For some people, the tax deadline brings a sense of closure. Their return is filed, their payment is scheduled, and they can finally stop thinking about taxes for a while.
For many affluent families, it does not always work that way. If you own interests in partnerships, private investments, or certain real estate structures, you may be waiting on K-1s. Or, you may be reconciling complex investment activity or coordinating multiple entities and accounts.
In that world, filing an extension is not unusual. Instead, it’s often the practical choice when accuracy matters and information arrives late.
Whether you just filed your income tax return or you are extending, the bigger point is the same. Tax filing is a compliance exercise. Tax planning is a strategy. One looks backward. The other looks forward.
And the part that can materially improve your outcome most often happens outside of “tax season,” when there is still time to make decisions that can actually change the result.
In other words, if you want 2026 to look better than 2025, it’s beneficial to start planning early.
Filing is about reporting; planning is about shaping
Tax filing is the act of documenting what already happened. Your W-2, 1099s, K-1s/partnership income, brokerage reporting, deductions, and credits come together to produce a return that should be accurate and complete.
If you are a household with multiple income sources, investment activity, charitable giving, or business interests, filing can be time-consuming and complicated. That is not a failure. It is simply a reflection of financial complexity.
Tax planning is different. It’s the process of intentionally shaping your financial decisions so your tax outcome aligns with your goals. It’s where the “why” and “how” show up.
How should income be timed across years? When does it make sense to realize gains? How do you give to charity in a way that supports causes you care about while improving tax efficiency? How should you approach quarterly payments so tax surprises do not interrupt your plan?
A simple way to frame it is this. Tax filing answers, “What do I owe based on last year?” Planning asks, “What can we do this year that changes what I will owe next year?”
High-net-worth families often sit in a “complex enough to matter” zone. Many households have meaningful taxable portfolios, concentrated positions, equity compensation, partnership income, significant charitable intent, and decisions that carry real tax consequences.
Small improvements can compound. One well-timed decision can change the character of income. One portfolio adjustment can reduce capital gains exposure. One charitable strategy can convert a giving plan into a multi-year approach that is both values-driven and tax-efficient.
The point is not to chase clever tactics. The point is to reduce friction, avoid preventable taxes, and keep more of your wealth working for you overtime.
Extensions: What they do, and what they do not do
If you are filing an extension, it is worth clarifying what an extension actually accomplishes. It extends the deadline to file, not the deadline to pay. That distinction matters because underpayment can lead to penalties and interest if your estimated payments are meaningfully short. Even in an extension year, planning often includes projecting your liability and confirming you have paid enough through withholding and estimated payments.
An extension can also create an opportunity. When information arrives late, it is easy to slip into a reactive mode. But the time between April and the extended deadline can be used well. You can treat it as a planning window to review where taxes are coming from, identify what drove the year’s result, and decide what you want to do differently going forward.
What it means to have a tax strategy
A tax strategy is not a stack of deductions. It is not a one-time move. And it is rarely effective when handled in pieces.
A real strategy connects the major parts of your financial life. It considers how you earn income, how your portfolio generates returns, how you give, how you transfer wealth, and how your cash flow supports all of it. The goal is not to eliminate taxes. The goal is to pay taxes intentionally, at the right time, at the right rates, and in the right places.
For many families, tax strategy sits on three pillars:
- Multi-year: The most powerful planning opportunities often involve timing.
- Integrated: Investment decisions, charitable giving (tax efficient), and estate planning all affect your tax picture.
- Implemented: A plan that is documented in a memo is designed with the intention to manage outcomes..
The investment side of tax planning
For affluent families, the portfolio is frequently the largest driver of tax variability. Dividends, interest, capital gains distributions, rebalancing, and the sale of appreciated positions can produce tax bills that feel disconnected from daily life. That is why investment tax management tends to be a core part of effective planning.
The nuances of tax‑loss harvesting
Tax-loss harvesting is often described as “selling losers to offset winners.” That is directionally true, but the real value is more nuanced. Harvested losses can offset current-year capital gains. If losses exceed gains, a limited amount can offset ordinary income and the remainder can carry forward.
