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2026 Key Figures Update Thumbnail

2026 Key Figures Update

Financial Planning Insights Investments Markets Retirement Planning Social Security Taxes

Towards the end of each year, Woodward Financial Advisors is left eagerly anticipating news from the IRS on what 2026 brings regarding updated limits, phase-outs, and tax wrinkles that guide us. 2026 also introduces a few new rules, coming from a mix of the SECURE Act 2.0 and OBBBA.

 We encourage you to review these updates below to stay abreast of these changes. If you’ve any questions, our awesome team is happy to discuss them in the context of your financial plan.

 Retirement Accounts


Employer Plans (401(k), 403(b), 457(b), etc.)

  • Under 50 Years Old: $24,500
  • Age 50-59 and 64+: + $8,000 (total limit of $32,500)
  • Age 60-63: + $11,250 (total limit of $35,750)

The amount you may contribute is dictated by your age at the end of the year. For example, if you are age 60 by 12/31/2026, you may elect to contribute a total of $35,750 for your employee contributions. If you turn 64 on or before 12/31/2026, you’ll be eligible for the lower max of $32,500.

Part-time employees who work at least 500 hours per year for two years in a row will have the opportunity to participate in their employer’s retirement plan. For younger employees, age limitations may still apply and are set by the plan sponsor. 

IRAs and Roth IRAs

  • Under 50 Years Old: $7,500
  • Age 50+: + $1,100 (total limit of $8,600)

The deadline for contributions remains the tax deadline (generally April 15th) of the following year. IRA contributions require you to have earned income for the contribution year. Your modified adjusted gross income (MAGI), employer retirement plan coverage, and tax filing status may impact your ability to deduct Traditional IRA contributions or make Roth IRA contributions.

This year, the IRS has elected to increase the IRA catch-up amount for the first time since 2002! Strangely, only by $100.

SEP IRAs

Regardless of age, you are eligible to contribute the lesser of $72,000 or 25% of wages (20% for owners). We highly encourage working with a tax preparer to calculate your allowed contribution.

Required Minimum Distributions (RMD)

With multiple changes over the past few years, we felt it important to highlight the rules as they stand today – unchanged from last year.

Your RMD age is determined by your birth year as shown below. These rules differ for inherited IRA accounts.

  • Born before 1960: the year you turn age 73
  • Born 1960 or later: the year you turn age 75

 

Miscellaneous


Health Savings Accounts (HSA)

Contribution limits are based on whether your high-deductible health care plan is an individual plan (only covering the subscriber) or a family plan (covering the subscriber and at least one other family member). Catch-up contributions are allowed for each covered individual age 55 or older by the end of 2026.

  • Individual: $4,400
  • Family: $8,750
  • Catch-up contributions: $1,000

Flexible Spending Accounts (FSA)

Maximum contributions are as follows:

  • Health Care FSA: $3,400
  • Dependent Care FSA: 
    • $7,500 for most filers
    • $3,750 for married filing separately

529 College Savings Plans

These accounts have become more flexible, now allowing funds to be used for new eligible expenses connected with post-secondary credential programs like trades and certifications.

  • K-12 annual withdrawal limit increased to $20,000 per student
  • 529 rollovers to Roth IRAs and ABLE accounts were made permanent (subject to limitations)

Trump Accounts (Child IRAs)

This is a government funded account for eligible children that is invested into an index primarily tracking American equities. Children born between Jan 1, 2025 and December 31st, 2028 are eligible to participate in the program.

  • $1,000 is funded by the US Treasury
  • Additional funding can be made by parents and employers

Form 4547 must be filed to enroll, and contributions cannot be made before July 4th, 2026.

Annual Gift Tax Exclusion

This remains unchanged from 2025 at $19,000 per giver, per recipient. Gift splitting allows a married couple to gift up to $38,000 per recipient, without impacting their lifetime exemption.

There are codified rules for gifts to individuals that go to supporting health care costs and educational expenses. Please speak with your advisor if you plan to support anyone in this way.

Lifetime Estate Tax Exemption

$15M per person ($30M for married couples)

 

Delayed Components of the SECURE ACT 2.0


Mandatory Roth Catch-Up Contributions

The SECURE Act 2.0 established a requirement that any highly compensated employees who wish to make catch-up contributions to their employer retirement plans do so with Roth dollars. This will go into effect for the first time in 2026.

Any employer retirement plan catch-up contributions must be made with Roth dollars if your compensation exceeds $150,000 in 2026. This is tracked by your FICA wages – box 3 of your W-2 form.

Key Impacts of the One Big Beautiful Bill Act


Standard Deduction and Deductions for Non-Itemizers

  • Standard deductions:
    • $15,750 (Single)
    • $23,625 (Head of Household)
    • $31,500 (Married Filing Jointly)
  • Seniors age 65 and older receive a new temporary extra deduction from 2025–2028:
    • $6,000 per person ($12,000 per couple if both are 65 or older)
    • This phases out for incomes above $75,000 (Single) and $150,000 (Married Filing Jointly)
  • Charitable deduction for cash donations up to:
    • $1,000 (Single)
    • $2,000 (Married Filing Jointly)
  • Additional deductions for tips and overtime pay:
    • Up to $25,000 deduction for qualified tips
    • Up to $12,500 (Single) and $25,000 (Married Filing Jointly) deduction for qualified overtime pay
    • These deductions phase out at $150,000 (Single) / $300,000 (Married Filing Jointly).

Itemized Deduction Updates

  • State and Local Tax Deduction Cap (SALT)
    • The SALT deduction increases to $40,400
    • This phases out, beginning at $505,000 and never falls below $10,000
  • Charitable contributions must exceed 0.5% of adjusted gross income (AGI) to be deductible.
  • Personal vehicle interest deduction of up to $10,000
    • Only for new vehicles assembled in the United States
    • Income phaseouts begin at $100,000 (Single), $200,000 (Married Filing Jointly)
  • Itemized deduction impacts are capped at 35%, so earners in the 37% bracket receive less benefit from deductions than in past years
  • Additional deductions for tips and overtime pay are also applicable for itemizers (see last section)

If you're wondering how these updates might affect your situation or how to take advantage of them, reach out to your team at Woodward. We're here to help you navigate the changes and make the most of what’s ahead!


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