Standard Deduction Increases Again
The standard deduction is going up again. For 2026, single filers get a bump, married couples filing jointly see an even bigger lift, and heads of households aren’t left behind. These increases are tied to inflation and meant to keep more of your income shielded from taxes. In plain terms, it means your first chunk of earnings stays tax free, and your paycheck might stretch a bit further.
So what does ‘indexed to inflation’ actually translate to? It means the IRS adjusts the deduction amounts based on how much prices are rising. With inflation still a factor, this adjustment helps prevent tax brackets from quietly swallowing more of your income. No stealth tax hike here at least not on this front.
Who benefits the most? Middle income households. The higher deduction especially helps those who don’t itemize. If you’re juggling rent, childcare, and trying to put a little away for retirement, this increase gives you a little breathing room. High earners won’t see much of a difference it’s not about loopholes, it’s about widening the base level protection for everyday earners.
Key Adjustments to Income Tax Brackets
Starting in 2026, income tax brackets are getting a reset. The temporary rate reductions introduced in the Tax Cuts and Jobs Act (TCJA) expire at the end of 2025, meaning rates snap back to pre TCJA levels unless new legislation intervenes. Translation: higher marginal tax rates for many.
Here’s what’s changing:
The 10%, 12%, 22%, 24%, 32%, 35%, and 37% brackets revert to the old structure: 10%, 15%, 25%, 28%, 33%, 35%, and 39.6%.
The income ranges for each bracket are widened slightly to account for inflation, but the higher rates can still bite.
Middle income earners especially dual income households will feel the squeeze most. For example, someone earning $90,000 a year could see a chunk of their income jump from a 22% to a 25% tax rate. High income taxpayers will take a more significant hit, with the top bracket moving from 37% back up to 39.6%, and kicking in at lower income levels than before.
In short, more income will be taxed at higher rates across the board. It’s a return to older norms, but in today’s economic climate, even a few percentage points can mean thousands in extra tax liability. Now’s the time for proactive planning before the higher rates are baked into your next paycheck.
Business Deductions and Credits Overhauled
Starting in 2026, small business owners are looking at a very different tax playing field. One of the major changes? The Qualified Business Income (QBI) deduction is getting reined in. The 20% passthrough deduction, which once gave LLCs, sole proprietors, and S corporations a serious tax break, will now be more narrowly applied. The new criteria means some high income earners and service based businesses could find themselves outside the deduction zone entirely.
Then there’s depreciation. Bonus depreciation is getting scaled back. The days of writing off 100% of new business equipment up front? Gone. Starting in 2026, the deduction will phase out fully unless Congress revives it. Section 179 limits are also tightening up not disappearing, but more restrictive. Translation: your new truck or HVAC unit may not be the golden deduction it used to be.
Not all changes are cuts, though. The new tax law introduces expanded credits focused on sustainability and workforce training. Businesses that go green from energy efficient upgrades to clean vehicle fleets could score meaningful tax relief. The same goes for companies investing in upskilling staff through qualified educational programs. The key here is strategy: those that adapt intelligently will find ways to offset some of the lost perks.
For the full breakdown on how these changes could hit your bottom line, see How New IRS Guidelines Impact Small Business Owners.
Child Tax Credit Rules Rewritten
The Child Tax Credit isn’t what it used to be even compared to last year. First, the income phase out thresholds have been nudged upward in 2026 to reflect inflation. That’s good news for some middle income families who may have previously edged out of eligibility. If your income barely disqualified you in 2025, check again this year there’s a solid chance you’re back in.
But the credit amount itself is a mixed bag. Some families will see a boost, especially those with multiple qualifying children and moderate earnings. Others particularly higher income households may notice a shrink. Like always, who gains and who loses depends on family size, filing status, and now a more complex sliding credit scale.
And about those advance payments? They’re gone. The expanded prepayment system introduced in previous years has officially sunsetted, meaning families will have to wait until they file their taxes to claim the benefit. No more monthly checks. This complicates cash flow for some households but simplifies things for the IRS and maybe your accountant.
Bottom line: If you’re unclear where you stand, it’s time to run the numbers. The rules have shifted, and assuming last year’s setup could cost you.
Retirement Contributions and Tax Advantages
If you’re saving for retirement, 2026 comes with some welcome upgrades and a few strategic pivots worth noting. The IRS has bumped up contribution limits across the board. You can now stash more in your traditional 401(k), IRA, and Roth IRA accounts, giving you extra runway to reduce your taxable income or grow assets tax free. For 401(k) plans, the new limit sits above $23,000, with additional catch up allowances for those over 50.
New federal rules are also putting auto enrollment on the front burner. Most employers offering new 401(k) plans will be required to automatically enroll workers at a minimum contribution rate, with automatic annual increases unless employees opt out. It’s a nudge toward better long term savings but it also means employees should stay alert to what their plans are actually doing (and charging).
