2026 Tax Season Update
With this year's tax season rapidly approaching, many people are wondering what, if anything, has changed. The answer is a little different than in past years. There aren’t sweeping tax reforms or new brackets to react to. Instead, the biggest shift is how much of the tax code has become more settled.
Several provisions that were once scheduled to expire are now permanent, and annual inflation adjustments continue to raise income thresholds and deduction amounts. That stability can be helpful, but it also means there’s less opportunity to make meaningful changes after the year is over.
For most individuals and families, 2026 is less about reacting to new rules and more about understanding how existing rules apply to their situation. It’s also a reminder that the most effective tax planning happens before income is earned, not when returns are filed.
Why 2026 Feels Different
The "One Big Beautiful Bill Act" (OBBBA) made several tax provisions permanent rather than temporary. From a planning standpoint, that’s helpful. It allows individuals, families, and business owners to make longer-term decisions with more confidence.
At the same time, the IRS adjusts dozens of tax items each year for inflation. These updates are meant to prevent bracket creep, where income rises but purchasing power doesn’t. For 2026, those adjustments were released in early October and will apply to returns filed in 2027.
The practical impact is simple. There’s less room to fix things after income is earned, and more value in planning ahead.
Are Tax Rates Changing in 2026?
No new federal tax rates were introduced. The tax system still uses seven marginal brackets. What did change is the income range for each bracket due to inflation.
The top marginal rate of 37% applies to:
- Single filers earning more than $640,600
- Married couples filing jointly earning more than $768,700
It’s worth emphasizing that only income above those thresholds is taxed at the top rate. The rest is taxed at lower rates along the way.
2026 Federal Income Tax Brackets
| Tax Rate | Single Filers | Married Filing Jointly | Head of Household |
|---|---|---|---|
| 10% | $0 – $12,400 | $0 – $24,800 | $0 – $17,700 |
| 12% | $12,401 – $50,400 | $24,801 – $100,800 | $17,701 – $67,450 |
| 22% | $50,401 – $105,700 | $100,801 – $211,400 | $67,451 – $105,700 |
| 24% | $105,701 – $201,775 | $211,401 – $403,550 | $105,701 – $201,775 |
| 32% | $201,776 – $256,225 | $403,551 – $512,450 | $201,776 – $256,200 |
| 35% | $256,226 – $640,600 | $512,451 – $768,700 | $256,201 – $640,600 |
| 37% | $640,601+ | $768,701+ | $640,601+ |
Source: Internal Revenue Service, Revenue Procedure 2025-32
The Standard Deduction Continues to Rise
The standard deduction increased again for 2026:
- $32,200 for married filing jointly
- $16,100 for single filers
- $24,150 for head of household
For many households, this means itemizing deductions will make less sense unless there’s intentional planning involved. Charitable giving, business expenses, or large one-time deductions can still change the math, but for most people the standard deduction will remain the better option.
A Quick Note on the Alternative Minimum Tax
The Alternative Minimum Tax (AMT) is still part of the picture, particularly for higher-income households. For 2026, the AMT exemption amounts are:
- $90,100 for single filers
- $140,200 for married filing jointly
AMT tends to affect people with large deductions, incentive stock options, or significant investment income. This is one area where coordinating tax, investment, and equity compensation planning can make a meaningful difference.
What Families Should Be Aware Of
Child Tax Credit Updates
The Child Tax Credit was permanently increased under the OBBBA:
- $2,200 per qualifying child
- Phaseouts begin at $200,000 for single filers and $400,000 for joint filers
- Up to $1,700 is refundable
- A $500 nonrefundable credit applies for other dependents
For families near the income limits, small changes in earnings, bonuses, or filing status can affect eligibility.
Considerations for Higher Earners
Roth Catch-Up Contributions
Beginning in 2026, workers age 50 and older earning more than $145,000 must make catch-up contributions on a Roth basis if their plan allows catch-ups. The catch-up limit increases to $8,000.
This change shifts how many people think about retirement savings. Instead of focusing only on tax deferral, the conversation moves toward tax diversification. Having both pre-tax and Roth assets can provide more flexibility later on.
Changes That Matter for Business Owners and Investors
Qualified Small Business Stock (QSBS)
The OBBBA expanded the benefits of Qualified Small Business Stock for shares issued after July 4, 2025:
- A 50% gain exclusion after three years
- A 75% exclusion after four years
- A 100% exclusion after five years
The lifetime gain cap also increased from $10 million to $15 million and will be indexed for inflation. These changes can be meaningful for founders and early investors, but the rules around eligibility and timing still matter.
The SALT Deduction Update
The state and local tax (SALT) deduction cap increased from $10,000 to $40,000 in 2025 and will increase slightly each year through 2029.
That said, the deduction begins to phase out at $500,000 of modified adjusted gross income and is fully phased down to $10,000 at $600,000. The cap is scheduled to revert to $10,000 in 2030.
For business owners, changes at the state level also come into play. Some states are eliminating pass-through entity tax elections, which may affect planning strategies in higher-tax states.
New Compliance Rules for Employers
The OBBBA introduced new deductions related to tips and overtime, along with new reporting requirements. Individuals may be eligible for:
- A tip income deduction of up to $25,000
- An overtime compensation deduction of up to $12,500 for single filers or $25,000 for joint filers
Employers must now separately report qualified tips and overtime compensation on Forms W-2 or 1099-NEC. While there was temporary relief for 2025, full compliance begins in 2026.
How to Think About 2026 Moving Forward
For many people, filing taxes feels like a one-and-done task. You file, pay what you owe, maybe get a refund, spend it, and move on. Once it’s done, it’s done.
In reality, your tax outcome is shaped by what happens throughout the rest of the year. Things like when income comes in, how savings are structured, and which accounts you’re using, all play a role. Most of those decisions don’t feel like “tax decisions” in the moment, but they have a real impact when filing time comes around.
With more rules now permanent and thresholds clearly defined, planning ahead and staying coordinated matter more. Your accountant or CPA focuses on accurately reporting what already happened. A financial advisor helps think through financial decisions before they show up on a return. Working together, they help you see how those decisions affect the rest of your finances, not just your taxes.
Shifting how you think about taxes can make a difference. Instead of viewing them as a once-a-year event, it helps to see them as part of the bigger financial picture and make small, thoughtful adjustments as life, income, and business needs change. That approach tends to lead to fewer surprises and a lot less headaches when tax season rolls around.