As we head into the warmer months, a wave of changes from last year’s tax legislation take effect, bringing new opportunities to lower your tax bill through expanded deductions and credits. Taking a few strategic steps now can help you save not just this year, but in the years ahead.
The tax law, passed last summer, makes most of the 2017 Tax Cuts and Jobs Act (TCJA) reductions permanent and introduces numerous other updates. While it keeps the current 7 tax brackets and their rates, it increases the income thresholds, which will continue to be indexed for inflation, helping many taxpayers avoid a higher tax bracket. The legislation also provides targeted relief for seniors, families with younger children, and households facing high state and local taxes. However, some provisions are temporary and may be revisited by lawmakers in the near future.
Other updates this year stem from ongoing provisions of the SECURE 2.0 Act, including changes that will affect catch-up contributions for older workers. New rules for inherited IRAs that took effect in 2025 continue to determine how long assets can remain in tax-deferred status.
“This is a good year to take stock of positive changes from the new tax law and SECURE 2.0, like the new senior deduction, increases to the child tax credit, and the ability to roll unused 529 funds into a Roth IRA,” says Jillian Enoch, vice president of retirement and tax policy at Fidelity.
While several of the changes are good only for the next 4 years, here are 10 tips for this year that are designed to help reduce your taxes in 2026 and beyond.
1. Understand how capital gains and dividends could affect your tax bill
The new tax law maintained long-term capital gains rates and the separate capital gains income brackets for assets held longer than 1 year and for qualifying dividends. The rates are 0%, 15%, and 20%, and the capital gains brackets are indexed for inflation. (It also retained the 3.8% net investment income tax, or NIIT, for higher income people.)
While the rates remain the same, wider income brackets may present you with an opportunity to lower your tax rate on this type of income, particularly when coupled with new or increased deductions that can decrease your taxable income. It could make sense to realize gains in taxable accounts this year. Or if you expect taxable income to be higher in future years, you might consider waiting to realize losses so they can offset capital gains that would be taxed at higher rates.
There are 2 important exceptions. Assets held in tax-advantaged accounts such as a workplace savings plan or traditional IRA are not subject to capital gains taxes, though you do owe income taxes on withdrawals. Additionally, short-term capital gains rates for assets held 1 year or less are the same as ordinary income rates.
2025 vs. 2026: Long-term capital gains rates
Long-term capital gains rates 2025
| Capital gains tax rate | Single (taxable income) | Married filing separately (taxable income) | Head of household (taxable income) | Married filing jointly (taxable income) |
| 0% | Up to $48,350 | Up to $48,350 | Up to $64,750 | Up to $96,700 |
| 15% | $48,351 to $533,400 | $48,351 to $300,000 | $64,751 to $566,700 | $96,701 to $600,050 |
| 20% | Over $533,400 | Over $300,000 | Over $566,700 | Over $600,050 |
Source: Internal Revenue Service. Note: Short-term capital gains rates apply to sales of assets you have held for a year or less and are the same as your current federal income tax rate.
Long-term capital gains rates 2026
| Capital gains tax rate | Single (taxable income) | Married filing separately (taxable income) | Head of household (taxable income) | Married filing jointly (taxable income) |
| 0% | Up to $49,450 | Up to $49,450 | Up to $66,200 | Up to $98,900 |
| 15% | $49,451 to $545,500 | $49,451 to $306,850 | $66,201 to $579,600 | $98,901 to $613,700 |
| 20% | Over $545,500 | Over $306,850 | Over $579,600 | Over $613,700 |
Source: Internal Revenue Service. Note: Short-term capital gains rates apply to sales of assets you have held for a year or less and are the same as your current federal income tax rate.
2. Review special tax considerations for older retirement savers
In 2026, workplace retirement plan contribution limits increased by $1,000 to $24,500, with a catch-up contribution of $8,000 available to those age 50 and older, for a total of $32,500. Those between the ages of 60 and 63 can make catch-up contributions of $11,250 in place of the $8,000 limit, if their plan allows.
Catch-up contributions to a Roth 401(k)
For tax-year 2026, if you’re 50 or older, you contribute to a workplace plan, and your Federal Insurance Contributions Act (FICA)-taxable earnings are $150,000 or more, any catch-up contributions to a 401(k) will have to be made to a Roth 401(k) with after-tax dollars. If losing the tax-deferred benefit is causing you to rethink your retirement strategy, remember you may be able to contribute to other kinds of accounts with tax-deferral features such as a health savings account (HSA). You could also consider nondeductible contributions to an IRA, and a Roth conversion.
Find out more in Viewpoints: Understanding new Roth 401(k) catch-up rules.
