How Tax Changes Can Affect Your 2026 Investments

A yellow note pad rests on top of a 1040 tax form with a reminder of the new tax laws to be implemented for 2026.

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Last year ended with several key tax-law changes that will have a dramatic effect on your 2026 investments.

For example, the One Big Beautiful Bill Act of 2025 signed into law by President Donald Trump took effect immediately, making permanent many aspects of Trump’s tax cuts originally passed in 2017.

Furthermore, the IRS provided guidance surrounding the SECURE 2.0 Act, shedding light on how tax payers saving for retirement can make tax-advantaged decisions. These two events dramatically alter the calculus for individuals making investment decisions in 2026.

What Are The Main Tax Changes In 2026?

The One Big Beautiful Bill Act of 2025 brought about one of the largest changes to the Internal Revenue Code in recent times. For individual taxpayers, OBBBA:

• Significantly increased state and local tax itemized deductions from $10,000 to $40,000;
• Offered all children a $1,000 tax-advantaged savings account (often referred to as a Trump account);
• Provided no tax on some tip and overtime wages for lower- and middle-income taxpayers;
• Permitted $10,000 of car-loan interest deductions for lower- and middle-income taxpayers;
• And created an enhanced standard deduction for taxpayers older than 65.

While some of these provisions are specific to certain types of taxpayers, there are two aspects of OBBBA that apply to all taxpayers.

First, the individual income tax rates stayed steady, from 10% to 37%. Previously, they ranged from 10% to 39%. However, the tax rates increased more rapidly across the brackets, with taxpayers earning lower amounts becoming subject to higher tax rates. While these tax rates not changing may not feel like a tax benefit, the truth is most taxpayers would have seen their liabilities increase had the rates reverted to pre-2017 rates. Second, the larger standard deduction ($16,100 for 2026 if single; $32,200 if married) remains intact. Absent the OBBBA, this deduction was projected to be about half as large.

From a corporate and business perspective, the OBBBA allows full expensing of domestic research and experimentation (as well as a retroactive recognition of expenses amortized between 2022 and 2025), permanent bonus depreciation, alterations to multinational taxation rules and amplified opportunity zone investment benefits. Additionally, like the changes introduced for individual taxpayers, the OBBBA retains the more advantageous 21% corporate income tax rate, which lawmakers could have altered throughout the legislative process.

The second key tax law change that impacts investments, announced in 2025, is the clarification of the rules surrounding the SECURE 2.0 Act. Congress passed this act in 2022 under the Biden administration, and many important provisions will go into effect in 2026. Under this act, individuals ages 60 to 63 can make additional contributions up to $11,250 to their retirement accounts. However, if the individual has an adjusted gross income over $145,000, then the incremental contributions must be made on a Roth, or after-tax, basis. The latter of these changes means that higher-income individuals will need to pay taxes on their contributions first, which closes a loophole that many older individuals used, as they were previously allowed to contribute more on a pre-tax basis and then take out the funds at retirement when tax rates are lower.

The Impacts Of The One Big Beautiful Bill (OBBB) And SECURE 2.0 Acts

It is difficult to overstate the widespread impacts of these two acts. Lawmakers passed OBBBA as a reflection of changes to Trump’s entire domestic agenda. Whether it be individuals or businesses, substantial tax law changes now take effect, designed to alter taxpayer behavior everywhere from investments, entrepreneurship, philanthropy, gambling, innovation and more.

The SECURE 2.0 Act was far more targeted at altering incentives and opportunities for individuals to save for retirement. Many of the rules governing the extent and nature of retirement contributions remained largely unchanged for decades. While the alterations increase the total amount that older taxpayers can contribute, the amount that these taxpayers can now contribute has substantially weaker tax benefits, as higher-income taxpayers can no longer defer the tax burden for these contributions by contributing on a pre-tax basis.

