Thanks to the permanent changes made by the “One Big Beautiful Bill Act” (OBBBA) and the annual inflation adjustments from the IRS, the 2026 tax year brings some changes you might want to make note of. Getting a handle on these updates can help you plan out your financial moves throughout this year, so let’s take a look at some updates to factor into your financial strategy!
- Standard Deduction Increases Again
The standard deduction continues its upward trend, primarily due to inflation and the permanent enhancements made by the OBBB. A higher deduction means more of your income is shielded from federal tax. Here’s the deduction breakdown for 2026 (filing in Spring 2027):
- Married Filing Jointly: Increases to $32,200 (up from $31,500 in 2025).
- Single / Married Filing Separately: Increases to $16,100 (up from $15,750 in 2025).
- Head of Household: Increases to $24,150 (up from $23,625 in 2025).
- Higher Retirement Contribution Limits
For 2026, retirement contribution limits are increasing, allowing you to add a little more to your retirement savings. The IRS has boosted the limits for various tax-advantaged accounts:
- 401(k), 403(b), and 457 Plans: The employee contribution limit increases to $24,500 (up from $23,500 in 2025).
- Age 50+ Catch-Up: The catch-up contribution rises to $8,000 (up from $7,500 in 2025), bringing the total possible contribution to $32,500 for those 50 and older. For some plans, the SECURE 2.0 adjustments allow participants ages 60, 61, 62, and 63 to have a higher contribution limit of $11,250.
- IRA Limits: The limit for Traditional and Roth IRAs increases to $7,500 (up from $7,000 in 2025).
Note: The Roth Catch-Up Rule
Starting this year, high earners aged 50 and over whose wages exceed $150,000 must use a Roth (after-tax) account to make their $8,000 catch-up contribution.
- Continued Deductions for Seniors, Tipped, and Overtime Workers
The temporary deductions introduced by the OBBB in 2025 continue through 2028:
- Senior Bonus Deduction: Taxpayers age 65 or older get an additional $6,000 deduction ($12,000 for a qualifying couple). This applies whether you itemize or take the standard deduction, but it begins phasing out at $75,000 MAGI for singles ($150,000 for joint filers).
- Overtime and Tip Deductions: Workers can deduct up to $25,000 in qualified tips or $12,500 in overtime pay for single filers ($25,000 for married filing jointly)
- Child Tax Credit (CTC) is Permanent and Indexed
The CTC amount of $2,200 per qualifying child is now permanent. Starting in 2026, the credit will be subject to annual inflation adjustments, providing ongoing tax relief for families.
- Increased Estate Tax Exemption
The OBBB also made the Tax Cuts and Jobs Act-era estate tax exemption permanent, and for 2026, the limit has increased from $13.99 million per individual ($27.98 million for married couples) in 2025 to $15 million per person, or $30 million per married couple, with annual inflation adjustments to be made thereafter.
Let’s Get Started
The world of taxes is always shifting, and for 2026, this is no different. Understanding these changes now is your biggest advantage in making smart tax moves throughout the year. Contact us today if you have questions about how the 2026 tax changes may apply to your situation.
