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As the year winds down, it’s important to set aside time to ensure your 2025 taxes don’t result in unwelcome surprises in 2026. Effective year-end tax planning generally falls into two categories: proactive strategies that may help reduce your tax burden, and required tasks that can lead to penalties if neglected. Reviewing both can help you enter the new year with greater clarity and fewer last-minute pressures. Here’s what to keep in mind, along with key tax changes to watch for in 2026.
Need help with a strategy to reduce your taxes? Talk to a financial advisor today.
General 2026 Tax Rule Changes
Federal tax rules will go into effect in 2026, bringing updated brackets, larger standard deductions and revised limits that affect how much income households ultimately owe. Marginal tax rates continue to follow a tiered structure from 10% to 37%, while thresholds for deductions and credits adjust to reflect inflation and changes in the One Big Beautiful Bill Act (OBBBA). These will affect how income is taxed and how much relief filers could get through deductions like the State and Local Tax (SALT) cap or the estate and gift tax exclusion.
Marginal Rates
Federal income tax brackets for 2026 continue to use a tiered structure, with rates ranging from 10% to 37% depending on taxable income and filing status. The lowest bracket applies to single filers earning up to $12,400 and married couples filing jointly earning up to $24,800, with rates increasing across income tiers. 1 The top 37% rate applies to incomes above $640,600 for single filers and $768,700 for joint filers.
2026 Federal Income Tax Brackets
| Tax Rate | Single Filers | Married Filing Jointly |
|---|---|---|
| 10% | Up to $12,400 | Up to $24,800 |
| 12% | Over $12,400 | Over $24,800 |
| 22% | Over $50,400 | Over $100,800 |
| 24% | Over $105,700 | Over $211,400 |
| 32% | Over $201,775 | Over $403,550 |
| 35% | Over $256,225 | Over $512,450 |
| 37% | Over $640,600 | Over $768,700 |
Standard Deduction
The standard deduction is set to rise again in 2026, increasing to $32,200 for married couples filing jointly and $16,100 for single filers and married individuals filing separately. For heads of household, the deduction will increase to $24,150.
For context, the 2025 amounts, already boosted under the OBBBA, are slightly lower, with joint filers receiving $31,500, single filers and separate filers receiving $15,750, and heads of household receiving $23,625.
Standard Deduction Amounts for 2025 and 2026
| Filing Status | 2025 Standard Deduction | 2026 Standard Deduction |
|---|---|---|
| Single / Married Filing Separately | $15,750 | $16,100 |
| Married Filing Jointly | $31,500 | $32,200 |
| Head of Household | $23,625 | $24,150 |
State and Local Tax Deduction
The SALT deduction cap increases from $10,000 to $40,000 starting in 2025. The limit will rise by 1% each year through 2029, then revert back to $10,000 in 2030. The expanded deduction applies only to households with a modified adjusted gross income (MAGI) of $500,000 or less ($250,000 for those married filing separately).
Above that threshold, the deduction phases down by $0.30 for every dollar of income over the limit, but never falls below $10,000. This means households with a MAGI above $600,000 in 2025 only receive the baseline deduction.
SALT Deduction Limits Under the One Big Beautiful Bill Act
| Tax Year | SALT Deduction Limit | Phase-Out Threshold (MAGI) |
|---|---|---|
| 2025 | $40,000 | $500,000 |
| 2026 | $40,400 | $505,000 |
| 2027 | $40,804 | $510,050 |
| 2028 | $41,212 | $515,151 |
| 2029 | $41,624 | $520,303 |
| 2030 | $10,000 | — |
Alternative Minimum Tax Exemption Amounts
For the 2026 tax year, the alternative minimum tax (AMT) exemption is set at $90,100 for single filers, beginning to phase out once income exceeds $500,000. Married couples filing jointly have a higher exemption of $140,200, with the exemption starting to phase out at $1 million of income. These thresholds determine when taxpayers may be subject to the AMT calculation rather than the regular income tax system.
