Tax Year 2025–2026: Optimize Your Tax Strategy

By: Frances Perez, Private Banker

As April 15 approaches, discover how to organize your documents, anticipate risks, and take advantage of tax opportunities that can help you achieve lasting tax peace of mind.

Do you want to take control of your financial future and ensure that every tax decision truly benefits you? It is essential to understand how to properly manage your tax obligations, especially considering changes to tax laws.

Advance planning is essential to facilitate the income tax filing process. This requires gathering information returns and other documents well in advance, as well as having the support of your financial advisory team.

Because tax laws change, it is essential to stay informed and adjust your strategies according to new provisions and any changes in your personal circumstances.

A solid action plan begins with an evaluation of your current situation through key questions, such as:

• What stage of life are you currently in?
• What recent changes in your circumstances require you to meet with your advisors to review financial strategies?
• Do you have a team of advisors you trust?
• Do you feel well supported, and do you believe the process and advice have been effective?

As part of this analysis, it is important to identify the following baseline factors:

• Place of birth and residence.
• Marital status: Single (including widowed), married, or separated, among others that may apply.
• Type of income: Wages, professional services income, Social Security benefits, interest, dividends, among others.
• Source of income: Puerto Rico, the United States, or other applicable locations.
• Current business structure: Do you file taxes as an individual, a pass-through entity, or a corporation?

Other important considerations include:

• Salary: Are you employed part-time or full-time? Do you work as an independent contractor or are you a business owner?
• Do you have dependents?
• Are you a renter or a property owner?
• Do you receive retirement benefits through your employer? If you are self-employed, do you have a self-directed retirement plan and/or retirement strategies in place?

These assumptions will provide a clearer picture. At every stage of life, it is essential to meet with your advisory team² to proactively identify strategies that allow you to optimize your tax obligations in an orderly, legal, and ethical manner. This process also supports better planning to save and strengthen your liquid assets.

IRAs and CAEs: Changes in Maximum Contribution Amounts

Recently, changes were established to the maximum contribution limits for Individual Retirement Accounts (IRAs) ³ and Education Contribution Account (CAE, for its Spanish acronym)³:

• For tax year 2025, the maximum annual contribution to IRAs is $7,000 per taxpayer.
• For tax year 2026, the annual contribution limit is $7,500 per individual.
• For tax years 2025 and 2026, the maximum contribution to CAEs is $1,000 per beneficiary per year.

We recommend consulting your tax advisor regarding these changes in the law and their applicability to your situation.

Other Tax Returns

In addition to the Income Tax Return, there are other types of returns that may apply depending on the circumstances, transactions, and/or life events of an individual, including:

• Gift Tax Information Return: To determine whether you are required to file this return, it is essential to know details such as place of birth, assets to be gifted, and the origin and value of the asset. It is also important to be aware of filing deadlines to avoid penalties and interest.
• Estate Tax Information Return: Relevant information to complete this return includes place of birth and residence, the geographic location of assets at the time of death, verification of family profile, identification of forced heirs, and confirmation of the existence of a will, among other factors. These details allow for proper organization and strategic planning of the process.

We Are Here to Support You

Timely filing of tax returns is crucial to avoid payments and penalties.

At Popular One¹, our team helps you create and implement your financial plan. We also encourage you to consult your legal and tax advisors. Contact your private banker by calling 787-281-7272 or emailing popularone@popular.com.