Introduction
A new year is a natural moment to step back and reassess your overall financial picture. After several years marked by legislative uncertainty and “wait-and-see” planning, the federal tax landscape has provided some needed guidance. That stability creates an opportunity for families to revisit their plans to ensure they still accomplish what they set out to do and craft them with new rules and regulations in mind.
This whitepaper is designed to help you understand the current environment and conduct a financial “wellness check” as we enter 2026.
2026 Quick Hits
Extension of the 2017 Tax Cuts
Many of the individual tax provisions introduced under the 2017 Tax Cuts and Jobs Act (TCJA) were originally scheduled to expire at the end of 2025. After extensive negotiations, those provisions were extended by the One Big Beautiful Bill (OBBB), which was signed into law in July 2025. This legislation provides much-needed clarity and removes a significant source of planning uncertainty.
Expanded Gifting Opportunities
The federal estate tax exclusion and lifetime gift tax exemption increased meaningfully from 2025 to 2026, rising from $13.99 million to $15 million per person. Individuals who had previously exhausted their lifetime exemption may now have renewed capacity to transfer assets out of their taxable estate. The annual gift tax exclusion remains $19,000 per recipient for 2026.
“Super Catch-Up” Retirement Contributions
Under the SECURE Act 2.0, individuals ages 60-63 may make an enhanced “super” catch-up contribution to their 401(k), 403(b), or 457 plan. For 2026, the maximum additional contribution is $11,250. Those who do not meet the age requirement remain subject to the age-50+ catch-up limit of $8,000.
Roth Treatment of Catch-Up Contributions for High Earners
SECURE Act 2.0 also requires high earners, defined by those who earned more than $150,000 in FICA wages in 2025, who are age 50 or older to make catch-up contributions to employer-sponsored plans on a Roth (after-tax) basis. This change does not apply to IRA contributions.
Changes to Charitable Deductions
For Taxpayers Claiming the Standard Deduction:
Beginning in 2026, taxpayers who do not itemize may deduct up to $1,000 (single filers) or $2,000 (married filing jointly) of charitable contributions. Only cash gifts qualify; donations of securities, property, or contributions to donor-advised funds are excluded.
For Taxpayers Who Itemize:
Starting in 2026, only charitable contributions in excess of 0.5% of adjusted gross income (AGI) are deductible. Therefore, smaller donations may no longer reduce your tax bill unless they clear this new threshold. Cash gifts to qualified charities remain capped at 60% of AGI. In addition, the maximum tax benefit from itemized deductions is capped at 35%, down from 37%. In other words, tax benefits are capped at 35 cents for every dollar you donate.
Expanded SALT Deduction (with Limits)
The OBBB increased the state and local tax (SALT) deduction cap from $10,000 to $40,000 beginning in 2025. However, the deduction begins to phase out once Modified Adjusted Gross Income (MAGI) exceeds $500,000 and drops back to $10,000 for taxpayers with MAGI above $600,000. The SALT cap is currently scheduled to revert to $10,000 in 2030.
New Senior Deduction
A new deduction is available for taxpayers aged 65 and older. The deduction is $6,000 per individual (or $12,000 for married couples if both spouses qualify) and is available to both itemizers and non-itemizers. Income limits apply, with the deduction phasing out for single taxpayers with MAGI between $75,000 and $175,000 and for married filers with MAGI between $150,000 and $250,000. Currently, this applies to tax years 2025 through 2028.
Other Notable Changes
Long-Term Care Insurance
According to the U.S. Department of Health & Human Services, individuals who reach age 65 have roughly a 70% chance of needing some form of long-term care. Beginning in December 2025, employees may take penalty-free distributions from employer-sponsored retirement plans (such as 401(k)s) to pay qualifying long-term care insurance premiums.
Distributions are limited to the lesser of $2,500 per year or 10% of the participant’s vested balance and are available only to individuals under age 59½.
Car Loan Interest Deduction
For loans originated between 2025 and 2028 on new passenger vehicles assembled in the United States, taxpayers may deduct up to $10,000 of qualified auto loan interest. The deduction phases out for taxpayers with MAGI above $100,000 (single) or $200,000 (married filing jointly). Leased vehicles and vehicles used for commercial purposes do not qualify.
