2026 IRS Tax Changes: What You Need to Know

New Tax Rules for 2026: Key Dollar Changes That Could Impact Your Financial Plan

The start of 2026 brings a wide range of tax changes that affect charitable giving, retirement savings, health care, and high-income planning. Some of these updates reflect inflation adjustments, while others stem from new legislation taking effect on 2026 tax returns (filed in 2027).

While the headlines can feel overwhelming, understanding the specific dollar thresholds is critical. Below are the most important 2026 tax changes and what they may mean for your financial plan.

Charitable Giving: New Rules for Itemizers and Non-Itemizers

Beginning in 2026, taxpayers who do not itemize deductions can once again deduct charitable cash gifts:

• Up to $1,000 for single filers
• Up to $2,000 for married couples filing jointly

This change primarily benefits retirees and others who take the standard deduction.

However, higher-income households who itemize will face tighter limits. Charitable deductions claimed on Schedule A are only deductible to the extent they exceed 0.5% of adjusted gross income (AGI). For C corporations, charitable deductions must exceed 1% of taxable income to qualify. Any excess donations may be carried forward for up to five years.

For retirees over age 70½, Qualified Charitable Distributions (QCDs) remain a powerful planning tool. In 2026, up to $111,000 can be transferred directly from an IRA to charity, satisfying required minimum distributions without increasing taxable income.

Expanded Child and Dependent Care Benefits

Families juggling work and caregiving responsibilities will see meaningful improvements in 2026:

• The child and dependent care credit rises to $1,500 for one dependent and $3,000 for two or more dependents
• Dependent-care flexible spending accounts allow contributions of up to $7,500
• Employers offering child care may qualify for credits up to $500,000, or $600,000 for smaller employers

For busy professionals, coordinating these benefits with income and cash-flow planning can significantly improve after-tax outcomes.

Itemized Deductions Are Capped for High Earners

Starting in 2026, upper-income taxpayers will see a cap on the value of itemized deductions. Regardless of your tax bracket, itemized deductions are effectively limited to a 35% tax benefit.

This makes tax-efficient investment strategies, retirement contributions, and income-timing decisions even more important for high earners approaching retirement.

Updated Tax Brackets and Standard Deductions

Tax rates remain unchanged, but brackets widen due to inflation:

• The 0% capital gains rate applies up to $98,900 for joint filers and $49,450 for single filers
• The 20% capital gains rate begins at $613,701 for joint filers and $545,501 for singles

Standard deductions increase to:

• $32,200 for married filing jointly
• $16,100 for single filers
• Additional amounts apply for taxpayers age 65 or older

These inflation adjustments help offset rising incomes but still require careful planning for withdrawals and investment gains.

Higher Retirement Contribution Limits

Retirement savings limits rise again in 2026:

• The 401(k) contribution limit increases to $24,500
• Catch-up contributions:
  • $8,000 for individuals age 50+
  • $11,250 for individuals ages 60–63

• IRA contribution limits increase to $7,500, with an additional $1,100 catch-up for those age 50 or older

High-income workers age 50+ earning more than $150,000 will be required to make catch-up contributions to a Roth 401(k), rather than pre-tax.

Health Care and HSA Changes

Health Savings Account limits increase in 2026:

• $4,400 for self-only coverage
• $8,750 for family coverage
• An additional $1,000 catch-up for those age 55+

Out-of-pocket maximums rise to $8,500 (individual) and $17,000 (family). At the same time, fewer households will qualify for premium tax credits, potentially increasing health insurance costs for early retirees.

Education, Estate, and Gifting Updates

Several additional dollar changes worth noting:

• Up to $20,000 per year can be withdrawn tax-free from 529 plans for K-12 education
• The lifetime estate and gift tax exemption increases to $15 million per individual
• The annual gift tax exclusion remains $19,000 per recipient

While estate taxes affect a small percentage of families, these limits create planning opportunities for legacy and multigenerational wealth strategies.

What This Means for Your Financial Plan

The 2026 tax changes reinforce a familiar theme: details matter. Small dollar thresholds—whether contribution limits, deduction caps, or income phaseouts—can have an outsized impact on long-term outcomes.

At Blue Advisors, we focus on integrating tax planning with investment management and retirement strategy, helping clients make informed decisions before the year is over—not after the return is filed.

If you would like to review how the 2026 tax rules apply to your situation, now is an ideal time to start planning.

By James Blue, Fee-Only Advisor | Blue Advisors

James Blue is the founder of Blue Advisors, a fee-only financial planning and investment management firm based in Columbus, Ohio.

This content is provided for informational and educational purposes only and should not be construed as personalized investment, tax, or legal advice. The views expressed are those of the author as of the date published and are subject to change without notice. Blue Advisors is a fee-only registered investment advisory firm. Advisory services are offered only pursuant to a written advisory agreement and to clients in the State of Ohio, the Commonwealth of Pennsylvania, and other jurisdictions where Blue Advisors is properly registered or exempt from registration. Past performance is not indicative of future results. Readers should consult with their financial advisor, tax professional, or attorney before making financial decisions.