Top 10 Tax Law Changes in 2026: What High-Income Earners Need to Know Now
I’d like to start with a re-introduction of myself – and an explanation of why I like to nerd-out not only on investment opportunities, but increasingly more on tax savings strategies.
As a Certified Financial Planner, I’m constantly learning about so many sectors of our lives that touch our money. This includes tax management, investment management, insurance, estate planning, philanthropy, risk management, college planning, long-term care planning, and so much more!
As the tax code changes very frequently, it is imperative to have the interest, the qualifications, and the industry connections to stay on top of the changes, and how to best incorporate strategies to help my clients. For this reason, I became what is called an Enrolled Agent.
Enrolled Agents are the only federally-licensed tax practitioners who both specialize in taxation and have unlimited rights to represent taxpayers before the Internal Revenue Service. These tax specialists have earned the privilege of representing taxpayers before the IRS by either passing a three-part examination covering individual tax returns; business tax returns; and representation, practice and procedure, or through relevant experience as a former IRS employee. All candidates are subjected to a rigorous background check conducted by the IRS.
I added this credential to my resume to be able to truly integrate wealth and tax planning into my practice. Most advisors will show you a portfolio statement once a quarter, while the reality of wealth management is SO much more. Further, most advisors will say, “Go ask your tax professional” when a complex issue arrives – and I know what happens. You try to connect with them, and either they don’t respond because they are too busy reactively doing tax work, OR they respond with comments that just further your confusion.
I wanted to offer my clients more – as busy career execs and entrepreneurs – you don’t have time for the back and forth – and you want someone who can explain things clearly. Which is why I offer a one-stop shop for wealth AND tax management. If this sounds like something you’re interested in, schedule a discovery call today.
This week I spent several hours in a continuing education class talking about what is changing for the 2026 tax year – and I learned a LOT! This blog is a digest of some of the most important issues to be aware of and plan for.
In summary, tax planning is becoming more important—not less—for high earners.
Several provisions taking effect in 2026 are changing how charitable deductions work, how itemized deductions are valued, who gets hit by the Alternative Minimum Tax (AMT), and how retirement and education planning opportunities can be used.
While many headlines focus on tax cuts for working families, affluent households should pay close attention to the less-publicized provisions that could increase tax bills if planning is ignored.
Here are the key changes I am discussing with clients this year.
1️⃣ AMT Is Back on the Radar
The Alternative Minimum Tax has been largely ignored by many taxpayers in recent years because exemption amounts increased significantly.
That changes in 2026.
The exemption levels fall to:
$90,100 for single filers
$140,200 for married filing jointly
Phase-outs begin at:
$500,000 for single taxpayers
$1 million for married couples
Who Should Pay Attention?
AMT exposure is particularly important for:
Executives exercising incentive stock options (ISOs)
Investors with large capital gains
Taxpayers with significant state income taxes
High-income professionals living in high-tax states
Massachusetts residents with equity compensation should be especially careful.
Many executives focus only on regular federal tax calculations and overlook potential AMT consequences when exercising options.
Running projections before year-end can help avoid unpleasant surprises.
2️⃣ Charitable Giving Just Got More Complicated
Many high-net-worth families use charitable giving as both a philanthropic and tax-planning tool. In particular, many of my clients have or should consider implementing a Donor Advised Fund. (see my prior blog).
Beginning in 2026, there are two important changes to understand.
New 0.5% AGI Floor for Charitable Deductions
For taxpayers who itemize deductions, charitable contributions must exceed 0.5% of adjusted gross income (AGI) before any deduction is allowed.
Here's a simple example:
AGI: $500,000
Charitable contributions: $15,000
0.5% AGI threshold: $2,500
Deductible amount: $12,500
This means part of your charitable gift may no longer generate a tax deduction.
Tax Strategy: Consider Bunching
Many affluent families may benefit from bunching charitable gifts into a single year.
For example, instead of donating $15,000 annually, a family might contribute $45,000 every three years through a donor-advised fund (DAF). The larger deduction may provide greater tax value while still allowing grants to charities over multiple years.
This strategy becomes even more valuable because of another change affecting high-income taxpayers.
3️⃣ Itemized Deductions Are Worth Less for Top Earners
Beginning in 2026, taxpayers in the 37% federal bracket face a new limitation often referred to as the "2/37 rule." This rule is so very confusing!
In practical terms, deductions will effectively provide tax savings as if you were in the 35% bracket rather than the 37% bracket.
Many investors assume a $100,000 deduction saves them $37,000 in taxes.
That assumption may no longer be correct.
The result is a reduction in the tax value of:
Charitable contributions
Mortgage interest
State and local taxes
Other itemized deductions
For households earning well into the top bracket, every deduction should be evaluated carefully to determine its actual after-tax benefit.
4️⃣ The SALT Deduction Changes Again
The State and Local Tax (SALT) deduction cap increases to:
$40,400 for most taxpayers
$20,200 for married filing separately
However, there is a catch.
The higher deduction begins to phase out when modified adjusted gross income exceeds:
$505,000 Married Filing Jointly (MFJ)
$252,500 Married Filing Separately (MFS)
The deduction is reduced gradually as income rises, although it will not fall below a $10,000 floor. Pay attention – sometimes we may decide to pre-pay real estate taxes in the year we itemize – but if you’re going to be above $505k income as joint filers, you’re SALT gradually declines back to $10k – which means maybe we hold that prepayment for a year when our income is lower. (SO much to suss out here – not to be done alone!)
