• 👉 Grab the 2026 Tax Cheatsheet (PDF)
• 2026 Tax Changes Explained: 5 Things Retirees Need to Know
• IRS Publication – One Big Beautiful Bill
• Tax Inflation Adjustments for 2026
• Define Financial: The Total Retirement System

Every January, we go through the same routine. Contribution limits change, tax brackets get adjusted, a few thresholds move around—and most years, it’s familiar territory. Whether you handle this yourself or work with trusted professionals, it’s usually just a matter of updating the numbers and moving on.

But 2026 is a little different.

Because of the sweeping tax legislation passed last summer, this year brings some of the biggest tax changes we’ve seen in a while. And buried inside those changes are two new rules that have caused some widespread confusion—even among financial experts.

So in this bonus episode, I’m walking through the most important tax updates for 2026, what they actually mean for your retirement plan, and a few practical action items you’ll want to think about sooner rather than later.

I’ll also break down those two unique rules—how they work, who they apply to, and why they matter. So even if you feel up to speed on the 2026 changes, I’m confident you’ll walk away with at least one new and useful insight.

Welcome to another episode of the Stay Wealthy Retirement Show. I’m your host, Taylor Schulte, and every week I cover the most important financial topics to help you “stay wealthy” in retirement. Ok, onto today’s episode.

2026 Tax Changes Explained (Including 2 Rules Causing Confusion)

Before we get into the weeds, just a quick reminder to grab my updated 2026 tax cheat sheet if you haven’t already. It’ll help you follow along today and serve as a helpful reference for your tax planning throughout the year. You can download it by following the link in the episode description right there in your podcast app, or by visiting youstaywealthy.com/cheatsheet.

And that cheat sheet brings us directly to the first of two unique tax changes that have caused a fair amount of confusion.

The first change we’ll cover involves charitable giving. So, in the past, you may recall that you only received a tax benefit for charitable donations if you itemized deductions on your tax return. In simple terms, this meant that unless all of your deductions added up to more than the standard deduction that every taxpayer receives, your charitable giving didn’t reduce your tax bill at all.

Starting in 2026, that changes, slightly. Married couples filing jointly can now deduct up to $2,000 of charitable contributions, and single filers up to $1,000, even if they take the standard deduction. And since the vast majority of people take the standard deduction, this creates a much more straightforward way to receive a tax benefit for charitable giving. Just one important caveat to keep in mind: this only applies to cash contributions made to public charities. It does not apply to gifts of appreciated stock or non-cash donations, like clothing or household items given to Goodwill.

Now, because this deduction is available even if you don’t itemize, many people—including several major financial news outlets—have wrongfully assumed it must be what’s called an “above-the-line” deduction. And that confusion is understandable, because one of the defining traits of an above-the-line deduction is that you don’t have to itemize in order to claim it.

But this charitable deduction is different. It does not reduce your adjusted gross income. As my 2026 tax cheatsheet accurately indicates, it’s a limited, below-the-line deduction that Congress specifically allows on top of the standard deduction. That structure is unusual, and it’s why the labeling has tripped people up.

For any super nerds listening, under Section 70424 of the One Big Beautiful Bill Act—which I’ll link to in the show notes—this provision is essentially a reinstatement and expansion of the temporary $300/$600 charitable deduction that existed for non-itemizers back in 2021.

Ok, hopefully that clarification is helpful.

The second unique tax change causing some confusion is centered around the updated retirement catch up contributions.

To bring everyone up to speed, one small change for 2026 is something we’ve never seen before: IRA catch-up contributions are now indexed for inflation. As a refresher, for decades, if you were age 50 or older, the IRA catch-up amount was stuck at $1,000 per year.  But beginning in 2026, that amount increases to $1,100, an inflation adjustment of $100 after a long period of stagnation. At the same time, the base IRA contribution limit also rises to $7,500 this year, which means, if you’re age 50 or older, you can now contribute a total of $8,600 to a Traditional or Roth IRA, and for married couples, that number doubles. It may not feel dramatic in any single year, but over time, these inflation adjustments can be helpful for diligent savers.

