Year-End Tax Planning: What’s Changed for 2026

Overview of Key 2026 Tax Changes for Individuals and Businesses

As the end of 2026 approaches, several tax law changes under the One Big Beautiful Bill Act (OBBBA), enacted in 2025, may affect individual taxpayers and businesses. While some provisions build on existing tax rules, others introduce new deductions, limits, and requirements for the 2026 tax year.

Understanding these updates before year-end can help you identify planning opportunities, prepare for upcoming changes, and avoid unexpected tax consequences.

Year-End Tax Planning for Individuals

Standard Deduction: The standard deduction increased to the inflation-adjusted amounts for the 2026 tax year: $32,200 for married couples filing jointly, $16,100 for single filers and married couples filing separately, and $24,150 for heads of household under IRC § 63.
State and Local Tax (SALT) Deduction: The SALT deduction cap under IRC § 164(b)(6) increased to $40,400 for 2026, or $20,200 for married couples filing separately. The phaseout begins at $505,000 in modified adjusted gross income (MAGI), with a minimum cap of $10,000.
Limitation on Itemized Deductions: A new limitation under IRC § 68 took effect in 2026, reducing itemized deductions for taxpayers in the 37% federal income tax bracket by 2/37 of the lesser of their itemized deductions or income above the applicable threshold.
Estate, Gift, and Generation-Skipping Transfer (GST) Exclusion: The exclusion increased to $15 million per person for decedents dying and gifts made on or after January 1, 2026.
Charitable Deduction for Non-Itemizers: Taxpayers who do not itemize may claim a deduction of up to $1,000, or $2,000 for married couples filing jointly, for qualified cash contributions to eligible charitable organizations, generally public charities or 50% charities.
Itemized Charitable Deductions: Beginning with the 2026 tax year, only charitable contributions exceeding 0.5% of adjusted gross income (AGI) are deductible. Taxpayers must reduce their total charitable contributions by 0.5% of AGI before calculating the allowable deduction.
Section 530A Accounts (“Trump Accounts”): Contributions under IRC § 530A began in July 2026. The federal pilot contribution provides $1,000 for eligible U.S. citizen children born between 2025 and 2028.
Child and Dependent Care Credit: The credit under IRC § 21 was enhanced. The maximum credit rate increased to 50%, eligibility expanded, and phaseouts apply at higher income levels.
Dependent Care Assistance Exclusion: The exclusion increased.
Employer-Provided Childcare Credit: The credit under IRC § 45F increased.
Premium Tax Credit: Rules governing the premium tax credit under IRC § 36B became more restrictive in 2026.
Mortgage Insurance Premiums: The deduction for qualifying mortgage insurance premiums was reinstated beginning with the 2026 tax year.
K–12 Educator Expenses: Eligible K–12 educators may claim a new itemized deduction under IRC § 67 for qualifying professional-development and instructional expenses that exceed the $350 above-the-line deduction amount. The itemized deduction may also be available for certain expenses that are not eligible for the above-the-line deduction.
Section 529 Plans : Eligible uses expanded to include additional K–12 expenses, the annual K–12 distribution limit increased to $20,000, and certain postsecondary credentialing costs became eligible expenses.
ABLE Accounts: The annual contribution limit increased to $20,000, and ABLE-to-Work contributions, 529-to-ABLE rollovers, and the Saver’s Credit for beneficiary contributions were made permanent.
Wagering Loss Deductions: Under IRC § 165, wagering loss deductions were reduced to 90% of losses and remain deductible only to the extent of wagering gains.

Year-End Planning for Businesses

Section 179 Expensing: The IRC § 179 expensing limit increased to $2,560,000 for 2026.
Business Meals: For amounts paid or incurred after December 31, 2025, IRC § 274(o) (enacted by the TCJA) eliminates the employer deduction for two categories only:
- Meals furnished on the business premises for the convenience of the employer (IRC § 119(a) meals); and
- Food and beverages provided at, or in the operation of, an employer-operated eating facility, including food that qualifies as a de minimis fringe benefit.
- This is a targeted change, not a repeal. Ordinary business meals, including meals while an employee travels away from home on business, remain 50% deductible under IRC § 274(n)(1).
Corporate Charitable Contributions Floor: A corporation may deduct charitable contributions subject to a ceiling of 10% of taxable income, computed without regard to the contribution deduction. For tax years beginning after December 31, 2025, a corporation’s otherwise-allowable charitable contributions, other than certain qualified conservation contributions, are deductible only to the extent the aggregate exceeds 1% of the corporation’s taxable income for the year.
Information Reporting: For payments made after December 31, 2025, the general reporting threshold under IRC § 6041(a), and the parallel threshold for remuneration to nonemployees under IRC § 6041A, rose from $600 to $2,000. The threshold is indexed for inflation for calendar years after 2026.

How These 2026 Tax Changes May Affect You

The 2026 tax changes create new planning opportunities and requirements for individuals, families, and businesses. Reviewing deductions, credits, contribution limits, and reporting obligations before year-end can help you understand which provisions may apply to your situation.

Contact your W&D advisor at (847) 267-9600 or [email protected] to discuss how these changes may affect your tax planning and identify steps to consider before year-end.

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