The biggest news in the 2025 law was what didn't happen: the individual tax cuts that were set to expire after 2025 were made permanent. But several changes take effect in 2026, and a few of them work against high earners. Here's what we're watching.
Tax rates and brackets stay put
The seven federal brackets, topping out at 37%, are now permanent, along with the larger standard deduction. Without the law, rates would have risen in 2026. That certainty makes multi-year planning, including Roth conversions, easier to model.
A higher SALT cap, with a catch
The cap on state and local tax deductions rose from $10,000 to $40,000 for 2025 and increases 1% a year through 2029, reaching $40,400 in 2026. For higher earners, the extra deduction phases down by 30% of modified AGI above $500,000 in 2025 ($505,000 in 2026), but never below $10,000. Many Oregon and California professionals above that range see little or no benefit, which keeps pass-through entity tax elections valuable.
New limits on charitable deductions
Starting in 2026, itemized charitable gifts are deductible only to the extent they exceed 0.5% of your AGI. Taxpayers in the 37% bracket also get a reduced benefit from itemized deductions, worth about 35 cents per dollar instead of 37. Non-itemizers can deduct up to $1,000, or $2,000 for married couples, of cash gifts to public charities.
AMT comes back into play
The higher AMT exemption was made permanent, but beginning in 2026 the exemption starts phasing out at lower incomes, around $500,000 for single filers and $1 million for joint filers, and phases out twice as fast. Exercising incentive stock options, large state tax payments and certain deductions can make AMT more likely than it was in recent years.
A $15 million estate and gift exemption
The federal exemption rose to $15 million per person in 2026, $30 million for married couples, indexed for inflation and no longer scheduled to drop. That eases the federal "use it or lose it" pressure, but it does nothing for state estate taxes in Oregon and Washington, which still start at much lower amounts.
Business owners: QBI, depreciation and expensing
- QBI deduction. The 20% qualified business income deduction is now permanent, with a wider phase-in range for service businesses.
- Bonus depreciation. 100% bonus depreciation is permanent for qualifying property acquired after January 19, 2025, and the Section 179 expensing limit increased to $2.5 million.
- Research costs. Domestic research and experimental expenses can be deducted immediately again, rather than spread over five years.
- Excess business losses. The limit on using large business losses against other income is now permanent.
More generous QSBS rules for founders
For qualified small business stock issued after July 4, 2025, the gain exclusion now phases in: 50% after three years, 75% after four and 100% after five. The per-issuer cap rose to $15 million, and companies with up to $75 million in gross assets can qualify. Founders and early investors should confirm how their stock was issued.
A new deduction for seniors
Taxpayers 65 and older can claim an extra $6,000 deduction from 2025 through 2028, phasing out above $75,000 of modified AGI for single filers and $150,000 for joint filers. Most of our high-earning clients won't qualify, but retired parents may.
The bottom line
Permanent rates give high earners a more stable base for planning, but the new charitable limits, the SALT phase-down and the AMT changes mean old assumptions need a fresh look. A projection under the current rules is the best way to see which changes affect you.
This article is general information, not tax, legal or investment advice for your situation. Rules and thresholds change, so please talk with a qualified advisor before acting.
