Tax Changes for 2026: What You Need to Know
If you’re planning your finances for the new year, there’s good news: some significant tax changes are coming in 2026 that could save you money. Most of these changes come from a law called the One Big Beautiful Bill Act (or OBBBA for short), which was signed in July 2025. Let’s break down what’s changing and how it might affect your wallet.
Your Standard Deduction Is Getting Bigger
The standard deduction is the amount of money you can earn without paying federal taxes on it. For 2026, this amount is going up to help account for inflation—and then some.
If you’re single, your standard deduction will be $16,100. If you’re married and filing jointly with your spouse, it jumps to $32,200. What makes this extra special is that the government added an extra 5% boost on top of the normal inflation adjustment. That means a married couple gets about $1,500 more in deductions compared to what they would have gotten with just a normal inflation increase.
Big News for Seniors
If you’re 65 or older, you get even more tax breaks. On top of the regular standard deduction, seniors can claim an additional deduction of $2,000 if you’re single, or $3,200 total if you’re married and both spouses are 65 or older.
But here’s where it gets really interesting: there’s a brand new senior deduction for 2025 through 2028. Seniors can claim an extra $6,000 per person. That’s $6,000 for a single senior, or $12,000 if both spouses are 65 or older. However, this extra deduction phases out if you make too much money. If your modified adjusted gross income is over $75,000 as a single person, or $150,000 as a married couple, you’ll start losing some of this deduction.
When you add it all up, a single senior could have a total standard deduction of about $23,750 in 2025. For older married couples, that number could be as high as $46,700. That means they wouldn’t owe any federal tax on income below those amounts.
Bigger Retirement Savings for Workers Ages 60-63
If you’re saving for retirement in a 401(k) or similar workplace account, the basic contribution limit for 2025 is $23,500. Workers who are 50 and older can usually add another $7,500 as a “catch-up” contribution.
Here’s the exciting new change: if you’re between ages 60 and 63, you can now make an even larger catch-up contribution of up to $11,250. That brings your total possible contribution to $34,750. This gives people who are in their early 60s—often their peak earning years—a chance to really boost their retirement savings before they retire.
No Taxes on Tips and Overtime (With Limits)
For tax years 2025 through 2028, certain workers can claim deductions that essentially eliminate federal income tax on their tips and overtime pay. There are some important limits, though.
For tips, you need to work in certain occupations that the IRS identifies as tipped positions. The tip income must be reported on your W-2 or other tax forms.
For overtime, you can deduct the extra portion of your overtime pay—like the “half” part of “time and a half.” The maximum deduction is $12,500 per year if you’re single, or $25,000 if you’re married filing jointly. Both of these deductions phase out for higher earners (those making over $150,000 individually or $300,000 as a couple).
Tax Brackets Staying the Same
The good news here is that the seven tax brackets we’ve had since 2017 are now permanent. They won’t be jumping back up to higher rates like they were scheduled to do. The tax rates remain at 10%, 12%, 22%, 24%, 32%, 35%, and 37%. The income levels for these brackets will still adjust each year for inflation, going up by about 2.7% for 2026.
Changes to State and Local Tax Deductions
For people who itemize their deductions instead of taking the standard deduction, there’s a big change to the state and local tax (SALT) deduction. The old limit was $10,000, which hit people hard in states with high property or income taxes.
For most taxpayers, the new cap is $40,400 for 2026. However, if you’re a very high earner, this cap phases back down toward the old $10,000 limit. While this mainly helps middle and upper-middle income families in high-tax states, remember that you can only benefit from this if you itemize your deductions—and with the standard deduction being so large now, many people find it’s not worth itemizing.
Social Security Changes
Social Security recipients will see a 2.8% cost-of-living adjustment starting in January 2026. That adds about $56 to the average monthly benefit check. While this is technically above the historical average, many retirees were hoping for more.
There’s also a change for high earners who are still working. The amount of your income that’s subject to Social Security payroll tax is increasing from $176,100 in 2025 to $184,500 in 2026. If you earn above this amount, you could pay between $521 and $1,042 more in Social Security taxes, depending on whether you’re employed by someone else or self-employed.
Some Changes for Families
The One Big Beautiful Bill also created something called Trump Savings Accounts for children under 18. Parents can contribute up to $5,000 per year to these accounts (adjusted for inflation after 2027), and employers can add up to $2,500. The government will even make a one-time $1,000 contribution for babies born between 2025 and 2028. Kids can’t take money out until they turn 18, and the earnings grow tax-deferred.
There are also expanded child tax credits. The credit amounts vary based on how much money your family makes and how many kids you have. The credit phases up and down depending on your income, with the highest percentage going to families in certain income ranges.
What Should You Do Now?
With all these changes, now is a good time to review your tax situation. If you’re close to retirement age, think about whether you want to increase your 401(k) contributions to take advantage of the higher catch-up limits. If you’re a senior with moderate income, the new deductions could significantly reduce your tax bill.
If you work for tips or overtime, talk to a tax professional or use tax software to make sure you’re claiming these new deductions correctly. And if you live in a state with high property or income taxes, run the numbers to see if itemizing makes sense with the new, higher SALT cap.
Keep in mind that many of these changes—especially the ones for tips, overtime, and the extra senior deduction—are only temporary, lasting through 2028. Some changes are permanent, like the tax brackets and standard deduction increases.
The Bottom Line
Tax season 2026 (when you file your 2025 taxes) could bring some pleasant surprises in the form of bigger refunds or smaller tax bills for many Americans. Just make sure you understand which changes apply to your situation so you don’t miss out on any savings you’re entitled to.
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