2026 Tax Changes: What to Know Before You File

The biggest 2026 tax changes go beyond the usual inflation updates to tax brackets and deduction amounts. For the 2026 tax year (the return you file in 2027), new rules from the Working Families Tax Cuts (One Big Beautiful Bill Act, or OBBBA) add deductions and savings options for many filers, while other credits became less generous. Below, we break down the tax changes for 2026 that matter most for your tax planning and filing.

At a glance

• 2026 tax changes include higher standard deduction amounts and wider federal tax bracket ranges due to inflation, but the seven tax rates stay the same at 10% through 37%.
• Starting in 2026, taxpayers who do not itemize can deduct up to $1,000 in qualifying cash donations ($2,000 for joint filers).
• The Child Tax Credit remains at $2,200 per qualifying child for 2026.
• HSA eligibility expands, 529 plans become more flexible, and Trump Accounts can begin accepting contributions after July 3, 2026.
• The enhanced Premium Tax Credit rules expire, meaning you must repay the full amount of any excess advance credit you received for 2026.

2026 tax brackets and federal income tax rates

2026 tax brackets determine how much of your taxable income is taxed at each rate based on your filing status. For 2026, the IRS adjusted the bracket ranges for inflation, but the seven rates themselves remain unchanged (ranging from 10% to 37%).

2026 income tax brackets

Tax tip: Not sure which bracket you are in? Try our tax bracket calculator. Remember, moving into a higher bracket does not mean all your income is taxed at the higher rate — only the portion within that bracket is.

2026 standard deduction updates

If you do not itemize your deductions, the standard deduction for 2026 reduces your taxable income automatically. The amount depends on your filing status. Here are the 2026 standard deduction amounts compared with 2025:

If you are blind or age 65 or older, you may also qualify for an additional standard deduction:

Extra senior deduction remains available

The temporary senior deduction created by the Working Families Tax Cuts remains available for 2026. Eligible taxpayers aged 65 or older may deduct an additional:

• Up to $6,000 per person for most filing statuses
• Up to $12,000 if both spouses on a joint return qualify

Note that this is separate from the regular additional standard deduction for age and blindness shown above, and you may claim it whether you itemize or take the standard deduction.

The senior deduction begins to phase out when modified adjusted gross income (MAGI) exceeds $75,000 for single and head-of-household filers, or $150,000 for married couples filing jointly. Married taxpayers must file jointly to claim it. The deduction is temporary and is scheduled to remain available through tax year 2028.

Working Families Tax Cuts (OBBBA) tax changes 2026

Many of the new tax laws for 2026 come from the Working Families Tax Cuts (One Big Beautiful Bill) enacted on July 4, 2025. Below, we’ve listed the new provisions most likely to affect individual filers in 2026.

Charitable deductions: New opportunities and limits

Charitable deduction for non-itemizers in 2026

Beginning in 2026, taxpayers who take the standard deduction can also deduct up to $1,000 in qualifying cash contributions to certain charities, or up to $2,000 for married couples filing jointly. This charitable deduction for non-itemizers is available in addition to the standard deduction.

Note: This is a below-the-line deduction, meaning it can reduce your taxable income but does not reduce your adjusted gross income (AGI). Noncash gifts do not qualify for this particular deduction, and you should keep a bank record or written acknowledgment from the charity to back up your deduction claim in case the IRS asks for proof.

New 0.5% floor for itemizers

Taxpayers who itemize also face changes to this deduction beginning in 2026. In general, your charitable contribution deduction is limited to the portion of your qualifying donations that exceeds 0.5% of your AGI.

Example: If your AGI is $100,000, the first $500 (0.5%) of otherwise deductible charitable contributions would not count toward your itemized deduction. So, if you donated $3,000, you could deduct $2,500 before applying any other charitable-deduction limits.

Taken together, these rules create both a new tax benefit and a new limitation. Here’s how TaxAct tax expert Mark Jaeger sums up the 2026 charitable deduction changes:

Child Tax Credit 2026

The Child Tax Credit remains $2,200 per qualifying child in 2026 (the same as in 2025). Up to $1,700 may be refundable through the Additional Child Tax Credit.

