Tax Changes for 2026 and Beyond
Tax Changes For 2026 and Beyond
While tax season is starting to really reach a fever pitch over here, I thought I would take you through some of the key changes for 2026 (tax year 2025) that are impacting my readers and clients.
- Senior deduction- If you’re over 65, you may just qualify for the new, but temporary, $6,000 tax deduction ($12k if MFJ). Just so we are clear, you will not be paying $6,000 less in taxes. Think of this like an additional bonus deduction on top of your regular standard or itemized deduction. For example, if you’re currently paying an effective tax rate of about 10% of your income, this could represent an additional savings of $600 in taxes. This could also represent an opportunity for some retirees to take some additional withdrawals from qualified accounts with little to no tax impact. Talk with your financial advisor to see if this is something you can benefit from. Also, check out this article for more info.
- After tax catch up- Starting this year (but not really enforced yet? It’s confusing) if you are over 50 and you are making catch-up contributions your retirement plan at work (typically a 401k), the catch-up portion must be made in an after-tax fashion. Whoa, that’s a lot, let’s break it down. When contributing to a 401k, most people will choose to defer taxes on the contributions and pay them when they make withdrawals in retirement. We call these pre-tax contributions. For 2026, the maximum pre-tax 401k contribution you can make is $24,500 if you are under age 50. Once you turn 50, there is something called a catch-up provision, that allows you to contribute an additional $8,000 to your 401k. Starting this year, if you decide to use the catch-provision, the additional $8,000 must be made in an after-tax (Roth like) fashion. That means you can still sock away that money, but you will have to treat it like a Roth account, paying income tax on that $8k now, and it will be tax free withdrawals in retirement. Why did they change this? It’s simple really, politicians want more tax revenue now.
- Salt cap increase- I already wrote a full blog post on this. Read it here.
- No tax on overtime and tips- Well, sort of….It should read more like no tax on some overtime and some tips, for some people. Tips are still considered taxable income, but some people will be able to deduct up to $25k in tips from their taxes. For overtime, you may be able to deduct up to $12,500 of actual overtime pay from your taxable income. If you make too much, then none of these could be applicable. Much like everything else, the headline is somewhat misleading to what the actual policy states.
