UPDATE: Significant changes to the U.S. tax landscape are set to take effect in 2026, impacting millions of taxpayers. These alterations, propelled by the passage of former President Donald Trump‘s One Big Beautiful Bill (OBBB), offer new opportunities for savings and deductions.
These updates could potentially put more money in your pocket, making it essential for every taxpayer to prepare now. The three major changes you need to know about are:
1. New Deductions for Charitable Donations
Starting in 2026, taxpayers taking the standard deduction will gain the ability to deduct up to $1,000 for single filers and $2,000 for joint filers on cash gifts made directly to qualifying charities. This change is poised to benefit a significant number of households—around 90% of Americans currently take the standard deduction.
According to DAF Giving 360, this shift means many who previously did not itemize their deductions can now receive tax benefits for their charitable contributions. However, it also introduces new limits for high-income donors, who will see their deduction caps reduced to 35%, down from 37%.
2. Introduction of Trump Accounts for Children
Another groundbreaking provision of the OBBB is the launch of Trump Accounts, aimed at children born between December 31, 2024, and January 1, 2029. These accounts will officially open on July 4, 2026, and each account will kick off with a $1,000 federal deposit.
This initiative is designed to provide middle-class families and their children a stake in America’s economic future. An additional $250 will be deposited into accounts for 25 million Americans aged 10 and under, funded by a generous $6.25 billion donation from Michael Dell, founder of Dell Technologies. Parents will also be allowed to contribute up to $5,000 annually, while employers can add up to $2,500 without affecting employees’ taxable income.
3. Increased Retirement Savings Contribution Limits
The IRS has announced a higher contribution limit for 401K plans, allowing individuals to contribute an additional $1,000 starting in 2026. The new annual limit will be $24,500, up from $23,500 in 2025.
For those aged 50 and over, the “catch-up” contribution limit has also increased to $8,000, allowing older workers to contribute up to $32,500 per year. Additionally, employees aged 60 to 63 will see an even higher catch-up limit of $11,250, enabling them to save more for retirement.
These changes, confirmed by the IRS, signal a pivotal shift in tax policy that could have lasting financial implications for households across the nation. As taxpayers prepare for 2026, understanding these developments will be crucial for maximizing benefits and minimizing tax liabilities.
Next Steps: Taxpayers should stay informed and consider how these changes may impact their financial strategies moving forward. With these updates on the horizon, it’s essential to start planning now to take full advantage of the new tax landscape.
Keep an eye out for further announcements as the implementation date approaches.
