Tax Planning 2026: Key Updates to Know

Individual income tax

1. Standard deductions

The standard deduction is the specific dollar amount you could take on your tax return to reduce your overall taxable income. The amount of the deduction is usually adjusted each year by the IRS for inflation and varies based on your filing status and age. You may also be able to claim a higher standard deduction amount if you’re 65 or older and/or blind.

Additional standard deduction: Did you know that the IRS allows individuals who are age 65 or older and/or are blind to take an additional standard deduction? If this applies to you or your spouse, be sure to check the appropriate boxes on your Form 1040. See IRS topic #551: Standard deduction for more information.

2. Itemized deductions

While most taxpayers typically choose to take the standard deduction, some may choose to itemize deductions instead. Individuals usually select the deduction method that provides the largest reduction to their taxable income . But everyone’s tax situation is different, so consult a tax professional to determine the best way to file your returns. Read more: Standard deduction vs. itemized deductions.

If you choose to itemize, here are some common deductions that may be relevant to you. You can also refer to Schedule A (Form 1040) to see the official list of itemized deductions.

Mortgage interest deduction. Generally, you may deduct the mortgage interest you pay on your main home, where you reside most of the time, or on your second home once certain conditions are met. Per the IRS, you can deduct home mortgage interest on the first $750,000 ($375,000 if married filing separately) of your mortgage debt. However, higher limitations—$1 million (or $500,000 if married filing separately)—apply if you are deducting mortgage interest from a loan taken out before December 16, 2017.

See IRS Publication 936 for more details.

State and local tax deductions (SALT). If you itemize deductions on your federal return, you may also be able to deduct the real property (or real estate) taxes you pay to your local and state governments.

Under the new tax law OBBBA:

• For the 2025 tax year, the deduction for state and local taxes, which include real estate taxes, is capped at $40,000 (or $20,000 if married filing separately) for taxpayers with a modified adjusted gross income (MAGI) below $500,000 (or $250,000 if married filing separately).
• If your MAGI is over $500,000 (or $250,000 if married filing separately), the maximum deduction amount is gradually reduced.

Charitable giving. Generally, charitable contributions to qualified organizations may be deductible in the year of your gift. The IRS provides a tax-exempt organization search tool to help you determine whether the organization you’ve contributed to is a qualified charitable organization. 

Planning note: OBBBA introduced several additional rules on charitable deductions. Of note, beginning in 2026:

• A new 0.50% adjusted gross income floor will apply to charitable contributions for individual taxpayers who itemize deductions.
• The maximum value of each dollar of an itemized deduction is capped at $0.35 for taxpayers in the highest tax bracket (previously $0.37).
• Individuals who do not itemize will generally be able to deduct up to $1,000 ($2,000 for joint filers) in charitable contributions. To qualify, the contribution must be made in cash to a public charity other than a donor-advised fund or supporting organization.

Since charitable deduction rules can be complex, it’s a good idea to speak with your financial or wealth advisor to understand how these changes could potentially impact your taxes and charitable giving plans.  

Retirement planning

As you plan out your contributions for the year, keep in mind that different types of retirement accounts come with different rules and tax considerations. The IRS typically adjusts contribution limits each year for inflation. Below is a summary of key contribution limits for 2025 and 2026 tax years. 

Annual contribution limits

Read more: What is a 401(k)?

Visit IRS.gov for more information about IRA rules. 

Visit IRS.gov for more information on SEPs

Visit IRS.gov for more information on SIMPLE IRAs

A quick reminder about RMDs

RMDs or required minimum distributions are withdrawals you must make from certain types of retirement accounts each year starting at age 73. For instance, RMD rules apply to traditional IRAs, SEP IRAs, SIMPLE IRAs, 401(k) plans, etc. (The IRS provides a list of account types here.)

RMDs are an important consideration in retirement planning (note: failure to take RMDs correctly may result in penalties). If you’ve reached (or you’re approaching) your RMD age, you may want to check in with your financial advisor to understand your obligations and the potential strategies that could help minimize the tax impact.

Estate planning

The federal government may tax the transfer of your estate after your death if it exceeds a certain value. However, the IRS provides an exemption amount that’s typically adjusted each year.

• For 2025, the federal estate and gift tax exemption amount is $13.99 million per person.
• For 2026, the federal estate and gift tax exemption amount is $15 million per person.

So for example, for the 2025 tax year, estates with combined gross assets and prior taxable gifts of more than $13.99 million would need to file an estate tax return (Form 706). Visit the IRS webpage for more information.