An unexpected tax bill can disrupt even the most carefully planned financial strategy. Tax codes are intricate and evolving, making it difficult to anticipate every implication—especially for those with complex financial situations.

Life events—such as a new job, moving to a different state, selling a business or receiving an inheritance—and investment portfolio changes can generate substantial tax liability.

“Before making major financial decisions, consult your advisors to assess potential tax implications,” says Dean Deutz, a private wealth strategist for RBC Wealth Management–U.S. “You don’t want to wait until you’re filing your taxes to find out that you’ve unknowingly triggered a capital gains tax.”

Strategic preparation can reduce surprises

Deutz recommends running tax projections with your advisors throughout the year so you can make adjustments as circumstances change.

“Then, as you and your tax advisor are preparing, you should start thinking about what might be different next year,” he says. “Will your W-2 be the same or different? Consider whether you’ll need to make estimated tax payments at a higher or lower rate.”

Deutz notes a few strategies to consider:

Manage your income streams:Tax-efficient planning requires proactivity. For example, if you expect to be in a lower tax bracket in the future, you may want to see if you can defer income. Or, if you’re heading into a higher tax bracket next year, moving as much income as you can to the current tax year may be beneficial. Your advisors can recommend strategies for your specific situation.

Bunching your charitable contributions: To maximize the tax benefit of charitable giving, you may want to consider combining multiple years of donations into a single year, perhaps with biennial giving, a donor-advised fund or a private foundation.

Qualified charitable distribution (QCD): If you’re 70 1/2 or older, you can donate up to $111,000 directly from an IRA to qualified charities. QCDs can help make your required minimum distributions more tax efficient and reduce your taxable income for the year.

Strategies for paying your tax bill

If, despite your consistent planning efforts, you owe the IRS a substantial amount, there are several ways to pay, including:

Cash:If you have plenty of liquidity, cash is a straightforward way to pay your bill, Deutz says, but it’s risky if you’re digging into your emergency fund. “It’s best to have a back-up plan so you don’t have to pay cash if you don’t want to,” he adds.

Securities-based line of credit: Another option is to borrow from a securities-based line of credit, says Matt Franks, head of Wealth Management Lending at RBC Wealth Management–U.S. “An advantage of leveraging credit is that you’re not creating a new taxable event when you borrow from your account,” he explains.

This strategy is most effective if you can repay the loan within a short timeframe.

“Borrowing can be smart if you know you have income coming in soon to pay off the debt, for example, if you’re paying your tax bill in April and know you’ll get a bonus in June,” Deutz says. “But if you don’t have a clear path to repayment, it’s best to avoid using debt for a big bill.”

Sell securities: Occasionally, selling securities may be an effective way to cover your tax bill, but it’s not usually the best option, Deutz says.

“You could be selling at the wrong time in the market and losing out on the benefit of a more strategic sale,” he explains. “In addition, selling securities could cause a bigger tax bill the following year because you have to include the proceeds as income.”

When it comes to navigating complex tax situations and preventing surprises, professional advice is essential.

“If you have a big tax liability, it’s important to communicate with your financial and tax advisors and recognize that you have several arrows in your quiver,” Franks says. “So many people think they need to sell assets when they’re hit with a bill, but there are other options.”

This article was updated in Feb. 2026.