07/19/2026
Hello everyone! I hope you’re have a great weekend so far!! We’ve been on a bit of a “tax tip” break. However, we’re back to offer some tax tips that may help you as you navigate 2026.
This week, we will discuss Part 1 of my mini-series that discusses 10 changes in the tax law from 2025 to 2026. We may also throw in a bonus tip in Part 2. If you missed any of my previous tips, feel free to visit my page at J. Chad McLamb, CPA.
10 Tax Changes for 2026 (Part 1) 7/18/2026
1. What Is the No Tax on Tips Deduction for 2026?
The IRS finalized regulations in April 2026 that define exactly which workers qualify for the “no tax on tips” deduction. This represents one of the most generous 2026 federal tax changes, potentially saving bartenders, servers, valets, and other tipped workers thousands annually. However, the rules are specific, and understanding eligibility is crucial to claiming this benefit.
To qualify for the tip deduction, your occupation must have “customarily and regularly” received tips before December 31, 2024. The IRS based this determination on real-world tipping practices and extensive public comments. Additionally, tips must be voluntary payments from customers or derived from tip pools—not mandatory service charges.
— Who Qualifies for the Tip Deduction?
The 2026 federal tax changes include specific occupations eligible for the tip deduction. Qualifying occupations include:
Servers and bartenders at restaurants and bars
** Valet parking attendants
** Bellhops and hotel service workers
** Hair salon stylists and technicians
** Influencers earning tips through platforms like Patreon
** Home repair workers and contractors
However, the IRS excludes certain specified service trades or businesses (SSTBs). If your occupation is in performing arts, athletics, healthcare, law, accounting, consulting, finance, brokerage, or other professional services, you cannot claim the deduction even if tips are customary. Additionally, employees of SSTBs are excluded, regardless of employer type.
— Calculating Your Tip Deduction for 2026
The maximum tip deduction for 2026 is $25,000 per tax return (not per taxpayer), meaning married couples filing jointly are capped at $25,000 combined, even if both earned tips above this amount. The deduction then phases out for higher income earners.
** Phase-out ranges for the 2026 tip deduction: The benefit begins declining at $150,000 modified adjusted gross income (MAGI) for single filers and $300,000 for married filing jointly. For self-employed workers claiming tips as business income on Schedule C, the deduction cannot exceed gross income less other business deductions. If your business operates at a loss, the tip deduction disappears entirely.
PRO TIP: Report all tips carefully on your 2026 return. Tips must appear on your Form W-2, Form 1099, or Form 4137 to qualify. Missing documentation means losing this valuable deduction.
2. How Do Retirement Contribution Limits Change in 2026?
For 2026, IRA contribution limits increase to $7,500 (under 50) and $8,600 (age 50+). Roth IRA income limits also rise, expanding access for middle-income earners.
The 2026 federal tax changes adjust retirement contribution limits for inflation. These annual increases ensure that middle-income savers can continue building tax-advantaged retirement funds. Understanding the new limits and phase-out ranges is crucial for strategic retirement planning.
The increases represent favorable inflation adjustments, giving savers more opportunity to build retirement security. For those age 50 and older (or turning 50 during 2026), the higher catch-up limit of $8,600 allows accelerated retirement saving. This is particularly valuable for business owners and self-employed professionals who may have delayed retirement planning.
— Roth IRA Income Phase-Out Ranges for 2026.
Roth IRA eligibility depends on modified adjusted gross income (MAGI). For 2026, the phase-out ranges have expanded:
** Single filers: Full contributions allowed below $153,000 MAGI; completely phased out at $165,000
** Married filing jointly: Full contributions allowed below $242,000 MAGI; completely phased out at $246,000
** Married filing separately: Generally limited to nominal contributions; phaseout begins at $0
The higher income limits mean more middle-income families can now fund Roth IRAs for 2026. A married couple with combined income of $240,000 can now each contribute the full $7,500 (or $8,600 if age 50+), locking in tax-free growth for decades.
