2026 Tax Updates
April 15th, tax day, has come and gone.
Great! Now what?
You do not want to wait until next April 15th to think about this year’s taxes.
Exploring and implementing tax strategies should be an ongoing process.
Every year, the tax code changes.
For 2026 taxes, some rules changed impacting both those preparing for retirement and those already in it.
That’s why we’ve put together a helpful resource outlining key figures and thresholds for the year. Be sure to download our 2026 Important Tax Numbers.
Spring is one of the best times to step back and evaluate your tax picture for the current year. If you haven’t done that yet, now is the time. Waiting until next year is waiting too long, and by then, many of the most effective planning opportunities may no longer be available.
Let’s take a look at a few of the most important tax changes for retirees and pre-retirees in 2026—and how they could impact your plan.
Tax bracket changes
As a financial advisor, I have the fortunate opportunity to have access to world-class economists and investment officers at some of the largest investment companies in the world. Often, when I have the opportunity to speak with such a professional, I try to ask them all the same question: where do you think taxes are going in the future?
It seems like a simple question,but really, there are a lot of complexities to it.
I’ve had to ask this question nearly three dozen times by now, and I’ve gotten the same answer every single time (except once): taxes are expected to go up.
Seeing that the US federal government debt is now over $1.7 TRILLION dollars, and is expected to grow to over $3 TRILLION dollars by 2036, according to the Congressional Budget Office, taxes are generally expected to rise.
https://www.cbo.gov/publication/62105
That one analyst who did not think taxes would go up told me he expected that taxes will just stay the same for the foreseeable future.
HOWEVER, our tax rates are subject to inflation.
Every year, the IRS adjusts our tax brackets. They can adjust the individual tax rates, and they can adjust how much income is applied to each tax rate.
Other tax rates, such as how much of your Social Security check is subject to inflation, have not changed. It’s not indexed to inflation. That means as your retirement income rises due to Cost of Living Adjustments (COLA) alone, more and more income will be subject to a higher tax rate.
https://www.iwmfinancial.com/blog/2026-federal-tax-updates-announced
Even the one analyst who expected tax rates to remain unchanged would likely agree that, over time, overall taxes could still rise in the future.
Be sure to download our 2026 Important Numbers where we have outlined important tax figures, including current tax brackets and Social Security Provision Income tax brackets.
The special “Social Security Deduction” continues
If you were 65 and older when you filed your 2025 tax return, and your 2025 income was $150,000 or less for a married couple, or $75,000 or less as an individual, you would have qualified for a new special deduction.
In 2025, congress passed the One Big Beautiful Bill Act. In efforts for the president to make good on “no taxes on Social Security”, they gave a new $6,000 deduction to all qualified persons age 65 or older. You don’t even need to be collecting Social Security to have received that special deduction. This is the so-called “Social Security Deduction”, or “Bonus Deduction”.
That Special Social Security Deduction is valid for a total of 4 years. So when you file for your 2026 taxes next year, this will be year two of four.
If you weren’t 65 by the end of 2025, or your income was too high to qualify, you may become eligible in a future year. That said, under current law, this deduction is set to go away after the 2028 tax filing season.
Contribution Changes
Every year, the IRS releases updated contribution limits for IRA’s, Roth IRA’s, 401(k), total defined contribution plan contributions, and more.
Because of this, we review those amounts and adjust our cash flow and savings plans accordingly.
An interesting change buried in the One Big Beautiful Bill Act, is that Congress has now indexed IRA catch-up contributions to inflation. What this means in practice:
- In 2025, an IRA contribution was limited to $7,000, plus an additional $1,000 catch-up if ages 50 or over.
In 2026, IRA contributions are now $7,500, plus an additional $1,100 catch-up if ages 50 or over. That extra $100 in the catch-up contribution may not seem like much, but as we anecdotally experience every time we buy milk and eggs, inflation makes a big difference over the long run.
401(k) contribution changes
For pre-retirees, taking advantage of making a full 401k contribution will make a big impact in retirement. In the past few years, we have seen a couple big changes that are creating some confusion.
First, 401k contributions have increased for 2026:
Elective Deferral to 401(k)’s & 403(b)’s | 2025 | 2026 |
Contribution Limit | $23,500 | $24,500 |
Catch-Up (ages 50+) | $7,500 | $8,000 |
Catch-Up (ages 60-63) | $11,250 | $11,250 |
403(b) Additional Catch-Up (15-year rule) | $3,000 | $3,000 |
There are additional contribution changes to SEP IRA’s, Simple IRA’s, Defined Benefit Plans, etc. that may be worth tracking. You can find those details in our 2026 Important Numbers. (add link again)
In addition, there is an important rule affecting wage income of $150,000 or more that may require adjustments to your tax strategy.Starting in 2026, if your prior year compensation was $150,000 or more, all, yes all, of your catch-up contributions must go into a Roth 401k.
We have been hearing our clients voice concerns that, as their incomes have increased, and when they need the deduction the most, they lose the extra catch-up contributions.
All 401k plans should have conformed to this rule. If your employer plan has not, we highly recommend you give us a call, and we may be able to help you sort things out.
Keeping your strategies clear and confident
It’s often said that the “tax code is written in pencil”.
Staying on top of a changing financial world and attempting to maximize retirement savings is difficult. As you prepare for retirement, there are a lot of important things to pull into your financial plan, and high on that list is taxes and tax changes.
Some tax rules change every year. Others stay relatively consistent but still play a key role in your retirement cash flow and retirement income planning.
A big challenge is that it seems there is a never-ending list of things to keep track of.
To help simplify things, we’ve created a two-page “2026 Important Numbers” summary guide. It brings together the key figures we reference throughout the year, so you can feel more confident and organized when making decisions about your retirement. (add link)
Feel free to reach out and schedule a quick conversation with our office to discuss more about your retirement plan.