# 2026 Tax Planning: Key Update Before Year End

> Dear Clients, We hope this newsletter finds you well as we head into the Fall planning season. Several federal tax rules have changed for 2026. Some may lower your tax bill, while others may affect decisions about retirement contributions, charitable contributions, and deductible expenses. Tax year 2026 covers income earned from January 1 through December \[…\]

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Dear Clients,

We hope this newsletter finds you well as we head into the Fall planning season.

Several federal tax rules have changed for 2026. Some may lower your tax bill, while others may affect decisions about retirement contributions, charitable contributions, and deductible expenses.

Tax year 2026 covers income earned from January 1 through December 31, 2026. These tax returns will generally be filed in 2027.

**The standard deduction is increasing**
 The standard deduction reduces the amount of income subject to federal income tax. For 2026, the amounts are:

- $32,200 for married couples filing jointly
- $16,100 for single taxpayers and married taxpayers filing separately
- $24,150 for heads of household

**Higher deduction for state and local taxes**
 Taxpayers who itemize may be able to deduct more of their state income taxes, sales taxes and property taxes.

For 2026, the state and local tax (SALT) deduction is generally limited to:

- $40,400 for most filing statuses
- $20,200 for married taxpayers filing separately

The deduction begins to decrease taxpayers with modified adjusted gross income above $505,000, or $252,500 for married taxpayers filing separately.

**Additional deductions for workers and seniors**
 Several deductions introduced for 2025 continue to be available in 2026. Depending on income and other requirements, taxpayers may qualify for deductions related to:

- Qualified tip income
- Qualified overtime pay
- Interest paid on certain qualifying vehicle loans
- An additional deduction for taxpayers age 65 or older up to $6,000

Despite names such as “no tax on tips” or “no tax on overtime”, these rules do not automatically make all tips or overtime tax-free. They are deductions with specific qualifications, income limits, and documentation requirements.

Please keep pay statements, Forms W-2 and 1099, vehicle-purchase documents, loan statements, and other supporting records.

**Retirement contribution limits are higher**
 Taxpayers may be able to save more for retirement in 2026:

- The employee contribution limit for most 401(k), 403(b) and governmental 457 plans are $24,500.
- The IRA contribution limit is $7,500.
- Taxpayers age 50 or older may contribute up to $8,600 to an IRA including the catch-up amount of contribution.
- Special super catch-up contribution of $11,250 may apply to employees between the ages 60 and 63.

Certain higher-paid employees making retirement-plan catch-up contributions may be required to make those contributions to a Roth account.

Consider reviewing your contribution percentage before year-end, especially after a raise, bonus or job change.

**Health Savings Account limits are increasing**
 For taxpayers enrolled in a qualifying high-deductible health plan, the 2026 Health Savings Account contribution limits are:

- $4,400 for self-only coverage
- $8,750 for family coverage

HSA contributions may be tax-deductible, and withdrawals used for qualified medical expenses are generally tax-free.

**A charitable deduction may be available without itemizing**
 Beginning in 2026, taxpayers who take the standard deduction may deduct qualifying cash donations of up to:

- $1,000 for single filers
- $2,000 for married couples filing jointly

Donations must be made to qualifying organizations, and taxpayers should retain receipts or other written records.

**The Child Tax Credit continues**
 The Child Tax Credit is worth up to $2,200 per qualifying child. Depending on income and eligibility, up to $1,700 per child may be refundable through the Additional Child Tax Credit. Social Security number and earned-income requirements apply.

**What should you do now?**
 Good tax planning should take place before December 31, not when the tax return is being prepared. We recommend taking the following steps before year end :

- Review your federal and state tax withholding.
- Keep records for tips, overtime, and qualifying vehicle loan interest.
- Reevaluate your retirement and HSA contributions.
- Save receipts for charitable donations.
- Contact us before selling investments or business property.
- Let us know about major life changes, including marriage, divorce, retirement, a new child, a home purchase, or a new business.

Tax planning is most effective when done before year-end. We encourage you to contact our office to schedule a tax planning and advisory meeting so we can review your individual or business situation, identify potential tax-saving opportunities, and help you plan ahead for 2026 and beyond.

Please feel free to contact our office for assistance.