Tax season is here, and while it’s never anyone’s favorite time of year, 2026 brings a few extra hurdles. The IRS is navigating staffing cuts while also implementing a long list of changes under the One Big Beautiful Bill Act (OBBBA), also known as the Working Families Tax Cut. Together, those factors have created more complexity and more room for surprises than usual.

Whether you’re expecting a refund or anticipating a balance due, this is a year where waiting until the last minute can work against you. Getting ahead of your return gives you more time to spot issues, make informed decisions, and take advantage of planning opportunities that could otherwise be missed.

Below are some of the key changes worth paying attention to this year, along with why they matter and how they may affect your filing.

#1: State and Local Tax (SALT) Deduction

For years, there’s been a $10,000 cap on the State and Local Tax (SALT) deduction, which has hit taxpayers in high-tax states especially hard. If you live in Minnesota or a similar state, the new, increased SALT cap may feel like a breath of fresh air, with a few caveats.

What’s changing for the 2026 tax season:

• Starting in 2025, the OBBBA raises the SALT deduction cap from $10,000 to $40,000.
• That higher limit begins to phase down once your modified adjusted gross income reaches certain levels, roughly $250,000 for single filers and $500,000 for joint filers.

If your income is close to or above those phase-out thresholds, planning matters. The timing of when you pay state and local taxes could affect how much of the deduction you actually get to keep. This is a good year to coordinate closely with your financial planner or CPA so you can make those decisions intentionally.

Business owners should pay extra attention here as well. While the OBBBA increased the personal SALT deduction cap, it left state-level pass-through entity (PTE) tax elections intact. In many cases, those elections can still provide meaningful tax savings on top of the individual SALT deduction.

#2: Higher Standard Deduction

The Tax Cuts and Jobs Act of 2017 raised the standard deduction significantly, and the OBBBA makes that higher level permanent. Even though many high-income households itemize out of habit, this is a good year to pause and run the numbers. Depending on your situation, the standard deduction may actually produce a better result, especially if you’re close to the line.

What’s changing for the 2026 tax season:

• For the 2025 tax year, the standard deduction increases to $15,750 for single filers, $31,500 for married couples filing jointly, and $23,625 for heads of household.
• Taxpayers age 65 or older may qualify for an additional deduction of up to $6,000, or $12,000 for couples where both spouses are 65 or older. This extra amount begins to phase out once income exceeds $75,000 for single filers and $150,000 for joint filers.

It’s worth comparing your 2025 tax outcome both ways, using the standard deduction and itemizing, before defaulting to one or the other. If you’re close to the cutoff, small planning moves can make a difference, like bunching charitable gifts or timing deductible expenses such as property taxes.

For taxpayers age 65 and older who don’t have many itemized deductions, income timing matters too. Being thoughtful about when you take distributions can help preserve the full senior deduction and avoid giving up part of it unnecessarily.

#3: Lower AMT Exemption Phaseout Thresholds 

If you’re a high earner, especially if a meaningful portion of your income comes from equity compensation or one-time income events, the Alternative Minimum Tax (AMT) deserves extra attention this year. Changes under the OBBBA make it easier to fall into AMT territory, and when that happens, some deductions you might expect, including SALT, may not apply.

What’s changing for the 2026 tax season:

• The income levels where the AMT exemption begins to phase out drop to $1,000,000 for married couples filing jointly and $500,000 for all other filers, with inflation adjustments going forward.
• Once you cross those thresholds, the exemption now phases out faster. It’s reduced by 50% of income above the limit, up from 25%, which means it disappears much more quickly than it used to.

If equity compensation plays a significant role in your pay, particularly Incentive Stock Options (ISOs), it’s smart to run side-by-side projections before making large exercise decisions. Comparing your regular tax outcome to your AMT exposure ahead of time can help you avoid a surprise tax bill.

For those living in high-tax states like Minnesota, AMT planning should also factor in SALT. While the higher SALT cap can lower your regular tax bill, SALT deductions are still disallowed under AMT, which now applies at lower income levels starting in 2026.

#4: New Charitable Giving Rules

The OBBBA changes how charitable deductions work, which makes both timing and structure more important going forward. If you regularly give and itemize deductions, 2025 may end up being one of the more favorable years for charitable write-offs for a while. While you can’t retroactively change your 2025 deduction, these updates are worth factoring into how you approach giving in the years ahead.

What’s changing for the 2026 tax season:

• Starting in 2026, itemized charitable deductions apply only to the portion of gifts that exceeds 0.5% of your adjusted gross income.
• For taxpayers in the highest tax bracket, the effective tax benefit of charitable deductions is capped at 35%, down from 37%, after accounting for the new floor and existing income limits.
• The OBBBA also adds an above-the-line deduction for taxpayers who take the standard deduction, allowing up to $1,000 in cash charitable gifts, or $2,000 for joint filers, even without itemizing.

If charitable giving is already part of your plan, the way you give may matter more than how much you give each year. Beginning in 2026, it may be more effective to concentrate gifts into fewer, larger years rather than spreading smaller amounts annually. That approach can help you clear the new deduction floor and capture more value when you do itemize.

#5: Permanent Higher Lifetime Estate and Gift Tax Exemptions

For several years, estate planning conversations were shaped by the expectation that the estate tax exemption would be cut roughly in half after 2025. That looming deadline drove a lot of rushed gifting and trust planning designed to lock in the higher exemption before it disappeared. Under the OBBBA, that pressure largely goes away, giving families more breathing room and flexibility.

What’s changing for the 2026 tax season:

• The OBBBA makes the higher lifetime estate and gift tax exemption permanent instead of allowing it to drop after 2025. In 2026, the exemption is set at $15 million per person and will continue to adjust for inflation over time.
• The annual gift tax exclusion remains in place as well, currently $19,000 per recipient, which reduces the need to make large gifts solely to preserve exemption amounts.

If you put estate planning strategies in place specifically to prepare for a 2026 “sunset,” this is a good time to revisit them. A review with your estate attorney or financial planner can help determine whether those strategies still serve your goals or if adjustments would make more sense now that the rules have changed.

Approach Your 2026 Tax Season with Confidence

While the OBBBA didn’t overhaul the tax brackets, changes to deductions and planning rules are likely to affect high-income households in real ways during the 2026 tax season. Paying attention now gives you more time to make thoughtful decisions and avoid surprises when it’s time to file.

You don’t have to navigate these changes on your own. Align Financial can help you understand how the new rules apply to your situation and identify planning opportunities that fit into your broader financial life.

When tax decisions are coordinated with your income, investments, and long-term goals, you can keep more of what you earn and put it to work with purpose. Contact us to learn more and take the next step.