In the right scenario, those carryforwards can become an asset you deploy over multiple years, especially if you expect significant gains in the future.
The catch is that harvesting needs to be executed carefully. The wash-sale rule can disallow a loss if you repurchase the same or substantially identical security within a defined window. The planning opportunity is not just “harvest and move on.” It is to maintain market exposure while managing the tax outcome, which often involves thoughtful substitution and coordination across accounts.
What matters is not whether you harvest a loss in a vacuum. It’s whether harvesting is coordinated with your broader goals. If you expect a business sale, a concentrated stock liquidation, or a large real estate gain in the next few years, building a bank of losses over time could provide you with more flexibility than you realize.
Deciding when to realize gains, not letting gains happen to you
Tax planning is not only about losses. It is also about gains, especially in taxable accounts. Many families end up realizing gains accidentally through portfolio turnover, fund distributions, or ad hoc sales for liquidity.
A more intentional approach asks different questions. Which positions should be held long enough to qualify for long-term treatment? Which gains can be realized in years when income is lower? Which positions can be gifted or donated instead of sold?
This is where the coordination matters. The same gain can be “cheap” in one year and expensive in another, depending on income, deductions, and other events. The families who tend to have better outcomes are the ones who treat gains like a lever, not a surprise.
Using asset location strategies can help improve after-tax return potential
Two families can own the same investments and experience different after-tax results simply based on where those investments sit. Interest-heavy strategies, certain alternatives, and high-turnover holdings can create ordinary income that is taxed at higher rates. For many households, part of tax planning involves evaluating which types of returns belong in tax-advantaged accounts versus taxable accounts.
Also be aware that certain investments can create unrelated business taxable income if held inside a retirement account. This can create an unfortunate tax surprise each year. Similarly, putting investments with higher income potential in a child’s name may make sense on the surface (lower tax rates since children often have little income), but if the kiddie tax applies, it can rob you of those savings.
This is not a one-time decision. As your balance sheet changes, as tax law evolves, and as your goals shift, asset location often needs to be revisited. The best version of the strategy also recognizes that taxes are not the only variable. Liquidity needs, risk exposure, and estate goals can all affect what “optimal” looks like.
Why tax awareness matters for long‑short and alternative strategies
Affluent portfolios increasingly include strategies that behave differently than traditional long-only stock and bond allocations. Some long-short approaches, managed futures, or other alternative exposures can generate a mix of gains, losses, and ordinary income that does not fit the neat capital gains narrative investors are used to.
This is not a reason to avoid these strategies. It is a reason to incorporate them into planning. If a strategy is expected to distribute meaningful taxable income, it may belong in a different account type when possible. If a strategy tends to generate losses in certain environments, those losses may interact with other gains in a helpful way.
The point is coordination. Alternative exposures can be powerful tools, but the after-tax experience depends on structure, location, and how the strategy is implemented.
Turning tax management into an ongoing advantage
For some affluent families, a more customized approach can create additional planning opportunities. Direct indexing, for example, may allow more granular harvesting because you own the underlying securities rather than a pooled fund. That can make it easier to capture losses, manage concentration, and incorporate values-based preferences without losing the benefits of broad diversification.
This is not a universal solution. It requires scale, careful implementation, and ongoing oversight. But for investors who are already dealing with tax complexity, customization can turn tax management from a reactive task into a consistent source of incremental improvement.
Philanthropy is one of the most flexible planning tools you have
If charitable giving is important to you, taxes should not be the reason you give. At the same time, the way you give can meaningfully change the efficiency of your plan.
One of the most common opportunities is to donate appreciated securities rather than cash. Doing so can help avoid realizing the embedded capital gain while still allowing a charitable deduction in many cases. Another widely used approach is a donor-advised fund, which can allow you to make a larger contribution in a high-income year while distributing grants to charities over time.
The planning value of philanthropy is not limited to one year. For many families, the goal is to align giving with multi-year income planning, investment transitions, and estate goals. When done well, philanthropy becomes part of the architecture of the plan rather than an isolated decision made in December.