Estate and Gift Tax Lifetime Exemption
The federal estate tax exemption will increase to $15 million for individuals whose deaths occur in 2026, up from $13.99 million for 2025. This higher exclusion amount allows larger estates to pass to heirs without triggering the federal estate tax. However, the threshold is scheduled to fall in future years under the current law.
The annual gift tax exclusion remains $19,000 per recipient in 2026, while the limit for gifts made to a spouse who is not a U.S. citizen increases to $194,000.
Retirement Deduction and Credit Changes
Changes in 2026 will also lead to higher contribution limits and expanded income ranges. The updates include increases to 401(k), 403(b), 457 and Thrift Savings Plan (TSP) contribution caps, as well as higher IRA limits and larger catch-up opportunities for older workers.
Retirement Plan Contribution Limits and Income Ranges
Retirement plan contribution increases in 2026 include a higher limit of $24,500 for employees participating in 401(k), 403(b), governmental 457 plans and the federal Thrift Savings Plan. 2 IRA contributions also rise to $7,500, with the IRA catch-up amount for individuals age 50 and older increasing to $1,100. Workplace plan catch-up contributions will grow to $8,000 for most participants age 50 and older, allowing a total of up to $32,500 for those eligible. A special catch-up limit of $11,250 applies to workers ages 60 through 63 under SECURE 2.0.
In addition, the income thresholds that determine eligibility for deductible traditional IRA contributions, Roth IRA contributions and the Saver’s Credit all rise for 2026.
2026 Retirement Plan Contribution Limits
| Category | 2025 Amount | 2026 Amount |
|---|---|---|
| Employee 401(k)/403(b)/457/TSP Contribution Limit | $23,500 | $24,500 |
| IRA Contribution Limit | $7,000 | $7,500 |
| IRA Catch-Up (Age 50+) | $1,000 | $1,100 |
| Workplace Plan Catch-Up (Age 50+) | $7,500 | $8,000 |
| Total Possible Workplace Contribution (50+) | $31,000 | $32,500 |
| Special Catch-Up for Ages 60–63 (SECURE 2.0) | $11,250 | $11,250 |
2026 Income Phase-Out Ranges for Traditional IRA Deductions
| Filing Status / Situation | 2025 Phase-Out Range | 2026 Phase-Out Range |
|---|---|---|
| Single, covered by workplace plan | $79,000–$89,000 | $81,000–$91,000 |
| Married Filing Jointly, contributor covered by workplace plan | $126,000–$146,000 | $129,000–$149,000 |
| Married Filing Jointly, contributor not covered but spouse is | $236,000–$246,000 | $242,000–$252,000 |
| Married Filing Separately, covered by workplace plan | $0–$10,000 | $0–$10,000 |
Senior Deductions
For the 2025 tax year, seniors receive an extra standard deduction that varies by filing status and whether the taxpayer is age 65 or older, blind or both. Single filers and heads of household can add $2,000 to their standard deduction, while married couples filing jointly receive an extra $1,600 per spouse who qualifies. Because the benefit applies individually, couples in which both partners are 65 or older can add up to $3,200 on top of the regular 2025 standard deduction. Some retirees may also qualify for an additional $6,000 bonus deduction beginning in 2025, which phases out at higher income levels. 3
In 2026, the additional standard deduction increases slightly. Single filers and heads of household age 65 or older or blind can add $2,050, while those who are both 65 or older and blind qualify for $4,100. Married couples filing jointly or separately can add $1,650 per qualifying spouse, or $3,300 per spouse if they are both 65 or older and blind.
