For many taxpayers, the new year is a time for a fresh look at financial plans.
<<This article was first published by Franklin Templeton>>
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.
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.
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:
Note: Standard deduction is slightly higher for those who are age 65 or older and/or blind.
Action steps to consider: