Pure’s Director of Tax, Amanda Cook, CFP®, CPA, Esq, reviews new tax changes and strategies for filing your return, making charitable donations, and structuring your estate plan in 2026.
Transcript
While you’re preparing your tax return for 2025, it’s a great time to start thinking about how to set yourself up for 2026. Here are a few items to think about for the coming tax year. First, did you know that there were some changes to individual income taxes that already took effect under the July 4th tax bill, commonly called the One Big Beautiful Bill Act, or OBBBA?
These changes were retroactive to 2025, but will also affect your 2026 tax return. Certain taxpayers who received tips and overtime income may be able to deduct this on their 25 and 26 tax returns. New for 2026, your W2 should identify how much of your income was for tips and overtime. However, you may still wanna keep track of this type of income on your own so that you can verify it.
Also effective in 2025 was the increase to the state and local tax deduction limit, called SALT. For the last several years, this deduction has been limited to $10,000 for most taxpayers. In 2025, that number was raised to $40,000, and this year it will be $40,400 due to inflation. This deduction phases down for higher-income taxpayers.
Also new for 2026, there are some changes to how your charitable contributions will be treated. This is a key area to plan around. Even though you may want to give to charity, regardless of the tax benefits, maximizing your tax benefits makes your donation less expensive for you.
In 2026, there are two new rules for charity, one for itemizers and one for non-itemizers. For itemizers, your deduction for charitable contributions is subject to a half-percent of adjusted gross income floor. This means if your AGI is 75,000, then the first $375 of charitable donations you make is not deducted.
For non-itemizers, a new charitable donation deduction is allowed on top of your standard deduction. It can be $2,000 for married filing joint, and $1,000 for everyone else. The donation must be cash, not stock, or other non-cash donations. These rules present a great opportunity for bunching strategies, where you overcome the standard deduction in some years and you claim the standard deduction in other years strategically.
For example, if you wanna claim the standard deduction in 2026, delay your property tax payment as late as possible, minimize your 2026 withholding just to avoid penalties, and do not make a charitable hold donation. Then, to itemize in 2027, you can pay an extra property tax installment, pay your remaining income tax balance from 26 and, make your 26 charitable donation in January, and your 27 donation in December. By controlling the timing, you’re able to maximize your deductions over two years.
For individuals who have a marketplace plan under the Affordable Care Act, the enhanced premium tax credit has expired. This means that individuals of all income levels are expected to pay a higher percentage of their income for their coverage before being eligible for the tax credit, sometimes called a subsidy.
However, the biggest impact will be for individuals and families who are near the 400% of the federal poverty line. This number acts as a cliff where no tax credit is allowed. And any tax credit that was received earlier in the year must be paid back in full.
This calculation is not monthly. If your income is low in one part of the year and then increases in another part of the year, no credit is allowed for the whole year if your income ends up being over 400%. Therefore, for individuals and families who rely on this credit, planning may be required to avoid exceeding the limit this year.
Another big change for 2026 is the permanent estate tax exemption of $15 million per spouse. By permanent, I mean there’s no sunset. If your taxable estate is less than 15 million, you may wanna review your estate planning documents. Having an estate plan that is too complicated is a burden to your heirs. If you have provisions that are intended only to avoid estate tax, simplifying your estate plan should be a top priority this year.
Plus, it’s a good idea to review your estate plan every three to five years anyway. Several changes resulting from the Secure Act of 2019, the Secure Act 2.0 of 2022, and the 2024 regulations about these acts also affected estate plans.
If you’re expecting a large capital gain event this year, such as the sale of a business or real estate asset, you may wanna consider the timing. OBBBA revived a tax benefit called opportunity zones that allows you to reinvest your capital gain income and defer the tax. In 2026, a reinvestment would not defer your gains, but in 2027, it will.
As you can see, there are many opportunities to explore. If you would like help proactively planning for 2026, take advantage of our free tax analysis.
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• Investment Advisory and Financial Planning Services are offered through Pure Financial Advisors, LLC, a Registered Investment Advisor.
• Pure Financial Advisors LLC does not offer tax or legal advice. Consult with your tax advisor or attorney regarding specific situations.
• Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
• Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
• All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.
• Intended for educational purposes only and are not intended as individualized advice or a guarantee that you will achieve a desired result. Before implementing any strategies discussed you should consult your tax and financial advisors.
CFP® – The CERTIFIED FINANCIAL PLANNER® certification is by the CFP Board of Standards, Inc. To attain the right to use the CFP® mark, an individual must satisfactorily fulfill education, experience and ethics requirements as well as pass a comprehensive exam. 30 hours of continuing education is required every 2 years to maintain the certification.
CPA – Certified Public Accountant is a license set by the American Institute of Certified Public Accountants and administered by the National Association of State Boards of Accountancy. Eligibility to sit for the Uniform CPA Exam is determined by individual State Boards of Accountancy. Typically, the requirement is a U.S. bachelor’s degree which includes a minimum number of qualifying credit hours in accounting and business administration with an additional one-year study. All CPA candidates must pass the Uniform CPA Examination to qualify for a CPA certificate and license (i.e., permit to practice) to practice public accounting. CPAs are required to take continuing education courses to renew their license, and most states require CPAs to complete an ethics course during every renewal period.
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