It’s crucial to stay informed about changing tax laws, even though it can often feel overwhelming and time-consuming. The recent passage of the One Big Beautiful Bill Act (OBBBA) underscores that the U.S. tax system remains complex and continues to evolve.
If the constant changes to the tax code leave you overwhelmed or intimidated, reach out to a financial advisor from the ARQ Wealth team for a free consultation. Our advisors can clarify the major 2026 tax changes and how they may affect your overall financial plan. Meanwhile, keep reading for a detailed guide to help you prepare effectively for tax year 2026.
There are several major federal tax changes to be aware of in 2026, including:
- Marginal Tax Brackets
- IRS Adjustments
- Retirement Account Adjustments
- Social Security Adjustments
NOTE: If you plan to file your 2026 taxes without professional assistance, keep in mind that the Internal Revenue Service (IRS) provides free filing options, including IRS Free File and Fillable Forms for eligible taxpayers. These resources can make the process easier for many. However, individuals with complex tax situations should still consult a tax professional to help maximize their credits and deductions.
For a consultation with us at ARQ Wealth Advisors, call us at (480) 351-4739 or fill out our contact form.
Marginal Tax Brackets for 2026
Knowing your tax bracket and whether it has changed for your situation is important when preparing your 2026 taxes, as it directly affects your federal income tax liability based on your taxable income.
Here are the federal income tax brackets for 2026, adjusted for inflation and including OBBBA provisions, which made many TCJA elements permanent.
- 10% for incomes of $12,400 or less ($24,800 or less for married couples filing jointly).
- 12% for incomes over $12,400 up to $50,400 ($24,800 to $100,800 for joint filers).
- 22% for incomes over $50,400 up to $105,700 ($100,800 to $211,400 for joint filers).
- 24% for incomes over $105,700 up to $201,775 ($211,400 to $403,550 for joint filers).
- 32% for incomes over $201,775 up to $256,225 ($403,550 to $512,450 for joint filers).
- 35% for incomes over $256,225 up to $640,600 ($512,450 to $768,700 for joint filers).
- 37% for incomes greater than $640,600 ($768,700 for married couples filing jointly).
What Taxes Will I Owe in 2026?
You can estimate your federal taxes by reviewing the IRS 2026 tax brackets, then factor in deductions, credits, and other applicable items.
For example, consider a single filer with $150,000 in taxable income in 2026. This places them in the 24% bracket after applying the lower rates progressively: the first $12,400 at 10%, the next portion at 12%, and so on. This provides a rough estimate of federal tax before deductions, credits, or adjustments. Actual amounts can vary—consult a professional on the ARQ Wealth team for personalized strategies designed to lower your taxable income using eligible credits and deductions.
Don’t forget state taxes, which are separate.
Arizona remains tax-friendly for residents in 2026, with:
- Income tax: 2.5% flat rate
- Social Security taxes: 0% at the state level (federal rules apply to benefits)
- Estate taxes: None
- Inheritance tax: None
- Sales tax: 5.6% state (plus local additions)
- Property tax: Average effective rate around 0.44%–0.63% of assessed home value, among the lowest in the nation.
To assess your complete 2026 tax picture, contact a financial planner at ARQ Wealth.
Let’s explore some of the biggest changes coming to the tax code in 2026.
2026 Federal Tax Changes: IRS Adjustments
Each year, the IRS adjusts various thresholds for inflation to maintain their real value. Important changes for 2026 include:
Standard Deduction
The standard deduction is $16,100 for single taxpayers and married filing separately (up from $15,750 in 2025); $32,200 for married filing jointly (up from $31,500); $24,150 for heads of household (up from $23,625).
Alternative minimum tax exemption
The alternative minimum tax is designed so that high-income taxpayers and middle-income taxpayers who benefit from significant deductions still pay income tax at a minimum level.
