2025 saw the passing of the One Big Beautiful Bill, which, as we know, made changes to the tax code. Most notably, it made the Tax Cuts and Jobs Act permanent (or as permanent as anything ever is in the tax world). This means the tax brackets and higher standard deductions of the past several years are largely the same. Below, we break out the updated figures for 2026.
Tax Brackets and Rates
The 10% and 12% brackets have each been expanded, which means a small amount of tax savings for every taxpayer.
The three long-term capital gains tax rates (0%, 15%, and 20%) remain unchanged. The income thresholds, however, increased, allowing for additional recognized gains to be taxed in the lower two tiers. The additional 3.8% surtax, known as net investment income (NII), remains and applies as follows:
Single: Filing a return with a modified adjusted gross income over $200,000
Married: Filing a joint return with a modified adjusted gross income over $250,000
Standard Deduction
The standard deduction increased in 2026:
From $15,750 to $16,100 for single and married filing separately
From $31,500 to $32,200 for married filing jointly and surviving spouse
From $23,625 to $24,150 for head of household
For those 65 and over, the standard deduction increases by an additional $2,050 (single or head of household) and $1,650 per spouse (married).
The OBBA also added an enhanced senior deduction between 2025 and 2028 that increases the standard deduction of those over 65 with incomes under $75K single and $150K married. Eligible senior taxpayers will receive the additional $6K deduction even if they itemize their deductions.
Contribution Limits
The annual contribution limit for defined contribution retirement plans [e.g., 401(k) and Thrift Savings Plan] has increased to $24,500, with an $8,000 catch-up (age 50 or older). The annual contribution limit for traditional IRAs and Roth IRAs has increased to $7,500, with a $1,500 catch-up (age 50 or older).
Those who are ages 60 to 63 have an $11,250 catch-up contribution limit for defined contribution plans rather than $8,000.
Notably, in 2026, is the enforcement of the Roth provision on catch-up contributions for high earners. These contributions must go to the Roth portion of your account rather than pre-tax if FICA wages are over $150K. Most employers are implementing this change automatically, but others are capping contributions at the baseline of $24,500 unless employees specifically opt into the Roth account.
Social Security Benefits
There were a few changes for 2026:
Recipients received a 2.8% raise for 2026, compared with a 2.5% raise in 2025.
For recipients below their normal retirement age (NRA), the annual exempt amount (earnings test) is $24,480, up from $23,400 in 2025. $1 of benefits is withheld for every $2 earned above this amount.
The maximum earnings subject to Social Security tax increased from $176,100 to $184,500.
There is no limit on income subject to Medicare tax, but those who earn more than $200K (or $250k if MFJ) will pay an additional 0.9% in Medicare taxes.
Tax Credits and Deductions
There have been some changes and adjustments for 2026:
Child Tax Credit: Available to taxpayers who have children under 17 at the end of the calendar year. The credit is $2,200 per qualifying child (increased from $2,000).
Retirement Savings Credit (Saver's Credit): If your AGI is below $80,500 MFJ or $40,250 single, you qualify for a tax credit between 10% and 50% of up to $2,000 per person of contributions to a tax-qualified retirement plan. This can come in handy for semi-retirees earning a lower income while doing something they enjoy.
Qualified Business Income (QBI): This deduction allows eligible self-employed and small business owners to deduct up to 20% of their income on their taxes. The 2026 limits increased to $197,300 (single filers) and $394,600 (joint filers). If income is over these limits, your deduction may be limited.
Clean Energy Credits: The Energy Efficient Home Improvement Credit (EEHIC), the Residential Clean Energy Credit (RCEC), and the credit for electric vehicles all ended due to the OBBBA.
Federal Government Benefits
There were minimal changes to governmental employees and retirees:
Federal Employees Health Benefits (FEHB): The average total premiums for current non-postal employees and retirees enrolled in FEHB plans will see an increase of 12.3%, which is slightly lower than the whopping 13.5% increase in 2025.
We work with clients to integrate tax changes into their financial plan. If you’d like to see how tax rules like this affect you, we invite you to schedule a consultation to see how our financial planning services may help you. Discuss your situation with a fee-only financial advisor.
Don't take anything we say as tax or legal advice. We are not licensed as CPAs, tax preparers, or attorneys.
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