Tax rules continue to evolve, and over the past year there have been several legislative changes that may impact both individuals and businesses. The One Big Beautiful Bill Act (OBBBA), passed in 2025, introduced a number of updates that are now in effect.
While many long‑standing tax strategies remain effective, several new deductions, credits, and planning opportunities may also apply this year. The overview below highlights key updates and planning considerations to help you stay informed and make thoughtful decisions as 2026 progresses.
Tax Updates for Individuals
New rules for charitable deductions
There are new limitations on charitable deductions listed below. For people who itemize deductions on Schedule A, it is more beneficial than ever to plan charitable giving to maximize tax deductibility.
- If you itemize, your charitable deduction is reduced by a small percentage (0.5% of your adjusted gross income, or AGI).
- If you do not itemize, you can now deduct up to $1,000 in cash gifts ($2,000 for joint filers). Noncash donations (like donations to Goodwill) do not qualify.
Retirement planning
- Required Minimum Distributions (RMDs) from your IRA or 401(k) must start at age 73; missing them can result in penalties.
- Giving directly from an IRA to charity may reduce taxes.
- Roth conversions may be beneficial in low-income years.
- Adjusting tax withholding on retirement distributions can help avoid penalties.
Higher SALT deduction
The limit on state and local tax (SALT) deductions has increased from $10,000 to $40,000, with additional yearly increases.
This deduction will begin to phase out for taxpayers with AGI over $500,000, and other strategies will need to be considered, such as pass-through entity tax (PTET) (see section: Additional Business Planning for 2026). For all taxpayers, except those married filing separately, if your AGI is under $500,000, you will want to make sure to track any sales tax on large purchases.
Health HSAs, FSAs, and 529 accounts
- The 2026 health savings account (HSA) contribution limit is $4,400 for individuals ($8,750 for families). If you do not contribute the maximum through payroll withholding, you can still make deductible contributions through April 15, 2027.
- Check your flexible spending account (FSA) balance to avoid forfeiting unused funds based on your employer’s rules.
- 529 plans remain a powerful way to save for education costs, including the option to make 5 years’ worth of gifts at once (“superfunding”). This does require you to file a gift tax return.
Gift and estate planning
- You can give up to $19,000 per person, to any number of recipients, per year tax‑free ($38,000 for couples giving jointly).
- The federal estate and gift tax exemption has increased and continues to rise with inflation.
Washington State has again adjusted its estate tax. Individuals with over $3 million in net worth ($6 million for married couples) should have wills and an estate plan in place to maximize the ability to pass on wealth tax free.
New limits on gambling losses
The new limit on gambling losses will limit deductions of gambling losses only up to 90% of your wagers and only up to your winnings. This may lead to situations where you have taxable income even with no net winnings! Good recordkeeping is important.
Car loan interest deduction
If you are planning on purchasing a new car, the interest paid on qualifying loans for new U.S.-assembled cars purchased from 2025–2028 may be deductible, up to $10,000.
This deduction begins to phase out for taxpayers with income exceeding $100,000 ($200,000 for joint filers).
Avoiding underpayment penalties
Higher IRS interest rates at 7% mean penalties for underpaying taxes can be costly. Reviewing your withholding and estimated payments early in the year may prevent unnecessary expense.
Tax Updates for Businesses
Asset expensing
You can fully expense many fixed assets that you purchase this year.
- 100% bonus depreciation has been restored, meaning that many non-real estate assets that you purchase for your business are fully deductible in the year purchased.
Qualified Small Business Stock (QSBS)
New stock purchased from newly formed C Corporations after July 4, 2025 qualifies for different levels of capital‑gain exclusion based on how long the stock is held. If you invest in a private company, making sure you comply with these rules may allow you to exclude up to $15 million of capital gain from future taxation, or more with advance planning (contact us to learn more).
Corporate charitable deduction limits
C Corporations now face a 1% “floor” before charitable gifts are deductible and remain capped at 10% of taxable income. Donations from S Corps and Partnership are reported on your personal return and would be subject to the individual rules.
Additional Business Planning for 2026
- If you’re self-employed, you may be able to contribute to a SEP IRA: You can contribute up to 25% of income (within annual limits).
- State tax considerations and pass-through entity tax (PTET): PTET elections can still provide federal tax savings for owners in many states, especially if the business owners are unable to take advantage of the increased state tax deduction on Form 1040.
In Conclusion
These are just a few of the tax planning opportunities and changes worth keeping in mind as the year moves forward. Tax rules continue to evolve, and the strategies that make sense for you will depend on your individual or business circumstances. If you have questions or would like to discuss how these updates may apply to your situation, please contact us. Our team is always happy to help.