Insights from HWC Financial
As we look ahead to tax year 2026
(returns filed in 2027), it’s more important than ever to stay
ahead of the curve. Several key changes — driven
by inflation adjustments and new law provisions — will
affect deductions, credits, and planning strategies. Here’s what clients of HWC Financial should be paying attention to.
1. Inflation Adjustments & “One Big, Beautiful Bill”
Thanks to the “One Big, Beautiful Bill” (OBBB) and standard
IRS inflation indexing, many of the numbers that matter are rising for 2026:
- Standard
Deduction jumps to $16,100 for single filers, $32,200
for married couples filing jointly, and $24,150 for heads of
households.
- Tax
Brackets: The top marginal rate remains 37%, with the threshold
for single filers now at $640,600 and for joint filers at $768,700.
- AMT
Exemption: For 2026, the alternative minimum tax (AMT) exemption for
single filers is $90,100, phasing out at $500,000.
These changes help mitigate “bracket creep” and provide
relief, especially for taxpayers whose income moves closer to higher brackets.
2. Expanded Tax Credits & Special Deductions
- Earned
Income Tax Credit (EITC): The maximum credit for taxpayers with three
or more qualifying children is increasing to $8,231.
- Adoption
Credit: In 2026, qualified adoption expenses up to $17,670 are
eligible for a credit — and $5,120 of that may be refundable.
- Senior
Deduction: Taxpayers aged 65 or older can claim a deduction up to
$6,000 (or $12,000 for couples), even if they take the standard
deduction.
New Child Savings Accounts
A major addition starting in 2026 is a new type of tax‑advantaged
savings account for minors (under 18):
- Government
Seed Contribution: Children born between 2025 and 2028 receive a
one-time $1,000 contribution when a parent files a return listing the
child.
- Annual
Contributions: Parents, family members, and even employers can
contribute up to $5,000 per year, indexed for inflation.
- Investment
Requirements: Funds must be invested in low-cost, broad U.S. equity
index funds (mutual funds or ETFs).
- Distribution
Rules: No withdrawals until the child turns 18; after that, the
account behaves similarly to an IRA.
- Gift
Tax Considerations: Contributions count against the annual gift tax
exclusion, so planning is key.
These accounts offer a powerful tool for long-term growth
and legacy planning for the next generation.
3. Wealth & Estate Planning Impact
- Estate
Tax Exclusion: Increases to $15 million per person in 2026.
- Gift
Exclusions: Annual gift exclusion remains at $19,000, with a
higher limit for noncitizen spouses at $194,000.
Higher thresholds can open strategic planning windows for
clients with significant estates.
4. Important Planning Considerations
- Bracket
Management: Review withholding, estimated payments, and income timing.
- Retiree
Strategy: Maximize the senior deduction and coordinate IRA or Social
Security distributions.
- Child
Savings Accounts: For families, opening accounts early can create
long-term compounding benefits.
- Estate
Moves: With higher estate exemptions, revisit gifting and trust
strategies.
Why Now Is the Time to Act
Many of these changes may seem like numbers on a page, but
they can materially impact your tax picture — both short- and long-term.
Waiting until filing season may mean missing opportunities to optimize
deductions, credits, and new accounts.
Ready to Get Ahead?
At HWC Financial, we’re helping clients evaluate how
to leverage the new minor-savings accounts, maximize deductions, and adjust
their tax planning strategies for 2026. If you want to explore these
opportunities for your family or business — reach out now. Let’s make
sure you’re positioned for success before the year ends.
