect the subjective judgments and assumptions of the authors only and do not necessarily reflect the views of Natixis Investment Managers or any of its affiliates.

Indexes are not investments, do not incur fees and expenses, and are not professionally managed. It is not possible to invest directly in an index.

A tax liability is the total amount of tax debt owed by an individual, corporation or other entity to a taxing authority.

Tax loss harvesting is a strategy for selling securities that have lost value in order to offset taxes on capital gains.

Capital gain is a rise in the value of a capital asset (investment or real estate) that gives it a higher worth than the purchase price.

Investing involves risk, including risk of loss. Investment risk exists with equity, fixed-income, and alternative investments. There is no assurance that any investment will meet its performance objectives or that losses will be avoided.

This document may contain references to copyrights, indexes and trademarks that may not be registered in all jurisdictions. Third-party registrations are the property of their respective owners and are not affiliated with Natixis Investment Managers or any of its related or affiliated companies (collectively “Natixis”). Such third-party owners do not sponsor, endorse or participate in the provision of any Natixis services, funds or other financial products.

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