Many families expected major tax increases in 2026 after the Tax Cuts and Jobs Act (TCJA) provisions were scheduled to expire. Instead, new legislation passed in 2025 made the lower tax rates and higher standard deduction permanent for most households. While the big tax hike many feared did not happen, important updates are now in effect for 2026 — including a significantly higher SALT deduction cap and brand-new savings options for families.
Here’s what you need to know and what actions to consider this year.
What Happened to the TCJA in 2026?
Congress passed the One Big Beautiful Bill Act in 2025, which made most individual TCJA tax cuts permanent rather than allowing them to expire. This means:
- The current lower federal income tax brackets and rates remain in place.
- The higher standard deduction continues (and adjusts annually for inflation).
- Most families avoided the significant tax increases that were originally projected.
Bottom line: There is more tax stability in 2026 than many anticipated, but planning is still essential due to inflation adjustments and new opportunities.
Key 2026 Tax Updates Families Should Know
1. Tax Brackets and Rates The seven lower tax brackets established under the TCJA were made permanent. These brackets continue to adjust each year for inflation. Strategic income timing and deductions can still help you stay in a lower bracket.
2. Standard Deduction The higher standard deduction remains available and is indexed for inflation. For most families who don’t itemize, this continues to reduce taxable income automatically.
3. SALT Deduction Cap (Major 2026 Change) One of the biggest updates this year is the temporary increase in the State and Local Tax (SALT) deduction cap.
- 2026 Cap:$40,400 for single and joint filers (up from the previous $10,000 limit).For married individuals filing separately, the cap is $20,200.
- Income Phaseouts:The expanded deduction begins to phase down by 30 cents for every dollar of Modified Adjusted Gross Income (MAGI) above $505,000 ($252,500 for married filing separately).However, the deduction will not phase out completely—it stops reducing once it hits a floor of $10,000 ($5,000 for separate filers).
- Timeline:These adjusted, inflation-indexed caps remain in effect through 2029, after which the limit is legally scheduled to revert back to the flat $10,000 cap in 2030.
This increase may make itemizing more valuable for families in higher-tax states like Michigan, especially homeowners with significant property taxes.
4. Child Tax Credit and New Family Savings Tools The enhanced Child Tax Credit structure remains largely intact. Additionally, Trump Accounts — a new tax-advantaged savings vehicle for children under 18 — became available in July 2026. Eligible children born between 2025 and 2028 may qualify for a $1,000 government contribution, with annual contribution limits now open.
Actionable Steps for Mid-to-Late Career Families in 2026
- Run a Mid-Year Tax Projection Don’t wait until tax season. Review your 2026 income, deductions, and credits now that the rules are clearer. A tax professional can help you model different scenarios.
- Maximize Retirement Contributions Contributions to 401(k)s, IRAs, and similar accounts remain one of the most effective ways to lower your taxable income while building long-term wealth.
- Re-Evaluate Itemizing vs. Standard Deduction With the SALT cap now at $40,400, it may be worth running the numbers on itemizing this year — especially if you pay high property taxes or have significant state income taxes.
- Review Your Estate Plan The estate and gift tax exemption was made permanent, giving you more long-term certainty. Still review your plan to ensure it reflects your current goals and family situation.
- Explore New Opportunities Like Trump Accounts If you have children or grandchildren under 18, look into Trump Accounts. Contributions became available in July 2026, and they offer a tax-advantaged way to support the next generation’s future education or homeownership goals.
Frequently Asked Questions About 2026 Tax Changes
Did tax rates go up in 2026? No. The lower TCJA tax rates and brackets were made permanent, so most families did not see the rate increases that were originally scheduled.
Should I itemize deductions in 2026? Possibly. The higher $40,400 SALT cap makes itemizing more attractive for many homeowners in Michigan and other higher-tax states. Run the numbers with your tax advisor.
What are Trump Accounts? New tax-advantaged investment accounts for children under 18. They allow contributions (with limits) and may include a $1,000 government seed for eligible children born 2025–2028. Contributions opened in July 2026.
Do I still need to plan for taxes in 2026? Yes. While the major rate shock was avoided, inflation adjustments, the new SALT rules, and other provisions still require proactive planning to minimize your tax bill and maximize opportunities.
Need Personalized Guidance for Your 2026 Taxes?
Tax rules continue to evolve, and the best strategy depends on your specific income, family situation, and goals. If you’d like help reviewing your current tax picture or exploring how these 2026 updates apply to you, our team is here to help.
Contact Covenant Financial to schedule a conversation. We’ll help you make clear, confident decisions for your family’s financial future.