Even if you’re not a higher earner making catch-up contributions this year, you might also consider contributions to your workplace plan's Roth option, if your plan allows them, because retirees no longer have to take RMDs from such an account. That can potentially give your savings many more years to grow. Assuming the 5-year aging rule has been met and you’re 59½ or older, withdrawals from a workplace retirement plan Roth balance are also tax-free.1
That’s a bit different from a traditional workplace plan, such as a 401(k), where savings can accumulate tax-deferred, but RMDs from such an account must begin once you’ve retired and have reached age 73.
New senior deduction
For tax years 2025 through 2029, people who are age 65 and older will get an additional $6,000 deduction that begins to phase out at incomes of $75,000 for single filers and $150,000 for joint filers. The deduction is available even if you don’t itemize and can be potentially helpful for retirees or near-retirees whose income temporarily rises due to continued work, a Roth conversion, or another taxable event.
Note: The enhanced senior deduction would be in addition to the $2,000 single filers and $3,200 ($1,600 each) married filers are currently able to deduct if they take the standard deduction and are 65 or older in 2025. The existing, additional deduction amounts increase to $2,050 for single filers and $3,300 ($1,650 each) for married couples filing jointly for the 2026 tax year.
3. Explore new opportunities to itemize deductions
The new tax act includes several provisions that could make itemizing this year worth a look if you haven’t done so in years past.
SALT deduction
If you live in a high-tax state, the new tax law raises the state and local tax (SALT) deduction cap to $40,000 from $10,000 for single and joint filers for the next 4 years. There are several caveats, however: The full deduction phases out for filers with modified adjusted gross income above $500,000 ($250,000 in the case of a married individual filing separately), and reverts to $10,000 for incomes of $600,000 and above. While the deduction cap and the phase-out levels will increase by 1% a year, these changes are in effect through 2029, after which point the cap reverts to $10,000. For married couples who file separately, the deduction increases to $20,000 and returns to its previous level of $5,000 in 2030.
Although the increased SALT deduction is likely to help wealthier taxpayers in high-tax states the most, particularly if they have a lot to itemize in addition to high state income and property taxes, these changes may also make it worthwhile for more people who used to take the standard deduction to consider itemizing.
Charitable deductions
For tax-year 2026, a reinstated charitable deduction allows non-itemizers to deduct cash donations to charity—up to $1,000 for single filers or $2,000 for married couples filing jointly. Good to know: Some types of donations are ineligible for the deduction, including those to donor-advised funds or private non-operating foundations.
A further note about itemized deductions in 2026
Starting January 1, the value of itemized deductions for those in the 37% tax bracket will be capped at 35%, or approximately 35 cents for every dollar they deduct. Also effective for the 2026 tax year, itemizers who make charitable contributions will only be able to claim a tax deduction to the extent that their qualified contributions exceed 0.5% of their adjusted gross income (AGI). For example, a couple with an AGI of $300,000 could only deduct charitable donations in excess of $1,500.
4. Stay up to date on rules for inherited IRAs
If you inherited an IRA recently, new rules for inherited IRAs went into effect last year that could affect what you do with these assets.
The original SECURE Act, passed in 2019, eliminated the so-called “stretch IRA” in favor of a 10-year period before IRAs must be fully distributed, with RMDs potentially being required throughout this period. It also tacked on many other potentially confusing new rules for inherited accounts, but delayed penalties for the failure to take RMDs for tax years 2020 through 2025. Previously, a younger beneficiary of an IRA was able to take RMDs based on their own life expectancy rather than the original owner’s, potentially allowing for many more years of tax-deferred growth.
Generally speaking, starting December 31, 2025, funds must be distributed within 10 years of the original owner’s death if you are a non-spouse beneficiary and do not qualify as an eligible designated beneficiary. Note: The rules did not change for spouses of the original owner as well as for IRA beneficiaries who inherited prior to 2020. Neither is required to empty an account within 10 years. Different rules may apply to those considered eligible designated beneficiaries.
A first step might be to understand whether your circumstances require you take distributions from the account within 10 years.
Find out more in Viewpoints: Inheriting an IRA from your spouse.
Remember, penalties can be steep, equaling 25% of the missed RMD amount, or 10% if corrected in a timely manner. It’s always a good idea to consult with a tax professional to understand how the new rules might affect your own situation.
5. Prepare for changes in estate tax rules
2026 is a great time to start thinking about estate taxes and creating a gifting plan. The lifetime gift and estate tax exclusions, which have more than doubled since 2017, increase to $15 million for single filers from $13.99 million and to $30 million from $27.98 million for those who are married filing jointly. Going forward, the exclusions will be indexed for inflation.