The income phase-out thresholds also remain $200,000 for most filing statuses and $400,000 for married couples filing jointly. The credit decreases by $50 for each $1,000, or fraction of $1,000, that your modified adjusted gross income (MAGI) exceeds the applicable threshold.

Child and Dependent Care Credit: Enhanced for 2026

The Child and Dependent Care Credit becomes more valuable for many working parents and caregivers in 2026:

• The maximum credit percentage rises from 35% to 50% for taxpayers with AGI of $15,000 or less. The credit percentage gradually decreases as income rises, but it will not fall below 20%.
• Eligible expense limits do not change: You can still only use up to $3,000 of work-related care expenses for one qualifying person or $6,000 for two or more. Depending on your income and tax liability, that means the maximum credit is:
  • $1,500 for one qualifying person
  • $3,000 for two or more qualifying people
• The credit remains nonrefundable, meaning it can’t exceed your tax liability.

Dependent care FSA amounts

If your employer offers a dependent care assistance program (often called a dependent care FSA), the amount you can receive or set aside tax-free increases in 2026. For working families, that could mean paying more eligible care expenses with pretax dollars:

The limit is $3,750 for married taxpayers filing separately. Keep in mind that you cannot use an expense covered by dependent care benefits to also claim the Child and Dependent Care Credit.

SALT deduction cap rises again

The state and local tax (SALT) deduction cap rises again in 2026, but the headline amount may not be the amount every taxpayer can claim. Income and filing status can both affect the final deduction:

For married taxpayers filing separately, the general cap is $20,200. The cap begins to decrease once MAGI exceeds $505,000 ($252,500 for married filing separately). It cannot fall below $10,000 (or $5,000 for married filing separately).

Note: This higher SALT cap is temporary. Under current law, it will continue to receive 1% annual increases through 2029, then return to $10,000 in 2030 unless new legislation passes.

Itemized deductions: New limit for taxpayers in the top bracket

Starting in 2026, a new rule slightly reduces the tax savings from itemized deductions for those with taxable income in the 37% tax bracket. It doesn’t reduce the deductions you can claim, but it limits the tax benefit of the affected deductions to 35% (down from 37%).

For example, every $1,000 of itemized deductions affected by the rule could reduce your federal income tax by up to $350 instead of $370. Most taxpayers will not be affected because the limit applies only to income in the highest tax bracket. For 2026, that bracket begins above $640,600 for single filers and $768,700 for married couples filing jointly.

Educator expense deductions expand

Educators have a few important deduction changes for 2026:

• Higher above-the-line deduction: Eligible educators can deduct up to $350 of qualifying unreimbursed expenses in 2026, up from $300 previously. If you are married filing jointly and both spouses are eligible educators, you can deduct up to $700 combined, but no more than $350 per spouse. Because this is an above-the-line deduction, you can claim it even if you take the standard deduction.
• More educators qualify: Beginning in 2026, certain early childhood educators can claim the deduction, too. This generally includes teachers, instructors, counselors, principals, and aides who work at least 900 hours during the school year at a qualifying preschool or childcare facility. Previously, the deduction was generally limited to K-12 educators.
• Additional itemized deduction: Educators who itemize may also deduct eligible unreimbursed expenses beyond the $350 above-the-line limit (but you cannot deduct the same expense twice). This separate itemized deduction can also cover qualifying coaches and interscholastic sports administrators.

Read more about these changes in our guide to tax breaks for teachers.

Gambling loss deduction drops to 90%

Beginning in 2026, you can deduct only 90% of your gambling losses, up to the amount of your gambling winnings. Previously, eligible taxpayers could deduct 100% of their losses up to their winnings.

For example, say you have $10,000 in gambling winnings and $10,000 in losses. Under the new rule, you can deduct only $9,000 of those losses. That leaves you with $1,000 in taxable gambling income, even though you technically broke even.

The change applies to both casual and professional gamblers. As before, casual gamblers must itemize deductions to claim gambling losses and should keep detailed records of their winnings and losses. If you take the standard deduction, you generally cannot deduct gambling losses.