2025 Additional Standard Deduction for Seniors
| Filing Status | Standard Deduction (2025) | Additional Deduction (Age 65+) | Total Possible Deduction (65+) |
|---|---|---|---|
| Single | $15,750 | +$2,000 | $17,750 |
| Married Filing Jointly | $31,500 | +$1,600 per spouse | Up to $34,700 |
| Married Filing Separately | $15,750 | +$1,600 | $17,350 |
| Head of Household | $23,625 | +$2,000 | $24,625 |
2026 Additional Standard Deduction Amounts
| Filing Status | Age 65 or Older or Blind | Age 65 or Older and Blind |
|---|---|---|
| Single or Head of Household | $2,050 | $4,100 |
| Married Filing Jointly or Separately | $1,650 per spouse | $3,300 per spouse |
Required Minimum Distributions (RMDs)
For the 2026 tax year, your RMD is calculated using your retirement account balance as of December 31, 2025, along with the IRS life expectancy factor that corresponds to your age. You may postpone your first 2026 distribution until April 1, 2027, but all subsequent RMDs must be taken by December 31 each year. These rules apply to most tax-deferred accounts, including traditional IRAs and employer-sponsored plans, though employees who continue working past age 73 may defer RMDs from their current employer’s plan if they are not 5% owners and the plan allows it. Failing to take the full RMD triggers a 25% excise tax, which may be reduced to 10% if the error is corrected within two years.
The age for taking RMDs remains 73 for individuals born between 1951 and 1959, reflecting the changes introduced under the SECURE Act and SECURE 2.0. The increase to age 75 takes effect in 2033 and applies to those born in 1960 or later.
Inherited IRAs and certain employer plans follow separate distribution rules, meaning beneficiaries and employees approaching retirement should confirm which requirements apply to their accounts.
To get an estimate of your required withdrawals from a 401(k) or IRA, use our RMD Calculator.
Required Minimum Distribution (RMD) Calculator
Estimate your next RMD using your age, balance and expected returns.
RMD Amount for IRA(s)
RMD Amount for 401(k) #1
RMD Amount for 401(k) #2
About This Calculator
This calculator estimates RMDs by dividing the user's prior year's Dec. 31 account balance by the IRS Distribution Period based on their age. Users can enter their birth year, prior-year balances and an expected annual return to estimate the timing and amount of future RMDs.
For IRAs (excluding Roth IRAs), users may combine balances and take the total RMD from one or more accounts. For 401(k)s and similar workplace plans*, RMDs must be calculated and taken separately from each account, so balances should be entered individually.
*The IRS allows those with multiple 403(b) accounts to aggregate their balances and split their RMDs across these accounts.
Assumptions
This calculator assumes users have an RMD age of either 73 or 75. Users born between 1951 and 1959 are required to take their first RMD by April 1 of the year following their 73rd birthday. Users born in 1960 and later must take their first RMD by April 1 of the year following their 75th birthday.
This calculator uses the IRS Uniform Lifetime Table to estimate RMDs. This table generally applies to account owners age 73 or older whose spouse is either less than 10 years younger or not their sole primary beneficiary.
However, if a user's spouse is more than 10 years younger and is their sole primary beneficiary, the IRS Joint and Last Survivor Expectancy Table must be used instead. Likewise, if the user is the beneficiary of an inherited IRA or retirement account, RMDs must be calculated using the IRS Single Life Expectancy Table. In these cases, users will need to calculate their RMD manually or consult a finance professional.
For users already required to take an RMD for the current year, the calculator uses their account balance as of December 31 of the previous year to compute the RMD. For users who haven't yet reached RMD age, the calculator applies their expected annual rate of return to that same prior-year-end balance to project future balances, which are then used to estimate RMDs.
This RMD calculator uses the IRS Uniform Lifetime Table, but certain users may need to use a different IRS table depending on their beneficiary designation or marital status. It's the user's responsibility to confirm which table applies to their situation, and tables may be subject to change.
Actual results may vary based on individual circumstances, future account performance and changes in tax laws or IRS regulations. Estimates provided by this calculator do not guarantee future distribution amounts or account balances. Past performance is not indicative of future results.
SmartAsset.com does not provide legal, tax, accounting or financial advice (except for referring users to third-party advisers registered or chartered as fiduciaries ("Adviser(s)") with a regulatory body in the United States). Articles, opinions and tools are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual. Users should consult their accountant, tax advisor or legal professional to address their particular situation.
Rollovers and Conversions
Rollover and conversion rules remain unchanged for the 2025 tax year.
