New 2026 IRS Limits: Bigger Breaks, Bigger Planning Opportunities

December 5, 2025  | By Manisha Gupta, CFP®, MBA

The IRS and Social Security Administration have released key numbers for 2026, including new federal income tax brackets, a higher standard deduction, bigger retirement and HSA contribution limits, and updated Social Security benefits and wage caps. In addition, several provisions from the One Big Beautiful Bill Act (OBBBA) become effective in 2026, affecting deductions, credits, business owners, and families with childcare and education expenses.​

2026 Federal Tax Brackets And Standard Deduction

The seven federal income tax rates remain 10%, 12%, 22%, 24%, 32%, 35%, and 37%, but the income thresholds for each bracket increase in 2026 to reflect inflation. For example, the top 37% bracket will  start at $640,600 of taxable income for single filers and $768,700 for married couples filing jointly.​

The standard deduction will increase to $16,100 for single filers, $32,200 for married couples filing jointly or qualifying surviving spouses, and $24,150 for heads of household in 2026. Additional standard deduction up to $6,000 per person for taxpayers age 65 and older or who are blind continue to apply on top of these figures.​

Social Security: COLA And Wage Base For 2026

Social Security and Supplemental Security Income benefits will increase by 2.8% in 2026, giving retirees and other beneficiaries a modest raise. For the average retired worker, this COLA translates to roughly $50–60 more per month in benefits beginning with January 2026 payments.​

On the tax side, the Social Security wage base—the maximum amount of earnings subject to the 6.2% Social Security payroll tax—will rise to $184,500 in 2026, up from $176,100 in 2025. That means employees and employers will each pay up to $11,439 of Social Security tax on wages at or above this level in 2026, while 1.45% Medicare payroll taxes remain uncapped.​

Retirement Plan And HSA Limits For 2026

For workplace retirement plans such as 401(k), 403(b), most 457 plans, and the Thrift Savings Plan, the employee contribution limit will rise to $24,500 in 2026. Individuals  aged 50 and older can contribute an additional $8,000 catch‑up, allowing a total of up to $32,500 in employee contributions where the plan permits.​ For individuals aged 60-63, the special catch up contribution limit in eligible retirement plans is $11,250 instead of the $8,000 mentioned above. 

Traditional and Roth IRA contribution limits increase to $7,500 for 2026, with an extra $1,000 catch up for those age 50 and older, subject to income‑based eligibility and deductibility rules. 

SIMPLE IRA plans have higher limits as well, with the basic salary‑deferral cap rising to about $17,000. Individuals aged 50 and over can contribute an additional $4,000 bringing the total contribution to $21,000. Individuals aged 60-63 are eligible for a super catch-up amount of $5,250. 

For those in high‑deductible health plans, Health Savings Account (HSA) limits also rise in 2026: up to $4,400 for self‑only coverage and $8,750 for family coverage, plus a $1,000 catch‑up contribution for individuals aged 55 and older. 

Key OBBBA Changes Taking Effect In 2026

Several provisions from the One Big Beautiful Bill Act (OBBBA), enacted in 2025, first apply for tax years beginning after December 31, 2025. These include:​

• Qualified Business Income (QBI) deduction: The Section 199A QBI deduction for owners of pass-through businesses which was originally supposed to expire in 2025 is made permanent, with higher phase‑in thresholds and a new minimum $400 deduction for those with at least $1,000 in active qualified business income.​
• Child Tax Credit (CTC): Beginning in 2025, the CTC is set at $2,200 per qualifying child, and starting in 2026 the credit is indexed to inflation so it can automatically increase over time.​
• Dependent Care FSA – OBBBA also permanently increases the dependent care assistance exclusion beginning in 2026, allowing up to $7,500 per year of employer‑provided or FSA‑funded dependent care benefits to be excluded from income ($3,750 for married filing separately), giving working families more pre‑tax room for childcare costs. 
• 529 Plan Expenses – OBBBA includes several changes to 529 plans, most notably increasing the annual K-12 expense limit from $10,000 to $20,000 starting in 2026. The law also expands the definition of qualified K-12 expenses to include items like curriculum materials, tutoring, and test fees. 
• Higher Estate Tax Exemption – Beginning in 2026, the federal estate and lifetime gift exemption will be set to $15M per individual. Moving forward, this will be indexed for inflation every year.

Planning Considerations 2026

The combination of higher brackets and deductions, increased retirement and HSA limits, Social Security COLA, and new OBBBA rules creates a good opportunity to revisit savings rates, Roth vs. pretax strategies, charitable and SALT planning, and business‑owner tax strategies. 

We are here to help and guide you through all the changes. We will make sure to discuss the rules applicable to your situation during our 2026 financial review meetings.