What Actually Changes on Your 2026 Return
A higher standard deduction, a state and local tax cap of $40,400 with a phase-down above roughly $500,500 of income, and a $2,000 charitable deduction for people who do not itemize.
The tax law enacted in 2025 arrived in two waves. The first applied retroactively to that year and produced the unusually large refunds of the spring. The second takes effect for the 2026 tax year — the one taxpayers are living in now and will file on next spring.
Here is what changes.
The standard deduction
For 2026, the standard deduction rises to $32,200 for married couples filing jointly, $16,100 for single filers and those married filing separately, and $24,150 for heads of household. Inflation adjustments across more than 60 provisions average roughly 2.7%.
State and local taxes
The cap on deducting state and local taxes stands at $40,400 for 2026. Above a modified adjusted gross income of roughly $500,500, the cap phases down by 30 cents per dollar of income above the threshold, but never falls below $10,000.
That structure creates a band of income where each additional dollar earned reduces a deduction — an effective marginal rate meaningfully higher than the stated bracket. Taxpayers near the threshold should model income timing carefully.
The higher cap is scheduled to run through 2029, after which the deduction reverts to $10,000.
Charitable giving, in both directions
Two changes push opposite ways. Taxpayers who do not itemize can claim a deduction of up to $2,000 for cash gifts to qualified charities — the return of a benefit that lapsed several years ago.
Taxpayers who do itemize face a new floor: charitable contributions are deductible only to the extent they exceed 0.5% of adjusted gross income. Corporations face a similar 1% floor against taxable income.
For a household with $400,000 of income, the first $2,000 of giving now produces no deduction. That has already changed how advisers structure gifts, pushing toward bunching several years of contributions into one.
Estate and gift
The federal estate and gift tax exemption rises to $15 million per person for 2026, indexed for inflation thereafter — $30 million for a married couple. The provision is written as permanent rather than sunsetting, which removes the deadline pressure that has driven high-net-worth planning for the past several years.
What to do about it
The practical advice for most households is unglamorous: check withholding. Refunds this spring were inflated by tables that had not caught up with a retroactive law. They have caught up now.