Annual gifting can help reduce the value of your estate without using up your lifetime gift and estate tax exemption. The annual gift tax exclusion remains $19,000 in 2026. That means you can give up to $19,000 per donor to as many people as you like each year without affecting your lifetime exemption. If you're married and elect to split gifts, each person in the couple can gift this amount without the gift being considered taxable.
You might also consider funding a 529 or custodial account for children in your life. While lifetime contribution limits to 529 accounts are set by states and are often quite high, remember annual contributions over $19,000 will be considered a taxable gift and count against your lifetime gift tax exclusion. But once inside the account, the money is not considered part of your estate. You can also think about front-loading 5 years' worth of annual gifts of up to $19,000 at once in 2025, for a total of up to $95,000 per person, per beneficiary without having to pay gift tax or interfere with the lifetime gift tax exclusion. However, after that, you won’t be able to make gifts under the annual exclusion to the same beneficiary for 5 years. You can also contribute to a custodial account, known as an UGMA/UTMA account. While such accounts are the property of the beneficiary once you set one up, the assets are considered part of the donor’s estate until the beneficiary is no longer a minor and takes control of them.
Donations to a qualified charity can also potentially lower the value of your estate while helping your tax planning in the year you’re donating. For example, if you itemize you can contribute to a donor-advised fund (DAF) and receive an income tax deduction. When you die, federal law allows your estate to take unlimited deductions of contributions to qualified charities. During your lifetime, you can also donate highly appreciated assets held longer than a year and deduct the fair market value without having to pay the capital gains tax. Note: If the goal is to avoid capital gains, your beneficiaries could receive a step-up in basis upon inheriting the assets.
Deducting charitable contributions may be subject to adjusted gross income (AGI) limits depending on the receiving charity and what you donated. (See section above on charitable deductions for various limitations.)
6. Ensure accurate reporting of digital assets
Rules involving cryptocurrency and other digital assets are still evolving, and transactions involving them may affect your tax planning this year.
Starting January 1, 2025, brokers have been required to report transactions involving digital currency on a new IRS Form 1099-DA. Nevertheless, you must still report payment, gifts, and other transactions involving digital currency, non-fungible tokens, and stablecoins on your Form 1040, 1040-NR, or 1040-SR. Capital gains are reported on Schedule D (Form 1040). It's likely you'll need to complete Form 8949 first to complete Schedule D accurately.
Be sure to work with a tax planner who can help you stay on top of regulatory changes.
7. Know that some home energy tax credits and incentives for residential energy improvements have ended
While many residential clean energy credits embedded in the Inflation Reduction Act (IRA) of 2022 were scheduled to phase out between 2032 and 2034, the new tax legislation ended them early. Generally, the credits fell into 2 categories, either to make homes more energy efficient or for clean energy upgrades. Projects must have been completed and in service by December 31, 2025, to claim any credits or incentives for tax-year 2025.8. Take advantage of higher contribution limits and wider tax brackets
Toward the end of 2024 the IRS increased the income amounts for the 7 tax brackets to account for inflation. It also made inflation adjustments to contribution limits for tax-advantaged accounts, such as workplace retirement plans, IRAs, and health savings accounts (HSAs), for those with a high-deductible health plan.
2025 and 2026 tax brackets
2025 tax brackets| Tax rate | Single filers | Married couples filing jointly | Married couples filing separately | Head of household |
|---|---|---|---|---|
| 10% | $11,925 or less | $23,850 or less | $11,925 or less | $17,000 or less |
| 12% | $11,926 to $48,475 | $23,851 to $96,950 | $11,926 to $48,475 | $17,001 to $64,850 |
| 22% | $48,476 to $103,350 | $96,951 to $206,700 | $48,476 to $103,350 | $64,851 to $103,350 |
| 24% | $103,351 to $197,300 | $206,701 to $394,600 | $103,351 to $197,300 | $103,351 $197,300 |
| 32% | $197,301 to $250,525 | $394,601 to $501,050 | $197,301 to $250,525 | $197,301 to $250,500 |
| 35% | $250,526 to $626,350 | $501,051 to $751,600 | $250,526 to $375,800 | $250,501 to $626,350 |
| 37% | Over $626,350 | Over $751,600 | Over $375,800 | Over $626,350 |
Source: Internal Revenue Service
2026 tax brackets
| Tax rate | Single filers | Married couples filing jointly | Married couples filing separately | Head of household |
|---|---|---|---|---|
| 10% | $12,400 or less | $24,800 or less | $12,400 or less | $17,700 or less |
| 12% | $12,401 to $50,400 | $24,801 to $100,800 | $12,401 to $50,400 | $17,701 to $67,450 |
| 22% | $50,401 to $105,700 | $100,801 to $211,400 | $50,401 to $105,700 | $67,451 to $105,700 |
| 24% | $105,701 to $201,775 | $211,401 to $403,550 | $105,701 to $201,775 | $105,701 to $201,750 |
| 32% | $201,776 to $256,225 | $403,551 to $512,450 | $201,776 to $256,225 | $201,751 to $256,200 |
| 35% | $256,226 to $640,600 | $512,451 to $768,700 | $256,226 to $384,350 | $256,201 to $640,600 |
| 37% | Over $640,600 | Over $768,700 | Over $384,350 | Over $640,600 |
Source: Internal Revenue Service
You can avoid a phenomenon called tax bracket creep—where wage growth can push you into a higher tax bracket—by reducing your taxable income dollar-for-dollar with yearly contributions to your workplace retirement plan (see section above for workplace plan contribution limits), HSA, IRA, and other retirement accounts.