HSA eligibility 2026: More plans qualify

HSA contribution limits for 2026 follow the usual IRS inflation adjustments. As of Jan. 1, 2026, eligibility also expands in a few important ways:

• Bronze and catastrophic health plans are treated as HSA-compatible, whether purchased through a health insurance exchange or elsewhere. Previously, you typically couldn’t contribute to an HSA when enrolled in these plans.
• Those enrolled in certain direct primary care arrangements may remain eligible to contribute to a Health Savings Account and may use HSA funds tax-free for qualifying periodic fees.

Note: The telehealth exception is not new for 2026, but it is now permanent. Normally, an HSA-compatible high-deductible health plan (HDHP) cannot pay for most nonpreventive care until you meet your deductible. But under this exception, your HDHP plan can cover eligible virtual visits before you meet the deductible without affecting your ability to contribute to an HSA.

2026 HSA contribution limits

To qualify under the general high-deductible health plan rules for 2026, a plan must have a deductible of at least:

• $1,700 for self-only coverage
• $3,400 for family coverage

The out-of-pocket maximum is $8,500 for self-only coverage and $17,000 for family coverage.

529 plan changes 2026: More ways to use education savings

Several 529 plan changes make these accounts more flexible in 2026. Beginning Jan. 1, 2026, the annual limit for tax-free 529 withdrawals used for qualifying K-12 expenses doubles from $10,000 to $20,000 per beneficiary across all the beneficiary’s 529 accounts.

The list of eligible K-12 expenses also includes more than tuition, such as certain curriculum materials, books, tutoring, standardized testing fees, dual-enrollment fees, and qualifying educational therapies for students with disabilities. Certain postsecondary credentialing expenses may also qualify, including required tuition, fees, books, supplies, and testing costs for eligible credential programs. Some of these expanded expense categories became available after July 4, 2025, while the higher $20,000 K-12 limit is new for 2026.

Tax tip: State tax treatment may differ from federal rules, so check your state’s requirements before taking a distribution.

Trump Accounts: A new tax-advantaged IRA for children

One of the biggest new 2026 tax changes is the launch of Trump Accounts, a new savings account for eligible children. Parents or guardians can open an account for a child who has not turned 18 by the end of the election year and has a valid Social Security number.

Contributions cannot begin before July 4, 2026. Eligible U.S. citizen children born from Jan. 1, 2025, through Dec. 31, 2028, may also qualify for a one-time $1,000 federal contribution if an election is made.

To learn who qualifies, contribution limits, withdrawal rules, and how to file Form 4547, see What is a Trump Account? Understanding the New Savings Accounts for Kids and Families.

Premium Tax Credit 2026: Eligibility narrows and repayment caps end

The Premium Tax Credit changes significantly for 2026:

• The temporary expansion that allowed some households above 400% of the federal poverty line to qualify ended after 2025. For 2026, household income generally must be between 100% and 400% of the federal poverty line to qualify, along with the other eligibility rules.
• The repayment rules also become stricter. If the advance Premium Tax Credit paid to your insurer is more than the credit you are actually allowed based on your final household income and family size, there is no longer a repayment cap. Instead, you must repay the full excess amount, which may reduce your refund or increase your balance due.

Tax tip: If your income, household size, marital status, or access to other health coverage changes during the year, update your Marketplace application as soon as possible. This can help prevent surprises when you file Form 8962.

Clean energy credits are no longer available for new 2026 purchases

Several federal clean energy credits ended before the 2026 tax year. The New Clean Vehicle Credit, Used Clean Vehicle Credit, and Qualified Commercial Clean Vehicle Credit generally do not apply to vehicles acquired after Sept. 30, 2025.

Some home-related credits, like the Energy Efficient Home Improvement Credit and the Residential Clean Energy Credit, also expired, making the purchase or installation date especially important for homeowners:

That means eligible upgrades completed in 2025 may still qualify on a 2025 return, but new improvements made in 2026 usually will not qualify for these federal credits. State or local incentives may still be available, though, so check your state’s tax rules if you made or plan on making energy-efficient updates in 2026.

Qualified business income deduction updates

The qualified business income deduction is permanent and continues to allow eligible business owners to deduct up to 20% of qualified business income. Beginning in 2026, the phase-in range for certain wage, property, and specified service business limits increases from $50,000 to $75,000 for most filers and from $100,000 to $150,000 for joint filers.

