2026 Tax Changes You Can’t Afford to Ignore

Insights from First Financial

As we look ahead to tax year 2026 (returns filed in 2027), it’s more important than ever to stay ahead of the curve. Several key changes — driven by inflation adjustments and new law provisions — will affect deductions, credits, and planning strategies. Here’s what clients of HWC Financial should be paying attention to.

1. Inflation Adjustments & “One Big, Beautiful Bill”

Thanks to the “One Big, Beautiful Bill” (OBBB) and standard IRS inflation indexing, many of the numbers that matter are rising for 2026:

• Standard Deduction jumps to $16,100 for single filers, $32,200 for married couples filing jointly, and $24,150 for heads of households.

• Tax Brackets: The top marginal rate remains 37%, with the threshold for single filers now at $640,600 and for joint filers at $768,700.

• AMT Exemption: For 2026, the alternative minimum tax (AMT) exemption for single filers is $90,100, phasing out at $500,000.

  
  

These changes help mitigate “bracket creep” and provide relief, especially for taxpayers whose income moves closer to higher brackets.

2. Expanded Tax Credits & Special Deductions

• Earned Income Tax Credit (EITC): The maximum credit for taxpayers with three or more qualifying children is increasing to $8,231.

• Adoption Credit: In 2026, qualified adoption expenses up to $17,670 are eligible for a credit — and $5,120 of that may be refundable.

• Senior Deduction: Taxpayers aged 65 or older can claim a deduction up to $6,000 (or $12,000 for couples), even if they take the standard deduction.

  
  

New Child Savings Accounts

A major addition starting in 2026 is a new type of tax‑advantaged savings account for minors (under 18):

• Government Seed Contribution: Children born between 2025 and 2028 receive a one-time $1,000 contribution when a parent files a return listing the child.

• Annual Contributions: Parents, family members, and even employers can contribute up to $5,000 per year, indexed for inflation.

• Investment Requirements: Funds must be invested in low-cost, broad U.S. equity index funds (mutual funds or ETFs).

• Distribution Rules: No withdrawals until the child turns 18; after that, the account behaves similarly to an IRA.

• Gift Tax Considerations: Contributions count against the annual gift tax exclusion, so planning is key.

  
  

These accounts offer a powerful tool for long-term growth and legacy planning for the next generation.

3. Wealth & Estate Planning Impact

• Estate Tax Exclusion: Increases to $15 million per person in 2026.

• Gift Exclusions: Annual gift exclusion remains at $19,000, with a higher limit for noncitizen spouses at $194,000.

  
  

Higher thresholds can open strategic planning windows for clients with significant estates.

4. Important Planning Considerations

• Bracket Management: Review withholding, estimated payments, and income timing.

• Retiree Strategy: Maximize the senior deduction and coordinate IRA or Social Security distributions.

• Child Savings Accounts: For families, opening accounts early can create long-term compounding benefits.

• Estate Moves: With higher estate exemptions, revisit gifting and trust strategies.

  
  

Why Now Is the Time to Act

Many of these changes may seem like numbers on a page, but they can materially impact your tax picture — both short- and long-term. Waiting until filing season may mean missing opportunities to optimize deductions, credits, and new accounts.

Ready to Get Ahead?

At First Financial, we’re helping clients evaluate how to leverage the new minor-savings accounts, maximize deductions, and adjust their tax planning strategies for 2026. If you want to explore these opportunities for your family or business — reach out now. Let’s make sure you’re positioned for success before the year ends.