Quarterly payments and withholding: The quiet driver of financial stress
Even high-net-worth families often underestimate how much stress comes from unpredictable tax payments. When income is variable, when partnership income arrives late, or when a portfolio throws off taxable distributions, it is easy to find yourself reacting to deadlines rather than managing them.
This is one of the most practical areas where planning can improve quality of life. A projection-based approach can help you adjust withholding or estimated tax payments during the year so you are not surprised by a large balance due. It also helps avoid the frustration of penalties that feel unnecessary.
For extension filers, this becomes even more important. You may not know every final number in April, but you can usually project a reasonable range. That projection can guide smarter estimated payments and reduce unpleasant outcomes later.
Real estate, business ownership, and “one-time” events are where planning can pay for itself
If you are considering selling real estate, a business interest, or a concentrated investment position, tax planning becomes less about marginal improvements and more about major decisions.
Real estate is a good example because the rules are specific and timing-dependent. Consider reading our real estate gains article. It underscores how planning ahead can help avoid unexpected tax bills and how the details of ownership, use, and recordkeeping can materially affect the result. When large numbers are involved, the difference between planning early and planning late can be the difference between choice and regret.
The same is true for business owners and executives. Equity compensation, deferred compensation, and liquidity events can create years where income spikes. Those are the years where multi-year planning matters most, because you can potentially shift the timing of income, coordinate charitable giving, and manage portfolio gains in a way that smooths your tax exposure.
Why April is the best time to start planning for 2026
Most people associate tax planning with year-end. In reality, year-end is where you finalize. The best planning often starts earlier because time creates options.
If you start now, you have room to spread decisions across the year. You can coordinate with your investment strategy rather than interrupt it. You can plan charitable giving intentionally instead of rushing to make a December decision. You can evaluate whether Roth conversions, gain realization, or other multi-year strategies fit your situation before deadlines compress your choices.
For many families, early planning can also mean the difference between a calm process and a frantic one. It turns taxes from a seasonal disruption into a managed element of the overall plan.
What a family office approach changes
One of the reasons tax planning often falls short is that it is handled in silos. A CPA files the return. An advisor manages the portfolio. An estate attorney drafts documents. An insurance professional addresses coverage. Each may do excellent work, but the strategy can still feel disconnected.
A family office approach treats taxes as part of a larger system. Investment decisions are evaluated for after-tax impact. Charitable strategies are aligned with values and portfolio construction. Estate planning is coordinated with how assets are held and how gains may be realized by heirs. Insurance is considered in the context of liquidity, risk, and long-term goals.
This integrated approach is often where the biggest improvement comes from. It is not about complexity for its own sake. It is about coordination, so your plan works as a whole.
Starting the post-filing planning conversation
Whether you filed already or you are extending, the most useful next step is often a post-filing review that is forward-looking. The goal is to identify what drove your tax outcome and to decide what should change this year.
That conversation typically focuses on a few high-impact areas: projected income, portfolio gains and distributions, loss harvesting capacity, charitable intent, expected liquidity needs, and any major upcoming events. From there, the plan becomes a timeline, not just an idea. A timeline is what turns planning into execution.
Not a Mercer Advisors client?
Contact us to discuss our family office approach and how we integrate tax optimization strategies into your financial plan.
The bottom line
Filing your return is important. It is also largely a record of decisions that are already behind you. Wealth management tax planning is the work that happens in front of you. It is the difference between hoping your tax bill is reasonable and designing a strategy that increases the odds it will be.
If you want your 2026 results to surpass those of 2025, the most valuable work begins now. Early planning gives you the time and flexibility to make decisions that can influence your outcomes.
All expressions of opinion reflect the judgment of the author as of the date of publication and are subject to change. Some of the research and ratings shown in this presentation come from third parties that are not affiliated with Mercer Advisors. The information is believed to be accurate but is not guaranteed or warranted by Mercer Advisors. Content, research, tools and stock or option symbols are for educational and illustrative purposes only and do not imply a recommendation or solicitation to buy or sell a particular security or to engage in any particular investment strategy.