Planning Opportunity
Households with fluctuating income may benefit from coordinating deductible expenses.
Potential strategies include:
Bunching charitable gifts
Timing estimated state tax payments
Coordinating income recognition
Managing capital gain realization
For executives with large bonus years, these planning decisions can significantly affect after-tax outcomes.
5️⃣ HSA Planning Gets More Attractive
In the financial planning world – this is HUGE!!!
One of the quieter changes in the legislation expands Health Savings Account eligibility.
Beginning in 2026, Bronze and Catastrophic health plans become HSA-compatible.
Why does this matter?
HSAs remain one of the most tax-efficient accounts available because they offer:
Tax-deductible contributions
Tax-deferred growth
Tax-free withdrawals for qualified medical expenses
Many planners refer to HSAs as receiving "triple tax benefits." Your contributions to an HSA are tax-free. Your funds grow tax-free. And you withdraw them tax-free upon usage – ideally many years down the road – when Medicare does not pay for many services you still need – think dental care, vision, hearing, etc. You WILL need these funds – I do tax returns for many seniors and I see how much they itemize for medical expenses.
So make note – if you DO have the ability to fund an HSA – try to max out your contributions. In 2026, singles can contribute $4,400 and families can contribute $8,750. Do it.
For affluent households who can pay current medical expenses from cash flow, allowing an HSA to grow for decades can create a substantial pool of tax-free assets. This is a financial planning super-power.
6️⃣ Roth Catch-Up Contributions Become Mandatory for Some Workers
A major SECURE 2.0 provision takes effect in 2026. While it is confusing, it is, in my opinion, a net positive for high-earners who should have more ROTH funds in retirement. Don’t forget – when you withdraw funds from a Roth, they are tax-free. While most 401k/IRA contributions getting withdrawn are taxable income that year (as they were funded with pre-tax dollars).
Employees who earned more than $150,000 in wages during 2025 and want to make catch-up contributions must do so into a Roth account. If you’re over 50, your catch-up contribution is $8,000, while ages 60-63 get a higher catch-up funding of $11,250. This is on top of your $24,500 maximum employee deferral contributions (which can still be made pre-tax).
This means:
No current-year deduction
Contributions made after tax
Future qualified withdrawals remain tax-free
Employers that do not offer Roth options may create administrative challenges for affected participants. Business owners – reach out to discuss your options! Schedule your call today.
If you're over age 50 and maximizing retirement contributions, verify your employer's plan provisions before year-end. Source: https://www.fidelity.com/learning-center/personal-finance/401k-catch-up-contributions-high-earners
7️⃣ 529 Plans Become More Flexible
Families saving for education gain additional flexibility.
The annual tax-free withdrawal limit for K-12 expenses doubles from $10,000 to $20,000.
Qualified expenses now include additional educational costs such as:
Books
Instructional materials
Certain tutoring expenses
AP testing fees
Standardized testing fees
For grandparents helping fund private education, this creates additional planning opportunities.
As always, state tax treatment should be reviewed before making withdrawals AND before contributing – as certain 529 plan providers, if in-state, offer tax benefits over those that are out-of-state.
An important note here, however. While 529 plans did become more flexible, I do still advise holding them for college expenses. In addition to tax changes, the Federal Student Loan program is changing in July 2026. I have MANY thoughts on that – and will be sharing – but basically, you don’t want your kids taking undergraduate loans if possible. This means preserving your 529 plan funds for college – AND being smart about your college choice.
8️⃣ Business Owners Receive Good News on the QBI Deduction
One of the most important provisions for entrepreneurs is the permanent extension of the Qualified Business Income (QBI) deduction under Section 199A. The QBI Deduction allows eligible owners of pass-through entities – including sole proprietors, partnerships, S corporations, and certain LLCs – to deduct up to 20% of their qualified business income.
The 20% deduction was scheduled to expire after 2025.
Instead, it becomes permanent.
For many business owners, this preserves one of the most valuable tax benefits available.
For successful entrepreneurs, this change alone may preserve thousands—or even tens of thousands—of dollars annually.
9️⃣ Energy Tax Credits Are Disappearing
Several popular energy-related tax incentives are ending.
These include:
Energy Efficient Home Improvement Credit
Residential Clean Energy Credit
Alternative Fuel Refueling Property Credit
1️⃣0️⃣ Tax Planning Is More Important Than Ever
Many affluent households focus primarily on investment returns.
But tax planning often delivers a more reliable benefit.
A portfolio earning 8% before taxes may produce dramatically different results depending on how income, deductions, charitable gifts, retirement contributions, and capital gains are managed.
The 2026 changes reinforce a reality I've seen repeatedly with clients:
👏 The tax code rewards proactive planning.
➡️ The households that benefit most are typically the ones making decisions before December—not after receiving a tax bill in April.
⚖️ If your income is expected to exceed $500,000, if you receive equity compensation, own a business, have significant charitable goals, or are approaching retirement, now is the time to evaluate how these changes affect your long-term plan.
📆 The earlier planning begins, the more options you have.
And as always, this information should not be construed as personal advice for readers. Always consult with your wealth and tax professionals.