3. Understand how capital gains and dividends could affect your tax bill.
The new tax law maintained long-term capital gains rates and the separate capital gains income brackets for assets held longer than 1 year and for qualifying dividends. The rates are 0%, 15%, and 20%, and the capital gains brackets are indexed for inflation. (It also retained the 3.8% net investment income tax, or NIIT, for higher income people.)
While the rates remain the same, wider income brackets may present you with an opportunity to lower your tax rate on this type of income, particularly when coupled with new or increased deductions that can decrease your taxable income. It could make sense to realize gains in taxable accounts this year. Or if you expect taxable income to be higher in future years, you might consider waiting to realize losses so they can offset capital gains that would be taxed at higher rates.
There are 2 important exceptions.
- Assets held in tax-advantaged accounts such as a workplace savings plan or traditional IRA are not subject to capital gains taxes, though you do owe income taxes on withdrawals.
- Short-term capital gains rates for assets held 1 year or less are the same as ordinary income rates.
4. Increased State And Local Tax (SALT) Deduction Cap (For Some)
In 2025, the OBBB increased the $10,000 cap on the SALT deduction temporarily to $40,000, but not for taxpayers with high incomes. Both the SALT cap and the income phaseout ranges will increase by 1 percent annually from 2026 to 2029. As of now, the limit will revert to $10,000 in 2030.
In 2026, the maximum state and local tax deduction cap is $40,400. The MAGI income phaseout range is $505,000 to $606,000. If your income exceeds $505,000, the deduction is reduced by 30 percent of the amount above this threshold. So a taxpayer with the maximum unadjusted itemized deduction and a MAGI of $555,000 would face a SALT deduction reduction of $15,000, as their income is $50,000 over the limit.
5. How Do Charitable Deductions Change in 2026?
For the 2026 tax year, non-itemizers can claim charitable deductions of up to $1,000 (single) or $2,000 (married filing jointly) without itemizing. This is one of the most significant 2026 federal tax changes for middle-income donors.
The 2026 federal tax changes democratize charitable giving by allowing taxpayers who claim the standard deduction to also deduct charitable contributions. Previously, only itemizers could claim charitable deductions, meaning approximately 90% of Americans couldn’t benefit from their generosity at tax time.
This provision is effective for tax years beginning after December 31, 2025, meaning your 2026 return is the first to take advantage. The deduction is above-the-line, meaning you claim it whether you itemize or take the standard deduction—a major enhancement to tax planning strategy.
— Non-Itemizer Charitable Contribution Limits
For 2026, you can deduct qualified charitable contributions up to:
** Single filers: $1,000 per year
** Married filing jointly: $2,000 per year
** Married filing separately: Limited to $1,000
Contributions must be to qualified charitable organizations (generally those with 501(c)(3) status). Additionally, itemizers now face new restrictions. Individual itemized deductions are subject to a 0.5% floor on the taxpayer’s contribution base, while corporate charitable deductions face a 1% floor tied to taxable income. These changes mean even large donors must strategically plan charitable giving.
— Strategic Giving: Itemizers vs. Non-Itemizers
The 2026 federal tax changes create new planning opportunities. A married couple filing jointly might now benefit from the $2,000 non-itemizer charitable deduction even if they take the standard deduction. This unlocks tax benefits for generous middle-income families previously unable to claim donations.
For high-income itemizers, the new floors on deductions mean bunching charitable contributions in certain years might optimize tax savings. Consider donating securities with appreciation rather than cash—a strategy that retains increased value under 2026 rules.
I’ll see yall next week for Part 2 in this mini-series. If you have any tax topics you’d like me to discuss, please let me know by commenting on this post, calling or emailing me or by visiting my website at
https://chadmclamb3.wixsite.com/chadmclambcpa
I hope you have a wonderful weekend!!
Thank you so much!
J. Chad McLamb, CPA
J. Chad McLamb, CPA provides trusted, affordable and personalized accounting services to a broad range of clients across the triangle area. As your Certified Public Accountant, I’m here to ensure that all of your financial decisions are made carefully and with your best interests in mind. Whatever...