The AMT exemption amount for unmarried individuals increases to $90,100 ($70,100 for married individuals filing separately) in 2026 and begins to phase out at $500,000. For married couples filing jointly, the AMT exemption amount increases to $140,200 and begins to phase out at $1,000,000.
These higher AMT exemption thresholds, made permanent by the OBBBA, mean fewer taxpayers are affected by the alternative minimum tax compared to prior law.
Estate tax exemption
This has recently increased significantly. For descendants dying in 2025, the federal basic exclusion amount is $13.99 million per individual (or effectively $27.98 million for married couples via portability). Under the OBBBA, this rises to a permanent $15 million per individual (or $30 million for married couples) starting in 2026, with future annual inflation adjustments beginning thereafter.
Estates below these thresholds are generally not subject to federal estate tax (which applies at up to 40% on amounts above the exemption).
Annual gift tax exclusion
This allows tax-free gifts of up to $19,000 per recipient each year, or $38,000 if gifts are split between spouses. Amounts over the annual exclusion may reduce the lifetime estate and gift tax exemption, but generally do not cause immediate gift tax for most individuals due to the high unified exemption levels.
Health Savings Accounts (HSAs) for 2026
Health savings accounts offer a triple tax advantage: contributions are tax-deductible, growth is tax-free, and withdrawals for qualified medical expenses are untaxed.
For 2026, the HSA contribution limits have been adjusted for inflation. Individuals with self-only coverage can contribute up to $4,400, while those with family coverage can contribute up to $8,750. The catch-up contribution for those age 55 and older remains at $1,000.
HSAs are particularly valuable for taxpayers looking to reduce their taxable income while saving for future healthcare costs. Unlike flexible spending accounts, HSA balances roll over year to year, making these savings accounts an excellent long-term planning tool.
2026 Gambling Tax Law Changes
The OBBBA introduced changes to gambling taxes starting in the 2026 tax year.
Notably, the deduction for gambling losses is now capped at 90% of winnings, down from 100%. This means a gambler who wins $100,000 and loses $100,000 can only deduct $90,000, leaving $10,000 subject to federal income tax despite having no actual profit—a scenario the gambling industry calls “phantom income.” This primarily affects taxpayers who itemize their deductions, as those who claim the standard deduction cannot deduct gambling losses.
There is bipartisan support in Congress for restoring the full 100% loss deduction, but as of early 2026, the 90% cap remains in effect. Gamblers should keep detailed records of all wins and losses and consult a tax professional to understand how these changes affect their financial situation and filing status.
Earned Income Tax Credit (EITC) amounts
The maximum credit for tax year 2026 has been adjusted upward to reflect inflation and other factors. The maximum amounts are:
- No qualifying children: $664
- 1 qualifying child: $4,427
- 2 qualifying children: $7,316
- 3 or more qualifying children: $8,231
These credits phase in and out based on earned income and adjusted gross income (AGI) levels, with higher phase-out thresholds for married filing jointly (e.g., up to approximately $70,244 for those with three or more children).
For the complete list of inflation adjustments, visit the IRS website.
Retirement Account Adjustments
Adjustments for 401(k)s and Similar Plans: The elective deferral limit for 401(k), 403(b), governmental 457 plans, and Thrift Savings Plans increases to $24,500 (from $23,500 in tax year 2025). The catch-up contribution for those age 50+ increases to $8,000 (from $7,500). The special catch-up for ages 60–63 stays at $11,250. These adjustments help taxpayers save more tax-advantaged dollars for retirement.
Adjustments for Individual Retirement Accounts: The annual IRA contribution limit increases to $7,500 (from $7,000 in the 2025 tax year). Those age 50 and older can contribute a total of $8,600, which includes an additional $1,100 catch-up contribution. Roth IRA phase-out ranges have increased (e.g., for single filers and heads of household, from roughly $153,000 to $168,000 in modified adjusted gross income). Taxpayers near these income limits should review whether they qualify for direct Roth contributions or should consider a backdoor Roth strategy.
