The IRS has changed the tax rules for 2026 — here’s how to keep more money and not overpay

The IRS has changed the tax rules for 2026 — here’s how to keep more money and not overpay
Sam Huszczo
6 min read
The “One Big Beautiful Bill Act” that passed Congress last year has arrived — and it’s bringing more swag than any tax law in recent memory.
For high-income earners, especially those nearing or already in retirement, this is your cue to update the tax playbook. When the rules of the game change, playing the same strategy isn’t discipline, it’s denial. Here’s what has changed, and what to do about it.
1. Revisit your payroll elections for 2026: Let’s start with the low-hanging fruit, how to reduce taxable income. Many individuals may consider reviewing their paycheck withholding in light of the 2026 tax updates. The IRS even has a quick paycheck checkup tool to help you dial in your withholding (www.irs.gov/paycheck-checkup). Translation: Is the IRS borrowing your money interest-free longer than necessary?
And while you’re at it, fine-tune your deductions as well:
That means a narrow window where workers aged 60–63 can contribute up to $35,750 to a 401(k). Enjoy it while you can because once the clock strikes 64, you’re back to the regular limits. High earners should also note that catch-up contributions must be Roth starting in 2026. No deduction now, but tax-free later can be an attractive trade-off for some taxpayers, depending on future income and tax circumstances. A 10-minute review of your withholding and planning assumptions could have the potential to save you thousands of dollars later through better tax-savings strategies. Inertia is expensive.
2. SALT is back on the Menu… (sort of): Since 2018, the $10,000 state and local tax (SALT) deduction cap has been a recurring nightmare for taxpayers in New York, California, New Jersey, Connecticut and Illinois, to name a few states. The OBBBA raised that cap to $40,000 for 2026 through 2029 — $20,000 if married filing separately (MFS). For many upper middle-class households, this is real relief and a meaningful tax reduction strategy. If you’ve been bumping into the old cap for years, you may finally deduct more of what you actually pay. But read the fine print before you pop the champagne.
If your modified adjusted gross income exceeds $500,000 ($250,000 MFS), the “extra” SALT deduction above $10,000 begins to phase out at a 30% rate. At around $600,000 of income, you’re effectively back to the old $10,000 cap. This wasn’t designed for billionaires or middle America. It’s for the professional class stuck in the middle of both.
3. The SALT workaround still matters: If you’re a business owner with pass-through income and live in a high-tax state, the PTET (pass-through entity tax) workaround remains one of the more valuable tools on the board. Close to 40 states allow businesses to pay state taxes at the entity level — fully deductible as a business expense, with a credit flowing back to the owner personally. OBBBA did not eliminate this state-level structure.
PTET is especially helpful if:
Because PTET is deducted at the entity level, it may reduce taxable income passed through to the owner in certain structures, which may also help manage stealth taxes including income-related monthly adjustment amount surcharges and the Net Investment Income Tax. As a business owner, this may involve additional administrative work but can provide meaningful tax benefits for some taxpayers..
4. Charitable timing before new limits arrive: Starting in 2026, charitable deductions are expected to be limited to amounts exceeding 0.5% of AGI, under current law. So smaller gifts that were fully deductible before might not generate a deduction now. One commonly used approach is charitable bunching.
If you plan to give consistently, consider accelerating multiple years of charitable gifts into 2026. This increases the odds you itemize, clears the future AGI floor, and maximizes deductions while the rules are more favorable. Donor-advised funds make this easier, letting you deduct now and distribute later.
5. Business owners: Bonus depreciation is back: The OBBBA restored 100% bonus depreciation for 2026, reversing the planned step-down to 40%. If you place qualifying equipment or assets in service after Jan. 19, 2026, you may deduct the full cost immediately.
This may create a clear planning window for proactive tax strategies. If you were already considering equipment upgrades, vehicles or major purchases, accelerating them into 2026 could increase current-year deductions for some businesses, depending on profitability and other tax limitations. While some depreciation rules were made permanent, assuming future Congresses will leave them alone may be wishful thinking.
OBBBA also made the 20% Qualified Business Income deduction permanent, removing a major source of uncertainty for pass-through owners. It’s not new, but knowing it’s staying matters when projecting long-term tax outcomes.
6. ISOs and the quiet return of AMT risk: The OBBBA kept higher Alternative Minimum Tax exemption amounts but lowers the income phaseout thresholds again starting in 2026. Translation: AMT will still be a non-issue for most people, but a larger group will be affected, especially those exercising Incentive Stock Options.
For in-the-money or soon-expiring ISOs, the timing of exercises can materially affect tax outcomes, and staged exercises are one approach that some taxpayers evaluate with professional guidance. This is not a do-it-yourself spreadsheet exercise; it takes careful planning and depth that a simple spreadsheet won’t capture. While AMT surprises tend to be expensive and sometimes avoidable with proper planning.
Stay proactive
Many of the OBBBA provisions are temporary: SALT relief expires; bonus depreciation could change; new deductions sunset. Doing nothing is not neutral, it means you’re sticking with the government’s default plan option, not designing your own playbook.
Advanced tax planning isn’t about tricks. It’s about sequencing, timing, and coordination across decades, not tax years, especially when applying tax strategies in retirement. When the rules change, your strategy should too. No single tweak is a magic bullet, but stack enough of them together and suddenly you’ve built a castle, not from one big move, but from multiple coordinated planning decisions that can meaningfully influence your long-term tax outcomes.
This content is provided for general educational and informational purposes only. It does not constitute personalized investment, tax, legal, or financial advice. Any examples or illustrations are hypothetical and do not reflect the results of any specific person or account. Future tax laws, investment results, and financial outcomes are uncertain and may change.