Tax law changes every now and again, so it’s good to keep abreast of the new updates that might affect your life. Even if you’re retired, some recent changes to income tax brackets and tax deductions could directly impact your finances — and future retirement.
Here are the key changes to tax rules coming in 2026, and what you can do to prepare.
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Thanks to the One Big Beautiful Bill Act (OBBBA), individual filers who are at least 65 years old can claim an additional $6,000 tax deduction. Married couples filing jointly can claim up to $12,000. This is on top of the standard deduction that already exists.
This tax law change began in 2025 and will continue through 2028. To get the most out of it going forward, consider doing a Roth conversion.
“For the next [few] years, taxpayers over 65 can convert $12,000 in pre-tax individual retirement accounts (IRAs) into tax-free Roth IRAs at zero tax,” said Kelly Gilbert of EFG Financial. “If you converted just the $12,000 each year, that would create a $48,000 Roth IRA growing tax-free.”
Income limits apply. If your modified adjusted gross income (MAGI) is over $75,000 (or $150,000 for joint filers), you may not qualify for this new deduction.
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The IRS recently released its 2026 marginal tax rates, which are:
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35% for those earning over $256,225 ($512,450 for married couples filing jointly)
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32% for those earning over $201,775 ($403,550 for married couples filing jointly)
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24% for those earning over $105,700 ($211,400 for married couples filing jointly)
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22% for those earning over $50,400 ($100,800 for married couples filing jointly)
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12% for those earning over $12,400 ($24,800 for married couples filing jointly)
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10% for those earning $12,400 or less ($24,800 for married couples filing jointly)
The highest tax bracket remains unchanged from last year. Individual taxpayers earning $640,600 ($768,700 if married filing jointly) are still taxed at the marginal rate of 37%.
These new tax rates could impact your retirement account distributions, so it’s good to know where you stand.
“If you only need a certain amount of income to live on for the year, you don’t want to accidentally take out too much money from an IRA (taxed as ordinary income) and move up into a higher tax bracket,” said Carla Perez, a tax accountant and owner of Contable Tax Group. “Having an exact idea of what your tax bracket is and planning your retirement account distributions by either spreading them out more or delaying them can save you money.”
Perez provided the following example:
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Your annual income is $190,000 and you want to draw $30,000 from your IRA.
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Doing this all in one year would put you in the next-highest tax bracket, resulting in a larger tax bill.
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Instead, spread that $30,000 over three years to remain in your current tax bracket.
Under the OBBBA, there are a few other deductions worth knowing about, including:
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Up to a $10,000 annual deduction for paying interest on a new personal vehicle loan (leasing doesn’t count)
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No tax on qualified tips for employees or self-employed individuals (up to a $25,000 annual deduction)
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Up to $12,500 annual deduction ($25,000 for joint filers) on overtime income
Even if you’re retired, you might still earn some income as a consultant or part-time worker, so some of these deductions may apply to you. But know that there are limitations.
“These deductions are subject to certain modified adjusted gross income (MAGI) limits however, and your itemized or the standard deduction won’t reduce MAGI — therefore, you’ll want to focus on reducing income,” said Colleen Carcone, director of wealth planning strategies at TIAA.
Carcone provided the following tips on reducing or controlling your income to stay within these limits:
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Maximize your retirement plan contributions (if applicable)
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Manage investment income
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Harvest investment losses
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Consider making qualified charitable distributions
There are also changes coming to qualified charitable distributions (QCDs), something that may apply to taxpayers who itemize their deductions.
“Beginning in 2026, charitable gifts will be subject to a 0.5% adjusted gross income (AGI) floor. This means that if your AGI is $100,000, the first $500 of charitable gifts that you make will not be deducted as an itemized deduction,” said Carcone. “Also, if you are in the 37% income tax bracket, all of your itemized deductions, including charitable gifts, will be limited.”
As for what you can do, one option is to make QCDs — specifically if you’re already taking required minimum distributions (RMDs). These are direct gifts from your IRA to a qualified charity. These QCDs will still satisfy the RMD but won’t be considered a taxable distribution. Since they’re not itemized deductions, they’re not currently subject to the 0.5% AGI floor or next year’s itemized deductions limit.
“Note that the gift must be from an IRA and cannot come from an employer plan, like a 403(b) or 401(k),” said Carcone. “So, if your retirement dollars are invested in an employer plan, you might want to roll those monies into an IRA before the end of the year so that you can take advantage of QCDs next year.”
RMDs usually begin once you turn 73, as per the IRS. If you haven’t reached that point yet, Carcone suggested “front loading” your charitable gifts via a donor-advised fund instead. Just remember, the new tax rules come into effect Jan. 1, 2026, so you’ll want to act soon.
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This article originally appeared on GOBankingRates.com: 4 Moves Retirees Need To Make Now To Prepare for 2026 Tax Rules