The bigger change to address, though, is happening inside 401(k) plans. For 2026, the standard employee contribution limit increases to $24,500. And if you’re age 50 or older, you can now add an $8,000 catch-up contribution, bringing your total contribution amount in 2026 to $32,500. In addition, if you’re between ages 60 and 63, there’s a “super catch-up” provision that allows an even higher catch-up contribution of $11,250, an unchanged amount from 2025.

But here’s the part that’s new, confusing, and a bit controversial. Under SECURE 2.0, this is the first time in U.S. tax law that a Roth contribution has been mandatory. More specifically, if you earned more than $150,000 in FICA wages in the prior year and you want to make catch-up contributions to your 401(k), those catch-up dollars MUST go into the after-tax Roth side of the plan—you’re no longer allowed to make those catch-up contributions on a pre-tax basis.

​​Mechanically, nothing changes with your paycheck. Your contribution still comes out the same way, but now it happens after taxes are withheld instead of before. So yes, you’re paying tax on those dollars upfront, which isn’t the most tax-efficient outcome for higher earners. But it’s the law, and if you’re going to pay tax on those dollars anyway, most people would much rather see them end up in a Roth account, where the growth and future withdrawals can be tax-free.

It’s also important to clarify one common misconception under this new rule: you don’t actually end up with two separate 401(k)s. Instead, your plan will track what many call a “Roth subaccount”, which sits alongside your pre-tax dollars. The investments are typically the same, and everything stays under one 401(k) umbrella until you retire, roll the money over to the institution of your choice, and cleanly split the money between Traditional and Roth IRAs.

For higher-income employees who want to offset the tax impact of this forced Roth treatment, the only real planning lever—if it’s available—is making contributions to a nonqualified deferred compensation plan. If you’re unsure what that is and/or if it’s available, talk to your benefits department or with your financial advisor. But outside of that, the choice is simple: if taxes are unavoidable, we’d rather see those dollars positioned for the most favorable long-term outcome. And for those with the cash flow to take advantage of it, especially between ages 60 and 63, this expanded catch-up window can be a powerful opportunity to intentionally build more tax diversity into their retirement plan.

ACA Subsidies

Alright, with those two unique changes out of the way, let’s zoom out and walk through the remaining 2026 tax updates that retirement savers should be aware of. While many are fairly straightforward, there are some under-the-radar nuances that I’ll point out along the way to be sure everyone is fully informed.

And let’s start with what I believe is the most urgent change for early retirees and those not yet eligible for Medicare, which is that the enhanced subsidies for the Affordable Care Act officially expired at the end of 2025.

Congress had been debating whether to extend these enhanced subsidies, but ultimately decided not to. So we’re now back to the regular subsidy structure that existed before the pandemic.

And here’s why this matters so much. Under the enhanced subsidies retirees have enjoyed since 2021, you could have a relatively high income and still qualify for meaningful help with your health insurance premiums, but that’s no longer the case.

Fast forward to today, and now there’s a hard cliff at 400% of the federal poverty line. If you’re even one dollar over that threshold, your subsidy drops to zero. And I mean zero. Not reduced. Gone.

To put some numbers to this, ignoring any state-specific assistance, 400% of the federal poverty line is about $63,000 for a single person household and $84,600 for a two-person household.

So, for example, if you and your spouse have modified adjusted gross income of $84,601, you could lose $20,000 or more in subsidies. One extra dollar of income could cost you five figures.

Now, I want to pause here and clarify something important, because this is where a lot of people get tripped up. When it comes to the Affordable Care Act, the income number that matters is not your standard adjusted gross income, or AGI. It’s something called modified adjusted gross income, or MAGI. For many people, MAGI looks similar to AGI, but there are a few key differences. The big one that applies to everyone to be aware of is that 100% of your Social Security benefits count toward that income calculation. Not just the taxable portion. All of it.

