Several major tax law changes take effect in 2026, including new Roth-only rules for retirement catch-up contributions, a sharply higher SALT deduction cap, and a temporary senior bonus deduction. These changes can raise or lower your taxes depending on income, age, and where you live. Coordinated planning is essential to avoid surprises and capture opportunities.
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New Roth Requirements for Catch-Up Contributions
One of the most significant 2026 changes affects retirement savers age 50 and older.
Historically, workers making catch-up contributions could choose between pre-tax and Roth options. Starting in 2026, employees with FICA wages of $150,000 or more must make all catch-up contributions as Roth contributions.
What this means in practice:
- Contributions are made after tax.
- Assets can still grow tax-free.
- Qualified withdrawals in retirement remain tax-free.
- There is no immediate tax deduction.
The standard catch-up contribution has increased to $8,000 for those age 50 and older. The enhanced “super catch-up” of $11,250 remains available for individuals ages 60 to 63.
For high earners who previously relied on pre-tax catch-up contributions to lower current taxable income, this change can increase today’s tax bill. While Roth savings offer long-term benefits, the lack of upfront tax relief may require adjustments elsewhere in a financial plan.
The SALT Deduction Cap Is Much Higher
Another major shift expands itemized deduction opportunities.
The state and local tax (SALT) deduction cap, which has been limited to $10,000 since 2017, rises to:
- $40,000 for tax year 2025
- $40,400 for tax year 2026
The cap then increases by one percent annually through 2029 before reverting to $10,000 in 2030.
This change is especially impactful for residents of high-tax states such as California, New York, and New Jersey. With a higher SALT cap, many households who have taken the standard deduction in recent years may once again benefit from itemizing.
For context, the standard deduction in 2026 is $16,100 for single filers and $32,200 for married couples filing jointly. With the expanded SALT limit, itemized deductions may now exceed those thresholds for many
Why Itemizing May Matter Again
When the SALT cap was reduced in 2017 and the standard deduction doubled, the percentage of taxpayers who itemized dropped sharply. With the higher cap in place, itemizing may once again reduce taxable income for households with meaningful state taxes, charitable giving, or mortgage interest.
As a simplified illustration, a married couple with substantial state taxes and other deductions could see itemized deductions exceed the standard deduction by tens of thousands of dollars under the new rules. That difference directly lowers taxable income.
Social Security, AGI, and the “Senior Bonus” Deduction
Tax planning does not stop with deductions. Adjusted Gross Income (AGI) plays a central role in how much of your Social Security benefits are taxable.
Key considerations for 2026:
- Social Security taxation thresholds have not been indexed for inflation.
- Higher AGI can cause a larger portion of benefits to become taxable.
- Roth catch-up contributions may increase AGI compared to pre-tax contributions.
There is also a temporary “senior bonus” deduction available from 2025 through 2028:
- $6,000 for single filers age 65 and older
- $12,000 for married couples filing jointly
This deduction applies even if you itemize, but it phases out at higher income levels. Decisions that increase AGI could reduce or eliminate this benefit.
Planning Opportunities and Timing Considerations
The expanded SALT deduction opens a limited window for proactive planning. Strategies may include:
- Bunching charitable contributions into a single year.
- Timing deductible expenses strategically.
- Reviewing whether itemizing now provides greater benefit than the standard deduction.
These opportunities are temporary. The SALT cap is scheduled to revert in 2030, making the next few years especially important for coordinated planning.
Key Takeaways
- High earners must make catch-up retirement contributions as Roth starting in 2026.
- The SALT deduction cap increases dramatically through 2029.
- More households may benefit from itemizing again.
- AGI changes can affect Social Security taxation and senior deductions.
- Tax changes should be evaluated together, not in isolation.
Frequently Asked Questions
Do Roth catch-up contributions make sense for everyone?
Not necessarily. Roth contributions offer long-term tax benefits, but they do not reduce current taxable income. The right choice depends on income, tax bracket, and retirement timeline.
Who benefits most from the higher SALT deduction cap?
Taxpayers in high-tax states and those with significant state income or property taxes may benefit the most.
Is the higher SALT cap permanent?
No. Under current law, it is scheduled to expire after 2029.
Can higher AGI increase taxes on Social Security benefits?
Yes. Higher AGI can cause more of your benefits to be taxable.
Next Steps With Viridian Wealth Management
Tax law changes create both risk and opportunity. A coordinated approach that considers retirement contributions, deductions, and income timing can help improve outcomes over time.
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Disclosure
This material is for informational purposes only and is not intended as investment, tax, or legal advice. Investing involves risk, including possible loss of principal. Consult a qualified professional regarding your personal circumstances.