- In 2026, you can contribute up to $7,500 to traditional and Roth IRAs combined. (People age 50 and over can make catch-up contributions of $1,100 to an IRA.)
- If you’re covered by an HSA-eligible health plan, the HSA contribution limits for 2026 are $4,400 (up from $4,300 for tax year 2025) for self-only coverage and $8,750 (up from $8,550 for tax year 2025) for family coverage. Those age 55 and older who are not enrolled in Medicare can contribute an additional $1,000 as a catch-up contribution. If both spouses are enrolled in an HSA-eligible health plan, age 55 or older, and not enrolled in Medicare, they can each contribute a $1,000 catch-up contribution, but they must do so in separate HSAs.
9. Understand the new option to roll 529 funds into a Roth IRA
529 account holders can transfer up to a lifetime limit of $35,000 to a Roth IRA established for a 529 designated beneficiary. Conversions are tax- and penalty-free, although a number of important conditions apply. Among them, the 529 account must be maintained for the 529 designated beneficiary for at least 15 years, the transfer amount must come from contributions made to the 529 account at least 5 years prior to the 529-to-Roth IRA transfer date, and transfers are subject to annual Roth IRA contribution limits. For 2026, a 529 beneficiary owner may transfer up to $7,500 annually until they reach the $35,000 lifetime maximum. Unlike regular Roth contributions, which have modified adjusted gross income limitations, 529-to-Roth IRA transfers do not appear to be subject to this limitation at this time. The IRS has not issued guidance on the 529-to-Roth IRA provision in the SECURE 2.0 Act but is anticipated to do so in the future. Based on forthcoming guidance, it may be necessary to change or modify some 529-to-Roth IRA transfer requirements. 2
Find out more in Viewpoints: How unused 529 assets can help with retirement planning.
10. Make full use of tax credits and tax-advantaged accounts for children
Trump Accounts
These are a new, custodial-style traditional IRA for minors—owned by the child but administered by an adult—created under federal law in 2025. Trump Accounts are slated to be available on or after July 5, 2026. The assets are owned by the child, while an adult—typically a parent or guardian—is authorized to open and act on the child’s behalf until the beneficiary reaches age 18.
Children under age 18 with a Social Security number are eligible for Trump Accounts. The Treasury’s pilot program adds a one-time $1,000 seed contribution to a Trump Account for US citizens born between January 1, 2025, and December 31, 2028, when a tax election is filed on the child’s behalf. Only one funded Trump Account is allowed per child.
Families can fund the account through individual contributions, and employer programs for both employee and employer contributions if available. These accounts may also be eligible for charitable contributions. Each of these different types of contributions has its own tax treatment.
Find out more in Viewpoints: Trump Accounts: A new way to save for kids.
Child Tax Credit (CTC)
The CTC received a few important changes that could affect how much families receive at tax time.
- The maximum credit increased slightly to $2,200 per qualifying child starting in 2025 and will be indexed for inflation for tax years after 2025. Note: the maximum credit remains the same for 2026. To qualify, your child must be under 17 at the end of the tax year.
- The refundable portion is capped at $1,700 per child for 2025 and 2026, also indexed for inflation.
- Income phase-out thresholds have been made permanent. The phase-out thresholds are $400,000 for joint filers and $200,000 for all others. The thresholds are not adjusted for inflation.
The permanently higher income thresholds may help more families benefit from the credit.
Find out more in Viewpoints: New tax law: 4 big changes for families.
Everyone’s tax situation is different, and you may want to consult with a tax professional who can help you understand whether recent tax changes affect your personal circumstances. But armed with information about these changes, you can take steps toward maximizing your tax situation now and in the years to come.