This brings to the surface a new reason for early retirees to consider delaying claiming Social Security while they’re receiving ACA subsidies. If your Social Security benefit pushes you over that 400% threshold, you could lose subsidies equal to or even greater than the benefit itself. In other words, you’d be worse off by claiming early in this situation.

So if you’re using the Affordable Care Act for health insurance and you’re anywhere near that $84,600 threshold for a two-person household, you need to be extremely careful about any voluntary income you generate. Roth conversions, capital gains harvesting, part-time work, all of it needs to be planned with this cliff in mind. This is one area and a good example where working with a professional who understands these interactions and how they apply to your exact situation can potentially save you tens of thousands of dollars.

2026 Tax Brackets

Alright, let’s move on to some better news.

The tax rates we’ve been paying for the past several years are now permanent. And really quick, just know that “permanent” doesn’t necessarily mean permanent, and a change can in fact be made by a future administration and an act of Congress. But, if you remember, the Tax Cuts and Jobs Act of 2017 included a sunset provision, and the lower tax rates we have all been enjoying since then were supposed to expire this year, meaning we would have reverted back to higher brackets.

But that didn’t happen. Last year’s legislation made those rates permanent, so your federal income tax brackets for 2026 remain at 10%, 12%, 22%, 24%, 32%, 35%, and 37%. No changes from last year.

In addition, the larger standard deductions we’ve enjoyed are also now permanent and adjusted for inflation each year. For married filing jointly, the amount is $32,200 in 2026. For single filers, it’s half of that amount.

Now, there’s one small technical tax change related to inflation adjustments that’s worth pointing out. To keep it simple, the government slightly shifted the income limits for the 10% and 12% tax brackets. What this means in practice is that the gap between where the 22% regular income tax bracket starts and where the 15% long-term capital gains tax bracket begins is now a little bigger. For couples who are married and filing jointly, this gap went from being about $250 to roughly $1,900.

Why is this important? Well, if your income puts you in the 12% tax bracket, earning extra money can sometimes cause what’s called “preferential income stacking,” which is when one extra dollar of regular income pushes some of your long-term investment gains from being taxed at 0% to being taxed at 15%. This can result in a high tax rate of 27% on that extra dollar. Because the gap is now a bit wider, you have more room for your income to grow before you hit that 22% bracket, giving you a little extra opportunity for smart tax planning. It’s a minor change, but for those doing sophisticated tax planning, it’s worth noting.

Itemized Deductions

Let’s now pivot and talk about itemized deductions, because there are several important changes here. Four to be exact.

First, the cap on state and local tax deductions (aka SALT), has been raised. You may recall that, for years, you could only deduct up to $10,000 of state and local taxes. Well, that cap is now $40,400 for 2026 for both single filers and married filing jointly, which is significant for higher earners and retirees living in high-tax states like California, New York, or New Jersey. But there are conditions: Your modified adjusted gross income must be below $500,000, and it quickly phases out as your income exceeds that threshold. It’s also one of the temporary changes, and is set to end after 2029. In 2030, it will revert to the $10,000 cap unless a future congress takes action.

Second, mortgage insurance premiums are once again deductible. This has been on and off over the years, but it’s back for 2026.

Now, this probably isn’t relevant for most retirees with a traditional mortgage—especially if you put 20% or more down when you bought your home—but it does become interesting in the reverse-mortgage world. With a Home Equity Conversion Mortgage—which is the only type of reverse mortgage insured by the federal government and available to homeowners age 62 and older—the mortgage insurance premiums don’t disappear; they’re added to the loan balance over time. And when that loan is eventually repaid, those premiums may be deductible, potentially creating an additional tax benefit for retirees who are thoughtfully using a reverse mortgage as part of a broader retirement income strategy.