Beginning in 2026, however, several updates will expand rollover and conversion opportunities. One notable change affects federal employees and service members: the Thrift Savings Plan will permit in-plan Roth conversions starting January 1, 2026. This will allow participants to convert pre-tax TSP balances to Roth dollars without separating from federal service. Taxes on the converted amount will be due for the year in which the conversion occurs, and the TSP will not withhold taxes, requiring participants to plan ahead and cover the bill with outside funds.
New tax law changes, including provisions in the One Big Beautiful Bill Act, also create additional considerations for Roth conversion strategies in 2026. Adjustments to tax brackets, deductions and retirement-related thresholds may influence the overall tax cost and ideal timing of a conversion, particularly for taxpayers age 65 and older who may qualify for a higher standard deduction.
Investors using self-directed IRAs may encounter more complex tax implications when alternative assets are involved. As a result, evaluating potential tax bracket shifts, deduction changes and asset-specific rules before converting can help ensure a more efficient outcome.
A financial advisor can help you determine how to structure your rollovers.
Qualified Charitable Distributions
Qualified charitable distribution (QCD) rules remain unchanged for the 2025 tax year, with eligible IRA owners able to transfer funds directly to qualified charities beginning at age 70 ½. These distributions can satisfy all or part of a required minimum distribution once they begin at age 73, while also keeping the donated amount out of adjusted gross income (AGI). There are no income limits to make a QCD, and the annual limit continues to be indexed for inflation. Transfers must come directly from a traditional IRA, inherited IRA or an inactive SEP or SIMPLE IRA, and must be made to a qualifying 501(c)(3) public charity.
In 2026, QCDs continue to operate under the same structural rules, but the annual limit increases to $111,000 per individual due to inflation indexing. Taxpayers will also encounter new charitable deduction rules beginning in 2026, which may affect broader giving strategies.
Non-itemizers will become eligible for an above-the-line deduction for cash gifts up to $1,000 for single filers or $2,000 for married couples filing jointly. Itemizers, meanwhile, will only be able to deduct charitable contributions that exceed 0.5% of AGI. A one-time lifetime QCD election of up to $55,000 in 2026 also remains available for funding a charitable remainder trust or gift annuity.
Consider talking to a financial advisor to discuss structuring charitable gifts.
Credit Changes for Parents
Families will see several child- and adoption-related tax benefits expand in 2026, including higher Child Tax Credit amounts, increased adoption credits and enhanced support for employer-provided childcare.
Child Tax Credit
For 2025, the Child Tax Credit (CTC) provides up to $2,000 per qualifying child under age 17, with as much as $1,600 refundable for eligible families through the Additional Child Tax Credit.
In 2026, the maximum credit increases to $2,200 per child and up to $1,700 of that amount can be refundable, calculated as 15% of earned income above $2,500. The full credit is available for households with a MAGI of up to $400,000 for married couples filing jointly and $200,000 for single filers, heads of household and qualifying widow(er)s, with the benefit phasing out by $50 for every $1,000 earned above these thresholds.
Starting in 2026, the credit becomes indexed for inflation, and both the taxpayer and qualifying child must have valid Social Security numbers to claim the credit, which is filed using Form 8812.
Adoption Credits
For the 2025 tax year, families can claim a nonrefundable adoption credit of up to $17,280 to help offset qualified adoption expenses.
In 2026, the maximum credit increases to $17,670, and up to $5,120 of that amount may be refundable for eligible taxpayers. The credit can be used for domestic, foreign or foster-care adoptions, and the allowable amount is tied to qualified expenses such as adoption fees, court costs and travel.
Employer-Provided Childcare Tax Credit
For 2026, the Employer-Provided Childcare Tax Credit receives an increase under the OBBBA, raising the maximum credit from $150,000 to $500,000 for most employers and up to $600,000 for eligible small businesses. This credit supports companies that invest in onsite childcare facilities or contract with licensed providers, helping reduce costs for both employers and working families.
