What Recent Tax Changes Mean for Your Money

Tax laws are confusing and every year, Congress seems to think we need a few more changes to keep things interesting.

In 2026, there are some updates you'll want to know about, especially around retirement savings and deductions.

Here's the thing: if you're over 50 and doing well financially, these changes are worth understanding now and not in November when you're scrambling before year-end.

New rules for retirement "catch-up" contributions

One of the bigger changes affects retirement savings. If you're 50 or older, you've probably been taking advantage of "catch-up contributions" extra money you can put into your retirement account beyond the standard limit.

Here's what's changing in 2026: if you earn $150,000 or more, those catch-up contributions have to go into a Roth account. That means you'll pay taxes on the money now, but it grows tax-free and you won't owe anything when you take it out later. The catch-up amounts are going up too $8,000 if you're 50 or older, $11,250 if you're between 60 and 63.

Why does this matter? A lot of high earners have used catch-up contributions to lower their tax bill today. That option is going away. Roth accounts are great for tax-free growth, but they don't give you any tax relief right now.

Higher limits for state and local tax deductions

Another change worth knowing about: the state and local tax deduction (SALT) cap is going up. Since 2017, you could only deduct $10,000 in state and local taxes on your federal return. In 2026, that jumps to $40,400 and will increase by 1% each year through 2029.

Here's why it matters: When you file taxes, you choose between taking the standard deduction (a fixed amount of $16,100 for singles, $32,200 for couples in 2026) or itemizing your deductions (adding up things like mortgage interest, charitable donations, and state taxes). You pick whichever saves you more.

With the old $10,000 cap, most people were better off taking the standard deduction. Now with the higher limit, more households might benefit from itemizing instead.

How these changes connect to Social Security and overall planning

These changes don't exist in isolation and they interact with each other, especially if you're retired.

For instance, the income thresholds that determine how much of your Social Security gets taxed haven't changed in decades. So if these new rules bump up your income, you might end up paying tax on more of your Social Security.

There's also a new deduction if you're 65 or older, an extra $6,000 for singles, $12,000 for couples. But it phases out as your income rises, which means decisions that increase your income could cost you this benefit.

The expanded SALT deduction does create some planning opportunities. If you're close to the itemizing threshold, it might make sense to bunch your charitable donations into one year instead of spreading them out. Just remember: this higher SALT limit is temporary. It drops back to $10,000 in 2030.

The bottom line? Tax changes in 2026 are complex and affect people differently. Looking at your complete financial picture and planning ahead can help you make the most of these changes.

References

1. https://taxpolicycenter.org/briefing-book/what-are-itemized-deductions-and-who-claims-them

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