2026 Tax Update

Every year, the formula for personal income taxes changes — sometimes due to Congressional action, and other times due to the IRS’s automatic cost-of-living adjustments. For the 2026 tax year, we’re seeing modest but significant increases across standard deductions, tax brackets, retirement savings limits, and Social Security thresholds that help taxpayers keep pace with inflation.

Standard Deduction and Age-65 Bonus (2026)

The standard deduction gets a noticeable bump for tax year 2026:

• Married couples filing jointly: $32,200, up from $31,500

• Single taxpayers & married filing separately: $16,100, up from $15,750

• Heads of household: $24,150, up from $23,625

• Taxpayers aged 65 or older, and/or blind, receive an extra deduction of $2,050 (single) or $1,650 (married).

New Senior Bonus Deduction

For tax years 2025 through 2028, taxpayers aged 65 or older may be eligible for the Senior Bonus Deduction of $6,000 per person.  This deduction begins to phase out for taxpayers whose income is over $75,000 (single) and $150,000 (married). These age-based boosts are in addition to the regular standard deduction and can help retirees reduce taxable income.

Federal Income Tax Rates and Brackets

The seven federal tax rates remain unchanged (10%, 12%, 22%, 24%, 32%, 35%, and 37%), but the income thresholds for each bracket are indexed for inflation and slightly higher for tax year 2026. The lowest two brackets grew by about 4%, while the others grew by roughly 2.3%. For example:

• 10% bracket: $0–$12,400 (single); $0–$24,800 (married filing jointly)

• 12% bracket: up to $50,400 (single); $100,800 (married filing jointly)

• 22% bracket: up to $105,700 (single); $211,400 (married filing jointly)

• 24% bracket: up to $201,775 (single); $403,550 (married filing jointly)

• 32% bracket: up to $256,225 (single); $512,450 (married filing jointly)

• 35% bracket: up to $640,600 (single); $768,700 (married filing jointly)

• 37% bracket: everything over the 35% bracket

These adjustments help prevent “bracket creep,” in which inflation pushes taxpayers into higher tax brackets even if their real income hasn’t increased significantly.

Retirement & Health Savings Contribution Limits

Several annual contribution limits are rising for 2026:

Health Savings Accounts (HSA)

• Single coverage: $4,400, up from $4,300

• Family coverage: $8,750, up from $8,550

401(k), 403(b), 457 Plans

• Base 401(k) contribution limit: $24,500, up from $23,500

• Catch-up for age 50+: $8,000 (total $32,500)

• Special catch-up for ages 60–63: $11,250

Starting in 2026, high earners aged 50 and older who earned more than $150,000 in the prior year’s FICA wages are required to make all catch-up contributions on an after-tax (Roth) basis.

Traditional and Roth IRAs

• Regular contribution limit: $7,500, up from $7,000

• IRA catch-up for age 50+: $1,100, up from $1,000

• Income phase-out ranges for Roth IRA eligibility are $153,000-$168,000 (single) and $242,000-$252,000 (married).

SIMPLE & SEP IRAs

• SIMPLE IRA limit: $17,000 with a $4,000 catch-up for 50+, and an extra $5,250 for age 60-63

• SIMPLE IRAs for employees of small businesses (25 or fewer employees): $18,100 with a $3,850 catch-up for 50+.  The age 60-63 bonus contribution of $5,250 still applies

• SEP IRA limit: $72,000, up from $70,000

Gift & Estate Tax Thresholds

• Annual gift tax exclusion remains at $19,000 per individual in 2026.

• Estate tax basic exclusion amount: increased to $15 million under OBBBA for decedents in 2026

Social Security & Medicare

The Social Security wage base — the maximum earnings subject to OASDI tax — increases to $184,500 for 2026, up from $176,100 in 2025. Once earnings exceed this base, Social Security tax stops for the year, though Medicare tax continues on all wages.

What’s New from the One Big Beautiful Bill Act (OBBBA)

The Tax Cuts and Jobs Act of 2017 dramatically reshaped individual taxation by lowering rates, increasing the standard deduction, and capping certain itemized deductions. Many of these provisions were set to expire after 2025. OBBBA now largely preserves those benefits for 2026 and beyond.

As always, annual adjustments like these can meaningfully impact tax planning, retirement contributions, Roth eligibility, and Social Security strategies. If you’d like a personal analysis of how these 2026 changes affect your situation, we’re happy to prepare a customized projection for you.