2026 Tax Changes for Individuals
Changes going into effect for individual taxpayers this year include:
New charitable contribution deduction for nonitemizers. For 2026 and future years, the OBBBA reinstates the COVID-era deduction for cash donations to qualified charities by taxpayers who claim the standard deduction, subject to an increased annual limit of $1,000, or $2,000 for joint filers.
The definition of “cash donation” may be broader than you think. It includes gifts made by debit or credit card, check, electronic bank transfer, online payment platform, and payroll deduction. If you make such gifts in 2026, be sure to retain proper substantiation so you can deduct them when you file your return next year.
New floor on charitable deduction for itemizers. Under the OBBBA, if you itemize deductions rather than claiming the standard deduction, your otherwise allowable charitable deductions are limited to the amount that, in aggregate, exceeds 0.5% of your adjusted gross income (AGI). Put another way, your 2026 charitable deduction is limited to the amount that exceeds 0.5% of your 2026 AGI.
New tax-advantaged Trump Accounts. Created under the OBBBA, these accounts are available to U.S. citizens under 18. Contributions to a properly established account can begin on July 4, 2026. Generally, up to $5,000 per year can be contributed. Although contributions aren’t tax deductible, the account can grow tax-deferred until the child is 18, when it converts into a traditional IRA.
Eligible children born between January 1, 2025, and December 31, 2028, whose parents have elected to participate in a pilot program, will receive a one-time, tax-free $1,000 federal contribution to their accounts. The $1,000 government contribution doesn’t count against the annual limit.
Increase in tax-free 529 plan withdrawal limit for qualified elementary and secondary school expenses. Distributions used to pay qualified expenses are income-tax-free for federal purposes and potentially also for state purposes, making the tax deferral a permanent savings. In recent years, certain elementary and secondary school expenses of up to $10,000 per year per beneficiary have been considered qualified and thus eligible for tax-free treatment. Beginning in 2026, the annual limit increases to $20,000 per year per beneficiary.
New Roth requirement for higher-income taxpayers’ catch-up contributions. Beginning in 2026, new rules under the SECURE 2.0 Act (signed into law in 2022) require higher-income participants in 401(k), 403(b) and 457(b) retirement plans to make any catch-up contributions as after-tax Roth contributions. For 2026, this requirement applies to participants with 2025 Social Security wages exceeding $150,000. That threshold will be annually adjusted for inflation.
If you’re subject to this limit, no longer being able to make pretax catch-up contributions could increase your 2026 taxable income. This, in turn, could push you into a higher tax bracket and impact your eligibility for various tax breaks. You may want to consider other steps for reducing your income in 2026, such as minimizing sales of stock or other investments that would generate capital gains income (or offsetting gains by selling other investments at a loss).
Elimination of certain energy-efficiency credits for homeowners. The OBBBA repealed two credits for taxpayers who take steps to make their homes more energy efficient, such as installing energy-efficient windows or adding solar panels: 1) the Energy Efficient Home Improvement Credit for qualified improvements to an existing home and 2) the Residential Clean Energy Credit for both existing and newly constructed homes.
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