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CONTRIBUTORS

Bill Cass, CFP®, CPWA®

Director of Wealth Planning,
Franklin Templeton

For many taxpayers, the new year is a time for a fresh look at financial plans.

In 2026 several new tax changes take effect. Combined with the impact of inflation, taxpayers may find more opportunities to explore tax-efficient strategies.

A first step in planning for the year ahead is for taxpayers to determine their marginal tax bracket. The “2026 tax rates, schedules and contribution limits” can be a useful reference to review with a financial advisor or tax advisor.

This image includes a link that can be used to download the PDF entitled “2026 tax rates, schedules, and contribution limits.”

New tax deductions

The 2025 One Big Beautiful Bill Act (OBBBA) introduced several new tax deductions. The new senior tax deduction for those age 65 and older provides for an additional $6,000 deduction per individual (subject to phase-out for taxpayers with modified gross income of $75,000 to $150,000 and for those married/filing jointly, the income phase-out range is $150,000 to $250,000).

Overtime pay is also deductible for individuals up to $12,500 in overtime pay, and $25,000 for married/filing jointly.

The law also introduced a deduction for qualified tips and a deduction for auto loan interest. All of these new deductions are subject to income phase-outs.

Inflation impacts changes in rates

With changes in tax brackets and contribution levels due to inflation adjustments, there are areas where individuals may want to consider revisions to their tax strategy for the year ahead. For example, the maximum amount a participant can defer salary into a defined contribution plan increases to $24,500 from $23,500. Contributions to health savings accounts (HSAs) also rose to $4,400 for individuals and $8,750 for families. It’s an opportune time to review current contributions.

Here’s a look at some of the key tax figure changes for 2026:

Changes to Key Tax Figures for 2026

Note: Standard deduction is slightly higher for those who are age 65 or older and/or blind.

Action steps to consider:

  • Understand the new tax deductions introduced by the OBBBA in order to maximize your potential for tax savings.
  • Tax refunds are expected to be much higher this year due to the new tax law. Make a plan now to make use of these potential tax savings. For example, allocate a tax refund to an emergency savings account.
  • Review retirement accounts to adjust contributions since limits have increased for 2026.
  • Adjust contributions to health savings accounts to take advantage of the higher contribution limits and tax savings.
  • Be aware the Social Security wage base has increased so those affected will pay roughly $500 more in payroll taxes.
     

Seek advice

To make adjustments to current financial plans, it is important to consult with an advisor with knowledge of your individual financial situation.

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