Trump Accounts
Launching July 5, 2026, Trump Accounts are designed to help families begin saving for a child’s future earlier. Eligible children- those born between January 1, 2025, and December 31, 2028, who are U.S. citizens with a valid Social Security number- will receive a one-time $1,000 federal contribution. Additional annual contributions of up to $5,000 are permitted from individuals and employers. Employers may contribute up to $2,500 per year without triggering taxable income for the employee. Investments are limited to certain U.S. equity index funds. Withdrawals are generally restricted until the child reaches age 18, after which the account is treated similarly to a traditional IRA.
Accelerated Depreciation for Business Owners
Meaningful opportunities for business owners to accelerate depreciation and maximize deductions on qualified property have been reintroduced. 100% bonus depreciation has been reinstated for certain assets and applies to property placed in service after January 19, 2025. This allows businesses to immediately deduct the full cost of eligible investments, including equipment, certain vehicles, software, and even portions of buildings.
Section 179 business deduction limits and phase-out thresholds have increased, which can complement the accelerated depreciation above. The maximum write-off has been raised to $2.5 million (up from $1.25M), and the investment phase-out threshold is now $4 million, allowing small to mid-sized businesses to qualify. Those apply for tax years after December 31, 2024.
What Does This Mean for You?
If You Expect Higher-Than-Normal Taxable Income This Year
- Accelerate itemized deductions, particularly charitable contributions
- Defer certain income items (e.g., bonuses, business sales, stock option exercises)
- Actively manage capital gains and harvest losses where appropriate
- Maximize retirement account contributions
If You Expect Lower-Than-Normal Taxable Income This Year
- Defer itemized deductions, particularly charitable contributions, to a higher-income year
- Accelerate income items where feasible
- Realize capital gains up to favorable thresholds
- Evaluate Roth conversion opportunities
Consider Charitable Bunching and QCD Strategies
Given recent changes to charitable deductions, taxpayers with elevated income in a particular year may benefit from “bunching” multiple years of charitable gifts into a single tax year to increase itemized deductions. Pairing this strategy with a donor-advised fund or private foundation can be especially effective.
For individuals age 70½ or older, qualified charitable distributions (QCDs) remain a powerful planning tool. QCDs allow Traditional IRA owners to donate up to $111,000 in 2026 directly to qualified charities, satisfying required minimum distributions without increasing taxable income. Each spouse may utilize this limit from their own IRA, and distributions must be completed by year-end.
Assess Non-Grantor Trusts and Income Tax Planning
Non-grantor trusts are separate taxable entities and remain subject to highly compressed income tax brackets. Retaining as little as $16,000 of income at the trust level triggers the top marginal rate and the 3.8% net investment income tax, rates an individual does not reach until income exceeds $640,601. As a result, consideration should be given to distributing income to lower-bracket beneficiaries (when consistent with the trust’s terms and applicable state law). That way, the income is taxed at the beneficiaries’ tax bracket.
In addition, recent SALT changes may make non-grantor trusts more attractive in certain circumstances. Each trust may qualify for its own SALT deduction cap, potentially allowing taxpayers to offset state and local taxes across multiple income streams, provided each trust’s MAGI remains below $500,000.
Revisit Your Estate Plan
Many estate plans were designed around the anticipated 2026 sunset of the federal estate tax exemption. Techniques such as aggressive sales to grantor trusts, QPRTs, and family limited partnerships were often implemented solely to meet that deadline. With higher exemptions now extended, simpler strategies may achieve the same objectives with lower administrative burden.
Additionally, we continue to see the gap widen between Federal laws and some states’ laws. This dynamic continues to make state-level planning, such as credit-shelter trusts designed around the state exemption, a priority, particularly if you live in any of the states highlighted in the map below.
Does Your State Have an Estate or Inheritance Tax
State Estate & Inheritance Tax Rates and Exemptions as of October 1, 2025
Appendix
Federal Income Tax Brackets
Long-Term Capital Gains Tax Rates
Standard Deduction vs. Itemized Deductions
Retirement Plan Limits
SOURCES
irs.gov/newsroom/one-big-beautiful-bill-provisions
irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill
IRS – “IRA contribution limits” (November 2025)
IRS – “Defined benefit plan benefit limits (November 2025)
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