Trump Savings Accounts
The One Big Beautiful Bill creates new Trump Accounts for eligible children under age 18, providing a $1,000 government-funded initial deposit for those born between January 1, 2025 and December 31, 2028. 4 Parents can contribute up to $5,000 per year, and employers may add up to $2,500 annually without affecting the employee’s taxable income.
Early projections suggest that a child born in 2026 could accumulate roughly $303,800 by age 18 and more than $1 million by age 28 if maximum contributions are made, while accounts receiving only the initial deposit could grow to about $5,800 by age 18 and $18,100 by age 28.
Additional 2026 OBBBA Tax Changes
Several temporary tax benefits take effect beginning in 2025 that directly affect workers in tipped industries, employees earning overtime and individuals financing new vehicles.
Taxation of Tips
The new No Tax on Tips Act allows workers in tipped occupations to exclude up to $25,000 in cash tips from taxable income each year from 2025 through 2028, while also permitting deductions of up to $12,500 in overtime pay for single filers or $25,000 for joint filers. These benefits begin to phase out once income exceeds $150,000 for individuals or $300,000 for married couples, and eligibility requires valid Social Security numbers for the taxpayer and spouse. Undocumented workers do not qualify, and the provisions are set to end after 2028 unless Congress acts to extend them.
Taxation of Overtime Pay
Under the new rules taking effect for tax years beginning after December 31, 2024, workers can deduct qualified overtime pay from their federal taxable income. To qualify, the overtime must meet Fair Labor Standards Act requirements and cannot overlap with tip income. The deduction is unavailable to highly compensated employees or for overtime already counted as tips, and taxpayers must provide valid Social Security numbers, along with a spouse’s if filing jointly, to claim it. This provision applies through the end of the 2028 tax year.
Auto Loan Interest
The One Big Beautiful Bill Act also creates a temporary auto loan interest deduction for tax years 2025 through 2028, allowing individuals to deduct up to $10,000 per year in interest paid on qualifying personal-use vehicle loans, even if they claim the standard deduction. To qualify, the loan must begin after December 31, 2024, be secured by a first lien and be used to finance a new U.S.-assembled vehicle such as a car, truck, SUV, motorcycle, trailer, camper or ATV.
The deduction excludes leases, business-use vehicles, fleet purchases and used or salvage-title cars. Income limits apply, with the benefit beginning to phase out above $100,000 of modified adjusted gross income for single filers and $200,000 for joint filers, disappearing completely at $149,000 and $249,000, respectively.
Bottom Line
Proactive year-end tax planning can help you avoid penalties and take advantage of valuable opportunities before the calendar turns. Reviewing your income, deductions and potential credits ahead of December 31 gives you more control over your final tax bill and sets the stage for a smoother filing season.
Tax Planning Tips
- Tax planning is a huge part of investing and structuring your retirement withdrawals. And a financial advisor can help. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors in your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor, get started now.
- When the tax code changes, it’s a good idea to use a good tax filing service. We did our annual roundup of the best tax filing software so that you can get through this tax season as painlessly as possible.
Photo credit: ©iStock.com/andresr, ©iStock.com/Khanchit Khirisutchalual
Article Sources
All articles are reviewed and updated by SmartAsset’s fact-checkers for accuracy. Visit our Editorial Policy for more details on our overall journalistic standards.
- “IRS Releases Tax Inflation Adjustments for Tax Year 2026, Including Amendments from the One, Big, Beautiful Bill | Internal Revenue Service.” https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill. Accessed 20 Nov. 2025.
- “401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500 | Internal Revenue Service.” Home, https://www.irs.gov/newsroom/401k-limit-increases-to-24500-for-2026-ira-limit-increases-to-7500. Accessed 20 Nov. 2025.
- “One, Big, Beautiful Bill Provisions | Internal Revenue Service.” Home, https://www.irs.gov/newsroom/one-big-beautiful-bill-provisions. Accessed 20 Nov. 2025.
- “Trump Accounts Give the Next Generation a Jump Start on Saving.” The White House, 29 Aug. 2025, https://www.whitehouse.gov/research/2025/08/trump-accounts-give-the-next-generation-a-jump-start-on-saving/.