Tax preparation is the last thing anyone wants to think about during the holidays. But it’s an ideal time for strategic planning that can yield tax savings and other financial benefits in the new year. That’s especially true as we approach 2026, when several important tax reforms will begin to take effect.

Overview of Major Rate Changes

Almost every year, the federal government adjusts the tax brackets in order to keep up with inflation. Next year will be no different. For example, in 2026, the highest marginal income tax rate (37%) will apply to individual filers with incomes of $640,600 or more and joint filers with incomes of $768,600 or more, reflecting a 2.3% increase from the previous year.

Beyond these usual adjustments, the tax code has been changed in other ways, too — especially thanks to the One Big Beautiful Bill Act (OBBBA), which Congress passed on July 4, 2025. The legislation extends a number of tax provisions that were set to expire or sunset, while also creating new ones that will impact financial planning. 

Some of the key provisions to keep in mind for your year-end planning are:

• Annual gift exclusion (unchanged)
• Lifetime estate exclusion (expanded)
• Charitable giving (new)
• Standard deduction for both single and married filers (expanded)
  
  

Here’s the good news: As a result of these changes, the Tax Foundation estimates that the average taxpayer will see their after-tax income go up by 5.4% on average in 2026.

If there’s bad news, it’s that navigating this new landscape — and maximizing your savings — will require a bit of paying attention. Fortunately, that’s what our team is here for.

Impact on Annual Gift Exclusion

Under the OBBBA, the annual gift exclusion will remain unchanged at $19,000. On an annual basis, this is the maximum amount of money that a person can gift to someone (other than a spouse, for whom there are higher limits) without triggering the gift tax. As long as the gift doesn’t exceed $19,000, it doesn’t need to be reported to the IRS.

The annual gift exclusion can be an effective tool to transfer wealth over time while minimizing tax effects, especially now that the exclusion will remain at its current peak level.

Impact on Lifetime Estate Exclusion

The lifetime estate exclusion is the total amount of money that a person can pass down to their heirs (including after death) without those assets incurring federal taxes. This exclusion and the annual gift exclusion are connected: If you make a gift in excess of $19,000, then it begins to count against your lifetime gift tax exemption.

Before the OBBBA was passed, the lifetime estate exclusion (currently at $13,990,000 for 2025) was set to decrease by half next year. Instead, the new legislation increases the limit to $15 million for individuals beginning in 2026, which is a welcome change for many wealthy families. Although there is no expiration date for this record-high cap, future federal legislation could potentially amend it. Therefore, families may want to consider taking advantage of the thresholds — by making large gifts or other asset transfers — while they are in effect.  

Impact on Charitable Giving

The OBBBA also introduced new provisions that will directly impact charitable deductions and giving levels. The legislation imposes new restrictions on the tax benefits of certain philanthropic gifts, particularly those originating from high-net-worth individuals.

For itemizers in the highest marginal tax bracket, there are new caps on charitable deductions. In 2025, taxpayers in the top bracket could lower their taxable income by up to 37% (i.e., a $1,000 charitable gift would produce a $370 deduction). In 2026, the maximum deduction will be capped at 35% for the highest income category. Anyone planning to execute a large charitable contribution might seek to accelerate those plans at the end of this current calendar year, in order to maximize their tax savings. 

Additionally, the OBBBA has created new floors for claiming a charitable deduction. Starting next year, itemizers will only be able to utilize a charitable deduction if they are donating more than 0.5% of their adjusted gross income (AGI). For example, in 2026, an individual with an AGI of $500,000 could only claim a philanthropic deduction if they’re contributing more than $2,500 to charity. Corporations also have a new floor, which will be set at 1% of the corporation’s AGI. Strategies such as “bunching” charitable donations will be even more important to consider going forward.

Impact on Standard Deduction 

For non-itemizers, the standard deduction is the primary tool for reducing annual taxable income. For each type of filing status, the standard deduction will increase in 2026.

Single filers can now claim a standard deduction of $16,100 next year, while married couples can reduce their reported income by $32,200. Additionally, seniors aged 65 and older are generally eligible for a slightly higher standard deduction.

The Next Step  

Taxes can feel overwhelming, but they won’t with an experienced financial advisor by your side. Faubourg Private Wealth has a proven track record of helping our clients maximize their year-over-year income while also realizing their long-term goals. Now is an ideal time to consider taking the next steps with your own financial strategy.

Reach out to us today to schedule a meeting!