Tax Changes to Consider in Your Financial Plan

This year introduced several meaningful tax changes that reshape how deductions, retirement income, and some savings strategies will be taxed. It’s an opportune time for pre-retirees, retirees, and business owners to proactively check in with their financial advisor and CPA to coordinate key decisions, model scenarios, and make adjustments to create flexibility and help avoid costly mistakes. We’ll break down the key changes taking effect, how they may impact you, and how you can thoughtfully prepare.

Why Should I Consider Tax Changes to My Financial Plan This Year?

The One Big Beautiful Bill Act includes several tax provisions that officially took effect in 2026. Early planning for these changes can help you understand how new rules may affect or fit into your existing plan and identify adjustments to capture opportunities and reduce liability.

Additionally, tax decisions such as contribution limits and new deductions often overlap in your financial life, affecting cash flow, retirement, and estate planning, making coordination critical.

What Are the New Tax Changes Taking Effect in 2026?

Here are some of the key changes taking effect this year that could affect pre-retirees, retirees, and high earners.

What Are the New Catch-Up Contribution Limits?

In 2026, new tax rules will increase catch-up contribution limits and change how some contributions can be made. Here’s what pre-retirees and high earners should know:

• Updated Limits: The catch-up contribution for people age 50 and older increases to $8,000 for plans that allow it.
  • A super catch-up contribution of $11,250 is available for people ages 60, 61, 62, and 63.
• New Roth Requirement: Contributions for savers with prior-year incomes of $150,000 or more must be made as after-tax Roth contributions. 
  • The new mandate will mean many high-earning pre-retirees may lose an immediate deduction previously allowed on pre-tax contributions. 
• Planning Points to Discuss with a Professional:
  • Understand the tax implications of maximizing your catch-up contributions (i.e., paying taxes today for tax-free growth and withdrawals in the future).
  • Do you have variable income as a business owner, or expect higher income from vesting company stock, for example, that may push you into the higher income threshold? 
  • How can you time your contributions around your income and cash flow?
  • As a pre-retiree, how will your contributions interact with other planning decisions, such as Social Security and Medicare?

What Is the New SALT Deduction Cap?

The state and local tax (SALT) deduction cap has increased, creating new planning opportunities for high earners that may incentivize itemized deductions.

• Updated Cap: The new SALT deduction cap increases to $40,400 (or $20,200 for married filing separately).
  • The deduction only applies to taxpayers who itemize deductions and do not take the standard deduction.
  • The deduction is scheduled to expire and revert to $10,000 in 2030.
• Income Phase-Outs: The full deduction is available to taxpayers with incomes below $505,000 in 2026.
  • The deduction begins to phase out for incomes above $505,000, and gradually reduces to the $10,000 cap for incomes exceeding $606,333.
• Planning Points to Discuss with a Professional:
  • Should you consider itemizing versus taking the standard deduction this year, based on your income, state taxes, and other factors?
  • As a business owner or pre-retiree, how can you time income and business expense deductions or structure charitable giving to take advantage of the new SALT deduction cap?
  • How can Roth conversions—which are taxable in the current year—be strategically timed under the new cap?

How Do 2026 Tax Rules Affect Social Security?

While there are no rules directly changing Social Security policy in 2026, changes to taxable income, deductions, and contributions may affect how much of your Social Security income is subject to tax. Here’s what to consider:

• Taxation Treatment: With new mandates around catch-up contributions for high earners, Roth contributions may no longer reduce your taxable income, affecting how much of your Social Security benefits are subject to tax.
  • The new SALT deduction cap and the potential benefits of itemizing may provide flexibility to reduce your taxable income, helping protect a portion of your Social Security benefits from taxation.
  • Any increases to your taxable income may also reduce or eliminate the “bonus” senior deduction introduced in 2025—$6,000 for single filers or $12,000 for married couples filing jointly—as it begins to phase out at modified adjusted gross incomes exceeding $75,000 or $150,000 for married couples.
• Planning Points to Discuss with a Professional:
  • As a pre-retiree, how will current contributions, income timing, and retirement timelines affect your Social Security benefits?
  • As a retiree, in what situation may your taxable income increase, affecting limits on deductions and taxes on your Social Security income?
  • How can you time contributions and withdrawals more strategically?

Why Does Coordinated Tax Planning Matter in 2026?

Tax planning has always been layered, affecting various parts of your financial life, with 2026 changes introducing new opportunities and considerations. Proactive, early planning can help you better understand how these changes work within your unique plan and may influence your taxes, retirement, and Social Security benefits.

Whether you’re coordinating your income and deductions, maximizing your contributions, or managing taxes in retirement, collaboration is essential. Partnering with a financial advisor and CPA can help you model outcomes across several years, make necessary adjustments, and ensure your plan is strategically positioned around shifting policy year-round, not just at tax time.

To take advantage of this opportune planning window, please contact us, and we’ll be happy to discuss your personal situation so you can move forward with confidence.