Also new for 2026: Some business owners may qualify for a minimum QBI deduction of $400. To qualify, you must generally be actively involved in running the business (known as material participation) and have at least $1,000 in total QBI from one or more qualified businesses. Other QBI deduction rules and limits still apply.

Form 1099-NEC and 1099-MISC reporting thresholds increase

Beginning with payments made in 2026, the reporting threshold for nonemployee compensation and certain other payments increases from $600 to $2,000. This means businesses generally will not need to issue Form 1099-NEC (or Form 1099-MISC for certain payments) unless the total paid to the recipient reaches $2,000. This $2,000 threshold will also be adjusted for inflation beginning in 2027.

Note that this is only an information-reporting change. It doesn’t mean 1099 income under $2,000 is automatically tax-free, and you must still report all taxable income, even if you do not receive a Form 1099. Different thresholds will continue to apply to some Form 1099-MISC payments (like royalties).

Estate and gift tax provisions: Updated amounts

Some estate and gift tax exclusions received inflation adjustments for 2026. According to the IRS’s 2026 inflation guidance:

• Annual gift tax exclusion: The exclusion remains $19,000 per recipient in 2026. Married couples who elect to split gifts may give up to $38,000 per recipient without using part of their lifetime exemption (gift-splitting rules and filing requirements may apply).
• Lifetime estate and gift tax exemption: The basic exclusion amount increases to $15 million per individual for 2026, up from $13.99 million in 2025.

If you are planning to give a large gift or update your estate plan, make sure to check how federal and state rules apply to your situation.

Adoption Credit increases for 2026

Families who adopt may qualify for an Adoption Credit of up to $17,670 per eligible child in 2026, up from $17,280 in 2025. Up to $5,120 of the credit is refundable, meaning you could receive up to that amount even if you do not owe federal income tax.

The credit begins to phase out once your MAGI reaches $265,080 and is no longer available at $305,080. Families who adopt a child with special needs may qualify for the full credit even if their actual qualified adoption expenses were lower.

2026 Earned Income Tax Credit amounts

The Earned Income Tax Credit (EITC) is a refundable credit for qualifying low- to moderate-income workers. Your credit amount depends on your earned income, filing status, and number of qualifying children. The maximum EITC for 2026 is $8,231 for taxpayers with three or more qualifying children.

2026 EITC income limits

The investment income limit for claiming the EITC is $12,200 for 2026.

Tax tip: Want a quick credit estimate? Try our Earned Income Tax Credit calculator.

Retirement plan contribution changes for 2026

401(k) contribution limits 2026

The amount you can contribute to a 401(k), 403(b), most 457 plans, or the federal Thrift Savings Plan increases in 2026:

• Regular contribution limit: $24,500, up from $23,500 in 2025.
• Standard catch-up contribution for age 50+: $8,000, up from $7,500.
• Super catch-up contribution for ages 60-63: $11,250, unchanged from 2025.

Traditional and Roth IRA contribution limits 2026

The contribution limits for traditional IRAs and Roth IRAs also increase in 2026:

• Standard contribution limit: $7,500, up from $7,000 in 2025
• 50+ catch-up contribution: $1,100, meaning eligible taxpayers aged 50 or older can contribute up to $8,600 total (standard + catch-up contributions)
• Income limits: Your income may reduce your traditional IRA deduction or limit your ability to contribute directly to a Roth IRA.

Tax tip: The $7,500 limit is the combined annual limit for all your traditional and Roth IRAs, not a separate limit for each account.

Disaster tax relief: special rules for qualified losses

If your home or personal property is damaged in a qualifying federally declared disaster, new special rules may make it easier to deduct your loss.

For qualifying disaster losses:

• You can claim the deduction even if you take the standard deduction.
• The usual rule requiring personal casualty losses to exceed 10% of your adjusted gross income does not apply.
• Each qualified loss is generally reduced by $500.
• You can only deduct losses that were not covered by insurance or another reimbursement.

These rules apply to qualifying major disasters with incident periods beginning before Jan. 1, 2027, including eligible disasters occurring during 2026.

