Major changes to the U.S. tax system will take effect in 2026, promising potential benefits for taxpayers. These adjustments, stemming from the passage of President Donald Trump’s One Big Beautiful Bill (OBBB), aim to enhance savings opportunities and provide more financial support to families.
New Deductions for Charitable Donations
One of the significant updates involves the rules for deducting charitable contributions. Under the new legislation, taxpayers opting for the standard deduction can deduct up to $1,000 for single filers and $2,000 for joint filers when donating cash to qualifying charities. This change is expected to benefit many taxpayers who previously did not itemize their deductions, as approximately 90% of households take the standard deduction.
According to DAF Giving 360, a public charity that offers donor-advised funds, this update is designed to support individuals wishing to contribute to causes they care about while also reducing their tax liabilities. High-income donors will face new limits, as their deductions will be capped at 35%, down from the previous 37%.
Introduction of Trump Accounts for Children’s Savings
Another notable provision in the OBBB is the establishment of “Trump Accounts.” These savings accounts will be available for American children born between December 31, 2024, and January 1, 2029. Accounts will officially open on July 4, 2026, and each account will receive an initial deposit of $1,000 from the federal government.
During an announcement, Trump stated that the accounts aim to provide middle-class families with an opportunity to invest in their children’s futures and access the benefits of a growing stock market. Additionally, Michael Dell, founder of Dell Technologies, has pledged $6.25 billion to ensure that 25 million children aged ten and under will receive $250 in their accounts.
Parents and family members will be permitted to contribute up to $5,000 annually to these accounts. Employers can also make contributions of up to $2,500 per year, which will not impact the employees’ taxable income.
Increased Retirement Savings Contributions
As part of the OBBB, new regulations will allow Americans to increase their retirement savings. The IRS announced that the contribution limit for 401(k) plans will rise to $24,500 in 2026, up from $23,500 in 2025. For employees aged 50 and older, the “catch-up” contribution limit will increase to $8,000, allowing these individuals to save a total of $32,500 annually.
Additionally, a higher catch-up contribution limit will be set for workers aged 60 to 63, allowing them to contribute up to $11,250.
These updates are expected to provide significant financial advantages to many American families, enabling them to save more effectively for charitable causes, their children’s futures, and retirement. As the tax landscape evolves, staying informed about these changes will be essential for taxpayers across the nation.
