2026 Tax Brackets Are Out: New Money Moves Now
The IRS has released the new, inflation-adjusted federal tax brackets for the 2026 tax year (filed in early 2027). While these adjustments mainly account for inflation, they shift the thresholds for every bracket, creating immediate opportunities for year-end 2025 tax optimization.
Key Changes for 2026 Tax Year
The core tax rates (10%, 12%, 22%, 24%, 32%, 35%, and 37%) remain the same, but the income boundaries have shifted, meaning you can earn more before hitting a higher marginal rate.
| Filing Status | 2025 Standard Deduction | 2026 Standard Deduction (New) | Increase |
|---|---|---|---|
| Single | $\text{\$15,750}$ | $\text{\$16,100}$ | $\text{\$350}$ |
| Married Filing Jointly | $\text{\$31,500}$ | $\text{\$32,200}$ | $\text{\$700}$ |
| Head of Household | $\text{\$23,625}$ | $\text{\$24,150}$ | $\text{\$525}$ |
The increase in the Standard Deduction and the widening of the brackets are generally beneficial, providing modest tax savings for most Americans.
3 Strategic Money Moves to Make Before 2026
Use the knowledge of the 2026 limits to make smart decisions *now*—before the end of 2025.
1. Optimize Your Roth Conversion Strategy
The Strategy: The widening of the 12% and 22% brackets in 2026 means those brackets will absorb a slightly larger amount of income before pushing you into the next, higher bracket.
- **Action Now:** If you are nearing the top of your current 2025 marginal tax bracket (e.g., about to cross from 22% into 24%), consider executing a **Roth conversion** in **December 2025**. You can convert Traditional IRA assets up to the edge of your current 2025 bracket, paying the known lower tax rate now.
- **Why it Matters:** If you anticipate earning significantly more in 2026 and jumping into a higher bracket, pre-paying taxes at the 2025 rate via a Roth conversion can save you money in the long run.
2. Review Capital Gains Tax Harvests
The Strategy: The threshold for the **0% long-term capital gains tax rate** is also increasing with inflation in 2026.
- **2026 0% Cap Gains Threshold (Approx):** $\text{\$49,450}$ for Single; $\text{\$98,900}$ for Married Filing Jointly.
- **Action Now:** If you have low taxable income in 2025 (e.g., you were unemployed part of the year), you may want to **sell appreciated assets** now to utilize the 0% capital gains bracket this year, before your income potentially rises in 2026.
- **Note:** Use this opportunity strategically. If your income is projected to be *lower* in 2026, deferring capital gains until January might be the better play.
3. Front-Load Retirement Contributions
The Strategy: While the 401(k) contribution limit for 2026 won't be announced until late 2026, the consistent rise in the standard deduction and tax bracket thresholds suggests the retirement contribution limits will also increase.
- **Action Now:** Ensure you have fully maxed out your **2025 401(k) ($\text{\$23,000}$)** and **IRA ($\text{\$7,000}$)** contributions before December 31. Every dollar contributed reduces your 2025 taxable income, potentially keeping you in a lower tax bracket.
- **Why it Matters:** When 2026 rolls around, you will be prepared to hit the (likely higher) new limits right away, maximizing your tax-deferred savings runway.
Access our Year-End Tax Optimization Planner to see how the new brackets affect your tax liability.
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