The law also allows certain wildfire relief payments received in 2026 to be excluded from taxable income. This can include qualifying payments for property damage, additional living expenses, lost wages, personal injury, or other losses caused by a federally declared wildfire, as long as those costs were not already covered by insurance or another source.

Disaster tax rules depend on the location and dates of the disaster. Check the IRS disaster relief announcements for your area, and keep records of your damage, insurance claims, reimbursements, and related expenses.

Other IRS tax changes for 2026

• Social Security wage base: The maximum earnings subject to the 6.2% Social Security payroll tax increases to $184,500, up from $176,100 in 2025. The Medicare tax does not have a wage cap.
• Alternative minimum tax: The AMT exemption increases to $90,100 for unmarried filers and $140,200 for married couples filing jointly. However, the exemption now phases out at lower taxable income levels ($500,000 for unmarried filers and $1 million for joint filers). The phaseout rate also increased from 25% to 50%, meaning it phases out more quickly.
• Long-term capital gains: The 0% rate applies to taxable income up to $49,450 for single and married-separate filers, $98,900 for joint filers, and $66,200 for heads of household. The 20% rate begins above $545,500 for single filers, $613,700 for joint filers, $306,850 for married-separate filers, and $579,600 for heads of household; the 15% rate generally applies between those thresholds.
• Health flexible spending accounts: The employee salary-reduction limit increases to $3,400 (up from $3,300), with up to $680 carried over if the employer’s plan permits carryovers.
• Qualified transportation and parking benefits: The monthly tax-free limit increases to $340 for each benefit.
• Foreign earned income exclusion: The maximum exclusion increases to $132,900 for qualifying U.S. taxpayers living and working abroad (up from $130,000).
• Remittance transfer excise tax: Beginning Jan. 1, 2026, you may pay a 1% federal tax when you send money from the U.S. to another country and pay with cash, a money order, a cashier’s check, or a similar form of payment. The transfer provider collects the tax when you send the money, but transfers funded through a qualifying bank account or a U.S.-issued debit or credit card are generally not taxed.

What has NOT changed for 2026?

Even with many 2026 tax law changes and inflation adjustments, several familiar rules stay the same:

• Individual income tax rates: The seven federal rates remain 10%, 12%, 22%, 24%, 32%, 35%, and 37%, although the tax bracket ranges have increased.
• Child Tax Credit amount: The maximum remains $2,200 per qualifying child, with up to $1,700 potentially refundable.
• Annual gift tax exclusion: The exclusion remains $19,000 per recipient.
• Temporary worker and senior deductions: The No Tax on Tips Deduction remains capped at $25,000 per return; the overtime deduction remains $12,500 (or $25,000 for joint filers); the car loan interest deduction remains $10,000; and the senior deduction remains $6,000 per eligible person. All four remain available through 2028, subject to their existing eligibility rules and income thresholds.
• Corporate income tax rate: The flat federal corporate tax rate remains 21%.
• Medical expense deduction: Itemizers may continue deducting qualifying unreimbursed medical expenses that exceed 7.5% of AGI.
• Personal exemptions: The personal exemption remains $0. The Tax Cuts and Jobs Act (TCJA) temporarily suspended personal exemptions beginning in 2018, and the OBBBA made the $0 amount permanent.

FAQs: 2026 tax law changes

The bottom line

The 2026 tax changes include new tax breaks, expanded savings options, updated disaster relief, and inflation adjustments to many tax amounts we’re all familiar with. Other changes may reduce certain deductions or increase what some taxpayers must repay. Reviewing the rules that apply to you can help you plan, keep the right records, and avoid surprises when you file.

If this all sounds overwhelming, remember that you don’t have to memorize every rule before you file! TaxAct® can help you prepare your federal and state returns in one place, walk you through 2026 tax changes as you go, and flag credits and deductions that may apply to your situation and help you save money.

This article is for informational purposes only and not legal or financial advice.

All TaxAct offers, products and services are subject to applicable terms and conditions.

The OBBB is now also being referred to by lawmakers as the Working Families Tax Cut Act. You may see one or both names used here, but they refer to the same set of tax changes.

Citations

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