What’s on Deck for Taxes in 2026?

Key Takeaways

• The SALT deduction, which was temporary under the OBBBA Act, raised it from $10,000 to $40,000 if your income is under $500,000.
• The new senior deduction is a $6,000 deduction you get just for being age 65 and under the income thresholds, regardless of whether you are taking the standard deduction or you’re an itemizer.
• There is a new charitable giving tax deduction for nonitemizers where you get a $1,000 deduction just for giving to charity, and for married filing joint, you get $2,000.
• For retirement savers, the bottom line is, whatever you’re contributing to, you can contribute more. There is also what has been called the “super catch-up contribution” for people who are between 60 and 63.
• There is also an unlimited new itemized deduction for teachers, educators, and coaches.

Christine Benz: Hi, I’m Christine Benz from Morningstar. Every new year brings its own share of tax changes, but 2026 has even more notable changes than is typical. Joining me to discuss some of the key ones that investors should keep on their radar is tax and retirement expert Ed Slott. Ed, thank you so much for being here.

Ed Slott: OK, welcome back, 2026.

Higher SALT Deduction for 2026

Benz: It’s great to have you here. So, let’s discuss some of the key changes that people should be bearing in mind in 2026. One of the biggies relates to this higher cap on how much we can deduct in our state and local taxes. Can you discuss that?

Slott: Well, the SALT deduction, which was temporary under the One Big, Beautiful Bill, OBBBA Act, raised it from $10,000 to $40,000 if your income is under $500,000. That’s going to continue in ’26, ’27, ’28, and ’29, and then it ends. So that gets you into itemized deduction territory, because if you can deduct $40,000, that will get you over the standard deduction limit in most cases. So you can pile on the charity, mortgage interest, medical if you have it, and it qualifies. So that can make a big impact on your tax deductions for 2026, can lower your tax bill.

Benz: OK. So if you’d gotten complacent about always being on the standard deduction, it’s maybe time to take another look, especially if you’re in one of the higher tax states.

Slott: Yes. And that deduction was available last year, too, in case you’re watching this and you’re doing ’25’s returns now and ’26.

Who Is Eligible for the New Senior Tax Deduction?

Benz: Right. OK. Well, also want to talk about this new senior tax deduction. What is that, and who’s eligible and who might not be eligible due to some of the income limits that apply?

Slott: Well, once again, that was available last year, now available this year, but not as available for as many years as the SALT deduction for some reason. I don’t know why some are more and some are less. That’s through ’28. And that’s a $6,000 deduction you get just for being age 65 and under the income thresholds, which are kind of low for some people. But a lot of seniors will get a $6,000 deduction. It’s a below-the-line deduction, which means it doesn’t reduce your adjusted gross income. It doesn’t reduce the amount of Social Security that will be taxable. That has nothing to do with that.

Benz: OK. And you get it, regardless of whether you are taking the standard deduction or you’re an itemizer, right?

Slott: Right. So if you combine and you get into itemized territory, you also get this.

New Charitable Giving Tax Deduction for Nonitemizers in 2026

Benz: It seems like there are some fairly significant changes related to charitable giving and taxes in 2026. Can we talk about some of those?

Slott: Yes. There’s a new deduction for nonitemizers, let’s say you’re not in the itemized deduction category. You don’t have the deductions, whatever reason, or you do better with the standard deduction and the senior deduction. You do better with all of that. You get $1,000 deduction just for giving to charity. Married filing joint, you get $2,000. So that’s a good break right off the bat if you don’t itemize. But if you do itemize, there’s a deduction reduction. That’s also in the OBBBA law, the One Big Beautiful Bill Act. If you’re at the top 37% bracket, you’ll only get a benefit of up to 35%. So it cuts that benefit of your charitable giving down. Also, there’s a new 0.5% floor, which doesn’t sound like a lot, but it’s 0.5% of your adjusted gross income. So, if your adjusted gross income is $100,000, it’s $500. 1% would be $1,000. So it’s $500. So if you gave a gift of $750, $500 wouldn’t be deductible. So it can add up depending on your income. So your charitable deductions will get clipped a little bit.

Changes to Contribution Limits for Retirement Savers in 2026

Benz: OK. I also want to talk about, for retirement savers, some of these new higher contribution limits that are in place for 2026. Could you talk about what’s changing for company retirement plans and IRAs for 2026?