Third, and this one’s a bit of a sting, there’s now a floor on charitable contribution deductions. Starting this year, if you itemize your deductions, you can only deduct charitable contributions that exceed point five percent (0.50%) of your adjusted gross income. So if your AGI is $100,000 and you donate $10,000 to charity, the first $500 is no longer deductible. You’d only be able to apply $9,500 of that donation. It’s not the end of the world, but it does reduce the tax benefit of charitable giving slightly.

Fourth, there’s a new limitation on gambling losses. Don’t worry, this can be our little secret, but if you’re enjoying the sports betting apps or trips to the casino, you can now only offset 90% of your losses against your gains, not 100%.

Here’s an example of why this matters. Let’s say you go to Las Vegas, you’re up $50,000 at one point, but then you give it all back playing penny slots and walk out with nothing. Under the old rules, your taxable gambling income would be zero because your losses offset your gains.

Under the new rules, you’d still have a $5,000 taxable gain because you can only deduct 90% of those losses. So, in short, gambling just became a bit less tax-friendly.

Misc. Changes

Ok, a couple more changes worth mentioning before we wrap up.

First, the estate tax exemption has increased again. This is the amount you can have in your estate before federal estate taxes apply. It’s now $15 million per person and up to $30 million for a joint estate. It’s also worth noting that the joint exemption of $30 million can actually be carried over to the surviving spouse. And I know, for the vast majority of people, this isn’t going to affect them. But if you’re fortunate enough to have an estate approaching these levels, it’s worth revisiting your estate plan to ensure you’re planning ahead properly and structuring things to take full advantage of the exemption.

Next, for 529 education savings plans, the cap on K-12 ancillary expenses has doubled from $10,000 to $20,000. This doesn’t include tuition, which has separate rules and still has a $10,000 limit, but ancillary expenses do cover things like books, supplies, and other qualified expenses. And if you’re a grandparent contributing to a 529 plan for your grandchildren, the rules continue to be quite generous, including the ability to front-load up to five years of the annual gift tax exclusion in a single year.

Finally, starting in July of this year, a new type of account called a Trump Account will become available. These allow contributions for children under the age of 18 without requiring earned income, which is different from how IRAs work. While we don’t have all the details yet, what I will say is that, at first glance, the account does sounds compelling: a retirement-style account for kids, tax-deferred growth, and even some “free” money—like the $1,000 federal contribution for children born between 2025 and 2028. On the surface, it looks a lot like a traditional IRA for minors, and I understand why it’s getting attention.

But when you zoom out and look at how this actually plays out over 40 or 50 years, the drawbacks start to matter. Distributions are ultimately taxed as ordinary income, withdrawals before age 59½ are heavily penalized, and there’s a very real risk that tax basis gets lost over decades—meaning more of the account could end up more taxable than people expect.

Compare that to a taxable custodial account, where families can often harvest capital gains at a 0% tax rate under the kiddie tax rules, steadily raising the cost basis along the way. That flexibility—using the money later for a home, a business, or whatever life brings—often leads to a better after-tax outcome.

So while the Trump Account may be a useful nudge to start saving early, in many cases, simpler and more flexible options will likely do the job better.

Bottom Line

Before we wrap up, if today’s episode reinforced how interconnected these decisions really are—and how easy it is for one small tax move to ripple across your retirement plan—this is exactly the kind of work my team and I do every day. We specialize in helping retirement savers over 50 coordinate taxes, investments, healthcare, and income decisions so nothing is working in isolation. If you’re approaching retirement or already there and want a second set of eyes on how these 2026 changes apply to your situation, we’d be honored to have a conversation to see if there’s a good mutual fit. You can learn more or schedule a retirement strategy session through the link in the episode description, or by visiting definefinancial.com and clicking “Get Started.”

Thank you, as always for listening, and to view the research and supporting resources mentioned in today’s episode, just head over to youstaywealthy.com/265

Disclaimer

This podcast is for informational and entertainment purposes only, and should not be relied upon as a basis for investment decisions. This podcast is not engaged in rendering legal, financial, or other professional services.