With the 2026 tax year drawing to a close, taxpayers should review new inflation-adjusted thresholds and the permanent extension of key individual tax provisions following the One Big Beautiful Bill Act (OBBBA).
The Permanent Extension of Tax Rates
For the 2026 tax year, the seven individual income tax rates—10%, 12%, 22%, 24%, 32%, 35%, and 37%—have been made permanent by the One Big Beautiful Bill Act (OBBBA), avoiding the previously scheduled 'sunset' to higher historical levels. While the rates remain the same, the income thresholds for each bracket have been adjusted upward for inflation. For 2026, the top 37% tax rate applies to single filers with taxable income above $640,600 and married couples filing jointly with income above $768,700.
2026 Standard Deduction and Personal Exemptions
The standard deduction has increased to reflect a roughly 2% inflation adjustment over 2025 levels. For the 2026 tax year, the standard deduction is $16,100 for single filers and $32,200 for married couples filing jointly. Notably, under the OBBBA, personal exemptions remain at zero, as the legislation made the temporary suspension enacted by the 2017 Tax Cuts and Jobs Act (TCJA) permanent.
Retirement Contribution Limit Increases
Taxpayers have new opportunities to maximize tax-deferred savings in 2026. The elective deferral limit for 401(k), 403(b), and most 457 plans has increased to $24,500. Individual Retirement Account (IRA) contribution limits have also risen to $7,500. A critical update for high-earners with wages exceeding $150,000 in the previous year: catch-up contributions must now be made on a Roth (after-tax) basis as mandated by SECURE 2.0 provisions effective this year.
Estate and Gift Tax Updates
The annual gift tax exclusion for 2026 remains at $19,000 per recipient, unchanged from 2025. However, the lifetime estate and gift tax exemption has seen a significant adjustment. Following the OBBBA, the exemption is $15 million per individual ($30 million for married couples) for 2026, effectively replacing the scheduled 50% reduction that would have occurred under the original TCJA sunset provisions.
Primary sources and further reading
- IRS releases tax inflation adjustments for tax year 2026
- IRS Notice 2025-67: 2026 Pension Plan Limitations
- Publication 926: Household Employer's Tax Guide for 2026
Tax rules depend on the tax year and individual circumstances. Confirm the current IRS guidance before filing.