Slott: I’m glad you asked. I have that right in front of me. Each year, but this year is different because of a confluence of several laws and the way they’ve been doing this, not everything is based on these, what we call “inflation factors,” the cost of living indexes, because some things have changed, and some things have not changed. One thing that’s changed for the first time in history, it may not sound like a lot, but it could add up, the catch-up contribution for IRAs, forever, it’s been $1,000 if you’re age 50 or over. Thanks to one of the new laws, this is the first time this is indexed for inflation. Not a lot—goes up $100—but now it’s $1,100 catch-up. Plus, the contribution limit, thanks to the inflation factor, went from $7,000 in ’25 to $7,500. So now it’s starting to add up. Now, if you’re 50 or over, you can contribute to a traditional IRA or Roth $8,600. And if it’s a married couple, it’s double. So it’s really starting to add up for people. So little by little, these are inflation factors that have been going on for years, but it’s the first time we had an inflation factor increase the catch-up contribution for IRAs.

But the big item is on 401(k)s. This is a big change from Secure 2.0. These affect employees, what they call “highly compensated employees.” I don’t think $150,000 in today’s world is highly compensated, but that’s what it is for this provision. If you’re an employee making $150,000 or more for the last year, your W-2 is over $150,000, and you’re in a 401(k) and you want to do catch-up contributions, same idea, being 50 or over, they must go to the Roth 401(k). You can’t put them into the 401(k). That’s one of the ways Congress is trying to create more revenue by pushing more people to the Roth.

What’s unique about this: This is the first time a Roth contribution in all of tax law has been mandated. You’re forced to, I mean, I don’t think it’s the worst thing in the world because I love piling up on Roth 401(k)s, but I think people would like to have a choice. So higher-income people will not be able to put their catch-up contribution—if they’re over that 150—for the prior year into a regular 401(k), it’ll have to go to the Roth, which again, I don’t think is the worst thing, and the Roth and the contribution limits are up for 401(k)s now. Went from 23.5. In ’26, you can contribute 24.5. Plus $8,000 catch-up, so now with the catch-up, the $8,000, you’re up to 32,500. So little by little, with these inflation factors, things pick up. Even the QCD amount went up to $111,000. So you remember when that provision first came out, it was at $100,000. It’s still at $100,000, but the way the tax law works, it’s $100,000, plus cost of living increases. So now that’s way up to $111,000. So that’s a big increase. And you see those increases all across the board. So the bottom line is, whatever you’re contributing, you can contribute more.

The ‘Super Catch-Up’ Contribution

Benz: And there’s also this, what they’ve been calling the “super catch-up contribution” for people who are between 60 and 63. Any changes there?

Slott: No, but it’s good you mentioned it, because that’s on top of the regular catch-up, the super catch-up, which last year was another $11,250 instead of the $7,500, which is what it was last year. And that remains the same for 2026, $11,250 instead of the $7,500, which is now $8,000 for 2026. So all of these things are great if you have the disposable income to pile that on. If you do, it’s a great, I think, it’s a great maneuver to move it into the Roth side and put it away income tax-free.

Benz: OK. Anything else that we should have on our radar taxwise as 2026 gets underway?

Slott: This has nothing to do with retirement, but I noticed a little-known piece, and it hasn’t gotten much attention. And everybody knows somebody who’s a teacher, an educator, or a coach. There’s a new deduction starting in 2026. They used to get, I don’t know if you recall, there was a $300 deduction you got for teachers who pay out of their pocket for supplies. And everybody knows they pay a lot more than $300 for supplies for the kids. Well, for some reason, again, somebody in Congress must have been a coach or something, or an educator, or had a spouse who was an educator—an unlimited new itemized deduction. Of course, you have to prove what you have for teachers, educators, and coaches for unreimbursed expenses.

It’s new for 2026. It was buried in the back of the One Big, Beautiful Bill Act, but could have a good impact. Everybody knows somebody who’s a teacher, maybe a coach or other kind of educator. You keep receipts, if you’re listening to this in the beginning of 2026, keep receipts, you’re going to see that adds up. And what they did, which is unusual, under Tax Cuts and Jobs Act, they removed what we used to call the miscellaneous itemized deductions. Those 2%, those were permanently eliminated, but they put this one in and said, this is not one of those. This is one that teachers, coaches, and educators get. And apparently there’s no limit unless the IRS has something to say about it. And it’s effective now, in 2026. So tell your friends and family that do lay out a lot of money. I’ve done tax returns for teachers and all these kinds of people, coaches. They lay out a fortune. Most people wouldn’t even believe what they do for these kids’ extracurricular activities. It can add up. Well, now you’ll get a deduction for it if you itemize your deductions.

Benz: Wonderful. Great reminder, Ed. Thank you so much for being here and Happy New Year.

Slott: Thanks, Christine. You, too.

Benz: Thanks for watching. I’m Christine Benz for Morningstar.

Watch Ed Slott: Higher SALT Cap Could Mean Significant Tax Savings for more from Christine Benz.