On top of that, matching contributions have new flexibility. Employers can now match student loan payments with retirement contributions, a move that helps younger workers who might otherwise have to choose one or the other. Don’t ignore this. These policy tweaks are designed to make saving easier, but strategy still matters if you want to actually benefit.
If you’re aiming to maximize tax efficiency before the year wraps up, get proactive. Bump your contributions now, consider doing a Roth conversion if your income is lower this year, and review how your investments align with your target retirement date. Plug the holes in your plan before December 31 next year’s tax return will thank you for it.
Capital Gains and Inheritance Tax Shifts
2026 brings several notable changes to how investment returns and inherited assets are taxed. If you’re planning to sell long held investments or transfer wealth, understanding these updates is essential.
New Long Term Capital Gains Brackets
Investors will notice updated income thresholds that determine how their capital gains are taxed. While the basic rate structure (0%, 15%, 20%) remains, the income levels associated with each bracket have shifted.
Here’s what to know:
0% Rate applies to lower income individuals up to a certain threshold.
15% Rate applies to moderate income earners, which now includes a broader group.
20% Rate kicks in sooner for high income individuals due to adjusted thresholds.
These changes may impact your decision on when to sell investments. Strategic timing could mean the difference between a sizable tax bill and significant savings.
Estate Tax Exemption Cap is Lowered
A substantial change is coming to the estate tax. The current exemption allowing estates up to around $13 million (per individual) to pass free of federal estate tax is being significantly reduced.
New cap expected: Roughly half of the current exemption, unless Congress intervenes.
Implications: More estates will become taxable, potentially triggering unexpected tax liabilities for heirs.
Action step: Those with significant assets should revisit estate planning tools like trusts, gifting strategies, and valuation freezes.
Step Up Basis Rules: Unchanged (For Now)
There has been speculation around ending or scaling back the step up in basis rule, which allows heirs to revalue assets to their market value at the time of inheritance.
In 2026, the rule remains intact:
Heirs receive stepped up basis: Taxes on past gains are effectively erased when the asset passes on.
Planning opportunity: This makes holding appreciated assets until death a strategic play, especially in taxable accounts.
But caution: Future administrations may revisit this rule, so consult with a financial advisor regularly.
Bottom Line
These shifts emphasize the importance of proactive planning, especially as wealth transfer and investment strategy become more central to tax obligations.
Next steps:
Review your portfolio’s unrealized gains
Align your estate plan with the new exemption limits
Consider consulting a tax advisor if you expect to pass assets in the coming years.
Keep Yourself in the Clear
The IRS isn’t playing around in 2026. One of the biggest adjustments hitting taxpayers especially freelancers, gig workers, and online sellers is the new reporting threshold for 1099 K forms. The old $20,000/200 transaction cutoff is history. Now, platforms like PayPal, Venmo, Etsy, and Uber are required to report a lot more and much earlier. That coffee money you earned from consulting or reselling? It might be on the IRS’s radar.
This means documentation isn’t just smart. It’s essential. If you’re working side gigs, selling merchandise, or monetizing content, you need clean records of everything: income, expenses, mileage, subscriptions down to the penny. Don’t rely on platforms to do the math for you.
To stay stress free, streamline your tracking. Use a budgeting app or spreadsheet, keep all receipts (digital or paper), and separate your business and personal finances now not in April. If you’re unsure where you stand, talk to a tax pro before year end. The rules have changed, but the game’s still winnable if you prepare.
Pro Moves to Stay Ahead
Let’s be honest 2026’s tax code isn’t something you want to trip over. If you’re looking to minimize liability, the basics still apply: keep meticulous records, track all income streams (yes, even side gigs), and don’t leave deductions on the table. That means being intentional with purchases, charitable contributions, and business expenses. For independent contractors and small business owners especially, batching expenses and contributing early to retirement or HSA accounts can soften the blow come tax time.
But sometimes the DIY route isn’t enough. With shifting rules around deductions, credits, and new IRS enforcement priorities, hiring a tax professional starts to look less like a luxury and more like a smart investment. If you’ve got multiple income sources, complex business activity, or just hate combing through tax code footnotes you’ll save time, avoid mistakes, and likely come out ahead.
As for tools, don’t skimp. Tax software has gotten sharper. Look for platforms that offer rule updates in real time and integrate with your banking or invoicing systems. Tools like Keeper, QuickBooks, and Zoho Books can flag deductions and auto generate reports. Even if you work with a CPA, running your numbers through intelligent software first gives you more control and better questions to ask.
Navigating 2026’s tax changes isn’t about outsmarting the IRS. It’s about staying proactive, dialing in your habits, and knowing when to call in reinforcements. Make your moves early, and avoid the yearly scramble.
