Significant changes to the U.S. tax system will take effect in 2026, affecting millions of American taxpayers. These updates, part of the legislation known as the One Big Beautiful Bill (OBBB) passed during President Donald Trump’s administration, aim to enhance tax benefits for charity donations, create new savings accounts for children, and increase retirement contribution limits.
New Tax Deductions for Charitable Contributions
One of the most notable changes involves the way taxpayers can deduct charitable donations. Starting in 2026, individuals who take the standard deduction will be eligible to deduct up to $1,000 for single filers and $2,000 for joint filers for cash gifts made directly to qualifying charities. This adjustment is expected to benefit a large number of taxpayers, particularly since approximately 90% of households opt for the standard deduction.
According to DAF Giving 360, a public charity focused on donor-advised funds (DAFs), this change allows many who previously donated without itemizing to now receive tax benefits. High-income earners will see a limitation on their deductions, with the highest tax bracket capped at 35%, down from 37%. This shift aims to distribute tax benefits more broadly across different income levels.
Introduction of Trump Accounts for Children’s Savings
In a significant initiative, the OBBB introduces the “Trump Accounts,” designed for children born between January 1, 2025, and December 31, 2028. These savings accounts, set to open on July 4, 2026, will come with an initial $1,000 deposit from the federal government aimed at helping middle-class families secure a financial future for their children.
The initiative is expected to impact approximately 25 million children under the age of ten, who will also receive $250 each, funded by a $6.25 billion donation from Michael Dell, founder of Dell Technologies. Parents and family members will be allowed to contribute up to $5,000 annually to these accounts, while employers can add up to $2,500 each year without affecting the parents’ taxable income.
Increased Retirement Contribution Limits
Another crucial amendment under the OBBB pertains to retirement savings. The Internal Revenue Service (IRS) has announced that the contribution limit for 401(k) plans will increase to $24,500 in 2026, a rise from $23,500 in 2025. For Americans aged 50 and older, the “catch-up” contribution limit will also see an increase to $8,000, allowing these individuals to contribute up to $32,500 annually.
Additionally, a higher catch-up contribution limit of $11,250 will be available for employees aged 60 to 63, providing further incentives for older workers to save for retirement.
As these changes unfold, American taxpayers are encouraged to familiarize themselves with the new regulations and consider how they may impact their tax planning strategies. The adjustments not only aim to enhance financial security for families and children but also seek to create a more equitable tax system for all income levels.
