Sancus Accounting Services, LLC

Sancus Accounting Services, LLC We are a full-service accounting/tax firm specializing in Sole Proprietors and small businesses. Certified Quickbooks Online ProAdvisor

01/22/2026

2026 Changes to 401(k) and Saver's Credit Rules

The IRS has announced the 2026 contribution and income limits for various retirement plans and related tax benefits, which include many increases over 2025 levels. For 401(k), 403(b) and certain similar plans, the general annual contribution limit will be $24,500, up from $23,500 in 2025. The additional catch-up contribution limit for qualifying employees of age 50-59 or 64 and over will rise from $7,500 to $8,000. However, the catch-up contribution limit for those of age 60-63 will not increase, remaining at $11,250. Annual and catch-up contribution limits for SIMPLE retirement plans will also increase.

In addition, the income limits for the Retirement Savings Contribution Credit (commonly known as the Saver’s Credit) will increase for all filing statuses. For those who file under single or married filing separately status, the adjusted gross income (AGI) limit will rise from $39,500 in 2025 to $40,250 in 2026. The AGI limit will increase from $59,250 to $60,375 for head of household filers, and from $79,000 to $80,500 for joint filers. Remember, qualifying individuals may claim both the Saver’s Credit and a deduction for traditional IRA contributions.

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01/22/2026

IRS Issues Additional Guidance for "No Tax on Tips" Deduction
The One Big Beautiful Bill Act (OBBBA) specifies that only tips separately reported on a year-end tax document like a W-2 or 1099 form qualify for the new “no tax on tips” deduction.

However, the current versions of those forms do not necessarily allow for reporting that complies with the OBBBA requirement. Therefore, the IRS will allow eligible tipped employees and self-employed people to use alternative methods to figure the deduction for 2025.

Under these special, temporary rules, qualifying tip recipients may be able to use any of the following as the basis for their deduction:

Tips shown in box 7 of Form W-2 (Social Security tips)
Tips properly reported to an employer, even if the tips do not separately appear on a W-2 form
Tips recorded separately in detailed records of self-employment income, even if the tips are not specifically reported on a Form 1099.

If you are eligible to claim the “no tax on tips” deduction, the maximum annual deduction is $25,000, subject to income limits, with a phase-out range beginning at a modified adjusted gross income (MAGI) of $150,000 for individuals, or $300,000 for joint filers.

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24441 Detroit Road, Suite 300
Westlake, OH
44145

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