Keep in mind: for 2026, catch-up contributions may be required to go into the Roth side of the plan. This applies to both the regular age 50+ catch-up and the age 60-63 super catch-up when an employee’s prior-year FICA wages from that employer were more than $150,000. Otherwise, catch-up contributions can generally be made on a pre-tax or Roth basis if the plan permits.
Social Security Adjustments
The Social Security payroll tax rate stays at 6.2%. The wage base (the maximum earnings subject to the tax) rises to $184,500 in 2026 (from $176,100 in 2025), which may increase contributions for high earners and their employers.
Separately, Social Security benefits see a 2.8% cost-of-living adjustment (COLA) increase in 2026. Arizona residents receiving these benefits keep the full amount, as the state does not tax Social Security income.
Looking Ahead: Post-TCJA Environment
The 2026 tax outlook indicates modest inflation-driven increases and stability. Thanks to the OBBBA, many TCJA individual provisions remain intact, and widespread disruptions that full expiration could have caused have been avoided.
Frequently Asked Questions
What are the changes to the tax code in 2026?
Primarily inflation adjustments to brackets, deductions, retirement limits, and other thresholds, while making some tax provisions from the TCJA permanent.
How has the standard deduction changed for 2026, and what about personal exemptions?
The significantly higher standard deduction introduced by the TCJA remains permanent and is adjusted for inflation. For tax year 2026, the limits are $16,100 for single filers, $32,200 for married filing jointly, and $24,150 for heads of household (including additional amounts for seniors). Personal exemptions are still eliminated (at $0), upholding the TCJA’s approach that favors a larger standard deduction over exemptions.
How does the state and local tax (SALT) deduction change for 2026?
The TCJA’s $10,000 cap on itemized SALT deductions (covering state and local income, sales, and property taxes) was temporarily increased by the OBBBA to $40,000 for many filers, with a gradual reduction for higher earners starting at $500,000 in Modified Adjusted Gross Income for tax years 2025-2028.
For 2026, the SALT deduction is capped at $40,400, with the phase-out beginning when MAGI is $505,000. Regardless of the MAGI, the SALT deduction will not fall below $10,000.
This relief is temporary (lasting through 2029 in some provisions, with annual 1% increases in caps and phase-outs) and aims to help taxpayers in high-tax states while preventing a full repeal. After the temporary period, it may revert or be further adjusted.
Are there new deductions or exclusions for specific types of income in 2026?
Beginning July 4, 2026, employers can contribute up to $2,500 to the new Trump Accounts for Children, and that amount is excluded from the employee’s gross income. While not new, as these applied for tax year 2025 with the passing of the OBBA, it is worth a reminder.
The law added several temporary deductions, including deductions for qualified tips, qualified overtime pay, qualified vehicle loan interest, and an additional deduction for certain taxpayers age 65 and older. These deductions are set to expire at the end of 2028 (unless Congress extends them) and are subject to income-based phaseouts.
Separately, the SALT deduction cap remains temporarily higher in 2026 at $40,400 and begins to phase down for higher-income taxpayers with modified AGI above $505,000. The current increased SALT deduction is set to expire at the end of 2029.
How do business-related tax provisions like bonus depreciation and pass-through deductions look in 2026?
Provisions such as 100% bonus depreciation for qualifying business property and the 20% qualified business income (QBI) deduction for pass-through entities (e.g., sole proprietorships, partnerships, S corps) were made permanent or extended, supporting investment and small/business owners. Other international/business rules (e.g., GILTI/FDII deductions, interest limits) received tweaks to permanence, while some clean energy credits from prior laws faced phase-outs or reductions.
Contact Us
If you have questions about your 2026 taxes or are exploring ways to reduce your liability, contact the experienced team at ARQ Wealth. We’re here and ready to help with efficient tax planning. Contact a financial advisor today by calling (480) 214-9572 or filling out our contact form.