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Looking Ahead to 2026: Tax Changes and Retirement Strategies

November 13, 2025

At First National Bank and Trust Company, we’re committed to helping you navigate financial changes with confidence. Our new series, “Preparing for 202 & Beyond: Tax Code Updates,” is designed to turn complex tax law changes into actionable opportunities, so you can make informed decisions for your future.

Part One — Retirement Planning Under the Updated Tax Rules: Keeping More of What You Earn

This article explores how the One Big Beautiful Bill Act (OBBBA) impacts retirees and those nearing retirement. The new provisions may allow pre-retirees to rethink income distribution strategies, while current retirees can benefit from deductions that increase their spendable income. 

The recently enacted OBBBA isn’t just another tax law, it’s a significant shift that could simplify planning and boost your after-tax income. Here’s what you need to know:

Simplified 7-Bracket System

In 2017, the Tax Cuts & Jobs Act (TCJA) saw the implementation of a lowered seven-bracket system (10%, 12%, 22%, 24%, 32%, 35%, 37%). These tax brackets are now a permanent fixture for taxpayers. This creates less complexity and allows income strategies to continue without the need to modify for a “what-if TCJA sunsets” scenario. Additionally, we can eliminate a sense of urgency and spread out distributions over the long term to keep a client in those lower tax brackets.

As a reminder, if the TCJA had expired, the following brackets would have increased in 2026: 12% to 15%, 22% to 25%, 24% to 28%, 32% to 33%, and 37% to 39.6%.

 

Extra Deduction for Seniors (65+)

From 2025–2028, taxpayers aged 65 and older can claim an additional $6,000 deduction or $12,000 for married couples filing jointly where both spouses meet the age requirement. This bonus deduction can help lower taxable income, reduce Medicare premiums, and create opportunities for Roth conversions at favorable rates.

Note: Phase-out begins at $75,000 for singles and $150,000 for joint filers.

Enhanced Charitable Contribution Deduction

Non-Itemizers who make charitable contributions are now eligible to deduct an additional $1,000 (singles) or $2,000 (married, filing jointly) in addition to the standard deduction, beginning in tax year 2026. This allows charitable-minded retirees an additional deduction without the need to file a more complex, itemized tax return.

For those who do choose to itemize and make charitable contributions, only contributions exceeding 0.5% of your adjusted gross income (AGI) are deductible, and the maximum tax benefit from those deductions is limited to 35%.

 

Higher SALT Deduction Cap

Between 2025 and 2029, the SALT cap rises from $10,000 to $40,000, increasing by 1% annually until 2030. This change offers meaningful relief for retirees in high-tax states.
Income over $500,000 triggers a reduction, but the deduction won’t fall below $10,000.

What This Means for You

These updates open the door to smarter planning:

  • Reassess withdrawal strategies to stay in lower brackets.
  • Explore Roth conversions while deductions are favorable.
  • Allocate resources for healthcare, travel, or charitable giving.

Remember, tax planning isn’t a one-time decision, it’s an ongoing process that adapts as laws and life evolve.

At First National Bank and Trust Company, we use a holistic approach, covering investments, retirement, estate and tax planning to help you make the most of these changes. Every situation is unique, and the real advantage comes from tailoring these rules to your goals.

Ready to optimize your plan? Schedule a complimentary consultation today to ensure your retirement strategy aligns with the new tax landscape.