This year’s update is particularly noteworthy. Not because it brings the usual inflation-driven adjustments, but because the newly passed One Big Beautiful Bill Act of 2025 (OBBBA) has brought numerous changes that could impact everyone. And there are meaningful tax shifts that could affect how much you owe (or save) come tax season.
Here’s a breakdown of the most important updates.
1. Tax Brackets
As expected, tax brackets for 2026 are moving upward to keep pace with inflation. This means you’ll be able to earn a little more income before being bumped into the next tax rate.
| Married Filing Jointly and Surviving Spouses | |
| 2025 Tax Rate | Projected Tax Brackets 2026 |
| 10% – $0 to $23,850 | 10% – $0 to $24,800 |
| 12% – Over $23,850 to $96,950 | 12% – Over $24,800 to $100,800 |
| 22% – Over $96,950 to $206,700 | 22% – Over $100,800 to $211,100 |
| 24% – Over $206,700 to $394,600 | 24% – Over $211,400 to $403,550 |
| 32% – Over $394,600 to $501,050 | 32% – Over $403,550 to $512,450 |
| 35% – Over $501,050 to $751,600 | 35% – Over $512,450 to $768,700 |
| 37% – Over $751,600 | 37% – Over $768,700 |
| Single Filers (other than heads of households and surviving spouses) | |
| 2025 Tax Bracket | Projected Tax Brackets for 2026 |
| 10% – $0 to $11,925 | 10% – $0 to $12,400 |
| 12% – Over $11,925 to $48,475 | 12% – Over $12,4000 to $50,400 |
| 22% – Over $48,475 to $103,350 | 22% – Over $50,400 to $105,700 |
| 24% – Over $103,350 to $197,300 | 24% – Over $105,700 to $201,775 |
| 32% – Over $197,300 to $250,525 | 32% – Over $201,775 to $256,225 |
| 35% – Over $250,525 to $626,350 | 35% – Over $256,225 to $640,600 |
| 37% – Over $626,350 | 37% – Over $640,600 |
Every bracket sees a modest upward adjustment to keep up with the consumer price index increase reported by the Bureau of Labor Statistics.
2. Standard Deductions
The standard deductions are expected to bring more breathing space in the room. Used by most taxpayers (in place of itemized deductions), standard deductions are also predicted to rise.
| Filing Status | 2025
|
Projected 2026 Tax Bracket |
| Married filing jointly/surviving spouses | $30,000 | $32,200 |
| Heads of household | $22,500 | $24,175 |
| All other taxpayers | $15,000 | $16,100 |
This increase means more income will be shielded from taxation before rates even apply. For families, this could lead to meaningful savings during tax filing.
3. Alternative Minimum Tax (AMT) Exemptions
Bloomberg’s report also projects changes to the AMT – a parallel tax system designed to ensure higher-income earners pay at least some tax after deductions:
| Filing status | 2025
AMT Exemption Amount |
AMT Exemption Amount Projected for 2026
|
| Married filing jointly/surviving spouses | $137,000 | $140,200 |
| Unmarried individuals
(other than surviving spouses) |
$88,100 | $90,100 |
| Married filing separately | $68,500 | $70,100 |
| Estates and trusts | $30,700 | $31,400 |
4. Kiddie Tax (Unearned Income of Children)
If your child has investment income, the Kiddie Tax rules apply.
- The first $1,350 of a child’s unearned income isn’t taxed.
- If their income is between $1,350 and $13,500, parents may elect to include it on their own return.
| Rule | Amount (2026) |
| Tax-free unearned income | $1,350 |
| Parental election possible | $1,350 – $13,500 |
5. Qualified Business Income Deduction (QBID)
The QBID deduction (§199A) is also being adjusted for inflation in 2026.
| Filing Status | Threshold | Phase-In Limit |
| Married Filing Jointly | $403,500 | $553,500 |
| Married Filing Separately | $201,775 | $276,775 |
| All Other Taxpayers | $201,750 | $276,750 |
Additional details:
- The minimum deduction for tax years in 2026 under §199A(i)(1)(B) is $400.
- To qualify, total business income must be at least $1,000.
6. Qualified Retirement Contributions (§219)
Retirement tax planning strategies may also get a small boost in 2026. The IRS limits how much you can deduct for contributions to IRAs and certain qualified retirement accounts, and those limits are adjusted for inflation.
Contribution Limits:
- Individuals under age 50 can deduct up to $7,500.
- Individuals 50 and older can deduct an extra $1,100 (catch-up), for a total of $8,600.
Phaseout Limits for Tax Planning for Families:
If you or your spouse are covered by a workplace retirement plan, the amount you can deduct may be reduced (phased out) once your income passes certain levels. For 2026, here are the new limits:
| Filing Status | 2026 Limit |
| Married Filing Jointly | $129,000 |
| All Other Taxpayers | $81,000 |
| Married Filing Separately | $0 |
| Non-active participant spouse | $242,000 |
7. Individual Retirement Accounts (§408)
According to the Bloomberg report, individual retirement accounts are also seeing adjustments in 2026, especially around charitable distributions, SIMPLE IRAs, and Roth IRA eligibility.
1. Qualified Charitable Distributions (QCDs):
- Up to $111,000 of IRA is excluded from distributions donated directly to charity from your taxable income.
- For a split-interest election (like giving through a charitable remainder trust), the maximum is $55,000.
2. SIMPLE IRAs (for small businesses):
- To participate, employees must earn at least $5,300 in compensation.
- Employer nonelective contributions cannot exceed $5,300 per employee for the year.
3. Roth IRA Contribution Limits:
Your eligibility to contribute to a Roth IRA depends on your income. For 2026, here are the new phaseout ranges:
| Filing Status | Phaseout Starts | Phaseout Ends |
| Married Filing Jointly | $242,000 | $252,000 |
| Single / Head of Household | $153,000 | $168,000 |
| Married Filing Separately | $0 | $10,000 |
8. Business Accounting Update: Cash Method
For 2026, corporations and partnerships can use the cash method of accounting if their average annual gross receipts for the last 3 years are under $32 million. This higher threshold makes it easier for more businesses to avoid the complexity of accrual accounting.
9. Foreign Earned Income Exclusion (§911)
For U.S. taxpayers living and working abroad, the foreign earned income exclusion is expected to rise to $132,900.
This means qualifying taxpayers can exclude up to $132,900 of foreign earned income from U.S. taxation, helping reduce overall taxable income. Business tax planning services can help expats optimize this benefit and coordinate with other deductions and credits.
10. Tax Changes Under the OBBBA
The One Big Beautiful Bill Act of 2025 adds some fresh wrinkles:
- Child Tax Credit: For the first time, this credit will be indexed to inflation, giving families a little extra relief each year.
- Pass-Through Businesses: Adjustments to the qualified business income (QBI) deduction under Section 199A provide a new minimum deduction for active business owners.
- Corporations: Revised phaseout amounts for the corporate alternative minimum tax (Section 55) mean companies will need to rethink their long-term tax planning strategies.
How to Plan Ahead for 2026
While these are only projections, they’re highly accurate based on inflation data and current law. For taxpayers, this means:
- Employees and families should review withholding and estimated payments for 2026.
- Business owners should try to accelerate or defer income and expenses depending on where their taxable income will fall under the new brackets.
- Tax professionals should start building tax reduction strategies around deductions, credits, and entity structures well in advance.
So, while the IRS will finalize these numbers later, taxpayers and advisors must start preparing now to take the full advantage of the changes.
Need help creating tax planning strategies for 2026? Connect with our tax planning advisors to maximize your deductions and avoid surprises the easy way.