2026 Federal Income Tax Brackets And Rates

As a form of equity in the U.S. federal tax system, the IRS provides new tax tables each year. 2026 was no exception. While the percentages remain the same, the top taxable income for each tax bracket increased from 2025 to 2026, meaning that, all else equal, taxpayers’ tax liabilities will decline.

The 2026 tax table is as follows:

This table provides the income that will be subject to each tax rate based on the taxpayer’s filing status. The U.S. uses a progressive income tax rate, meaning that taxpayers’ income becomes subject to increasingly higher tax rates as they earn more. However, even if a taxpayer is in a high tax bracket, their lower levels of income will still be subject to the lower rates. For instance, a single taxpayer with $100,000 of taxable income will pay 10% on their first $12,400 of income, followed by 12% on their income between $12,401 and $50,400, followed by 22% on their income between $50,401 and $100,000.

2026 Capital Gains And Investment Income

In 2026, long-term capital gains and dividend income continue to be taxed at a rate of 0%, 15% or 20%, depending on the taxpayer’s taxable income. The following table outlines the 2026 taxable income cutoffs for each rate:

Importantly, these preferential capital gains tax rates only apply to gains on assets held for one year or longer. Holding for less time than this will result in the gains being classified as short-term and taxed at ordinary income tax rates (the individual income tax rates).

As it pertains to individual investors, particularly older Americans saving for retirement, they can now put substantially more into their retirement accounts than before under the SECURE 2.0 Act (albeit, it can no longer all be on a pre-tax basis). Taxpayers can now also obtain substantially more tax benefits by investing in qualifying small-business stocks as well as investments into opportunity zones — investments into low-income or distressed communities. These two new programs enhanced under the OBBBA provide tax deferral or tax-free treatment for taxpayers who realize significant earnings from investments, particularly outside of brokerages.

Retirement And Savings Changes To Know

Like previous years, the amounts that taxpayers can set aside for retirement under tax-preferred accounts grew from 2025 to 2026. 401(k) contribution limits grew to $24,500, and IRS contribution limits increased to $7,500. The amount that can be contributed for those older taxpayers looking to “catch up” also increased for both types of retirement accounts. The changes combine with those deriving from the SECURE 2.0 Act to create dynamic fluctuations in the tax rules governing retirement and savings accounts. In particular, higher-income taxpayers looking to contribute to additional catch-up contributions will need to carefully weigh the benefits now that the catch-up portion must be on an after-tax basis.

For parents considering setting aside funds for their children, they can now look to a Trump account. Children born between 2025 and 2028 will receive $1,000 in seed money to bolster their account. However, even if children were born before 2025, parents can contribute funds to these accounts on an after-tax basis, and the children can withdraw the funds after they turn 18 without any penalty if they use them for qualified purchases, such as a first-time home purchase and higher education expenses. At the time of withdrawal, only the earnings are subject to tax. Parents can contribute up to $5,000 per child per year, and the contributions do not have earned-income requirements. This $5,000 can also include contributions made by the taxpayer’s employer. While these accounts are similar to 529 education plans in some regards, they have different financial features, making them another tool to consider employing when parents put away money for their children’s future.

Will Tax Refunds Be Changed In 2026?

The process for taxpayers paying taxes, filing their return and getting a refund (or paying their liability) has not changed in 2026. However, the OBBBA contained many provisions that will lower a taxpayer’s 2025 tax liability. Furthermore, lawmakers passed OBBBA midway through 2025, and the IRS elected not to update withholding tables. Thus, even if taxpayers were less impacted by the specific provisions of OBBBA, it is possible that they had more withheld from their paychecks through 2025 than necessary. This potential tax refund windfall may not mean that all taxpayers will receive massive checks from the government upon filing. However, those who do not may pay a lot less in taxes upon filing than they would have otherwise.

Bottom Line

OBBBA and the SECURE 2.0 Act significantly altered the tax environment for individuals and businesses in 2025 and beyond. While some of the most impactful provisions extend prior tax cuts, many new provisions change how taxpayers incorporate tax considerations into their investment and savings decisions.