Why it matters

Several provisions of the One Big Beautiful Bill Act (OBBBA) went into effect this year, potentially changing the tax consequences of decisions involving certain aspects of your personal finances.

Here are six key changes to keep in mind for 2026

1. Reinstated charitable contribution deduction for non-itemizers

For taxpayers claiming the standard deduction, the OBBBA reinstates a COVID-era deduction for cash donations to qualified charities, subject to an increased annual limit of $1,000 ($2,000 for married couples filing jointly). The definition of a “cash contribution” includes gifts made by debit or credit card, check, electronic bank transfer, online payment platform, and payroll deduction.

Unlike charitable contribution deductions for itemizers, the break for nonitemizers isn’t subject to income-based limitations. However, deductions exceeding the annual limit can’t be carried forward, and contributions to donor-advised funds and private foundations are excluded.

2. New limit on charitable deductions for itemizers

A new limit on charitable deductions applies to taxpayers who itemize rather than claim the standard deduction. Your otherwise allowable charitable deductions for the year will be limited to the amount that exceeds 0.5% of your 2026 adjusted gross income (AGI). 

In other words, if your AGI for 2026 is $200,000, and you donate $10,000 during the year, your deduction would be reduced to $9,000. Under certain circumstances, you may be able to carry forward disallowed amounts, but the rules are complex. 

Bunching donations into alternating years can reduce the impact. But first consider the tax consequences of having $0 in donation deductions in the off years (unless you don’t itemize deductions in those years, in which case you’ll be eligible for the nonitemizer deduction for cash donations). 

3. New limit on itemized deductions for high-income taxpayers

Generally, this limitation means that the tax benefit from itemized deductions for taxpayers in the 37% bracket will be as if they were in the 35% bracket. For 2026, the 37% bracket starts when taxable income exceeds:

• $640,600 for single filers and heads of households,
• $768,700 for joint filers, and
• $384,350 for married couples filing separately.

As a result, certain deductions may generate less tax savings than before, making it more important to evaluate the timing of deductible expenses.

4. Reduced threshold for the AMT exemption phaseout

The OBBBA calls for the alternative minimum tax (AMT) exemption phaseout thresholds to revert to their 2018 levels for 2026. That is, the law removes the inflation adjustments applied to the 2019 through 2025 tax years, though the thresholds will again be adjusted for inflation going forward. The law also phases out the exemption more quickly beginning in 2026. Effectively, the exemption will phase out twice as fast. 

For 2026, the AMT exemption phaseout ranges are:

• $500,000 – $680,200 for single filers and heads of households (down from $626,350 – $978,750 in 2025),
• $1,000,000 – $1,280,400 for joint filers (down from $1,252,700 – $1,800,700 in 2025), and
• $500,000 – $640,200 for separate filers (down from $626,350 – $900,350 in 2025).

These changes, together with the increased cap on state and local taxes (SALT) for 2025 through 2029, may increase AMT risk. If you have significant investment income, a large SALT deduction or other factors that may trigger the AMT, consider reviewing your projected 2026 tax liability before year end.

5. Increased limit for tax-free 529 plan withdrawals for qualified K-12 school expenses 

In previous years, annual distributions from Section 529 plans used to pay for qualified elementary and secondary school expenses of up to $10,000 per beneficiary were eligible for tax-free treatment. Starting in 2026, the annual limit has increased to $20,000 per beneficiary. Families using 529 plans to pay K-12 education expenses may wish to revisit their funding strategies in light of the higher tax-free withdrawal limit.

Important: In addition to saving funds for education in a 529 plan, you might contribute to a Sec. 530A Trump Account. These accounts are essentially a tax-favored savings vehicle for kids that can grow over time and eventually transition into a traditional IRA once your child reaches adulthood. Beginning July 4, 2026, parents, grandparents and employers can contribute up to $5,000 per year (combined) to a beneficiary’s account.

6. New Roth catch-up contribution requirement for high-income taxpayers

Another important development is the new Roth catch-up rule. Under the SECURE 2.0 Act, beginning in 2026, higher-income participants in 401(k), 403(b) and 457(b) retirement plans must make any catch-up contributions as after-tax Roth contributions. 

For 2026, this requirement applies to participants with 2025 Social Security wages from the same employer exceeding $150,000. The threshold is adjusted annually for inflation. If you earned more than the limit and your employer’s plan doesn’t offer a Roth option, you can’t make catch-up contributions to the plan this year. 

However, if you changed jobs and your 2025 Social Security wages exceeding $150,000 were from a different, unrelated employer, the Roth requirement won’t apply to you for 2026. The Roth requirement also doesn’t apply to IRA catch-up contributions.

If you’re subject to the Roth requirement and you’ve made pretax catch-up contributions in recent years, more of your compensation may be subject to tax in 2026. In addition, a higher AGI and modified AGI (MAGI) could trigger (or increase the impact of) various tax-break phaseouts and the net investment income tax. So planning for the potential tax consequences is critical. 

Turn tax changes into planning opportunities

With several individual tax provisions taking effect in 2026, familiar tax-planning strategies may need a fresh look. The impact of these changes will vary depending on your income, deductions, family circumstances and financial goals, so there’s no one-size-fits-all approach.