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Preparing for 2026 & Beyond: Tax Code Updates - Retirement Planning

November 13, 2025 | TS Prosperity Group

Our team at TS Prosperity Group remains steadfast in providing clarity and confidence during times of change. We created the “Preparing for 2026 & Beyond: Tax Code Updates” series is to provide a depth of knowledge from those you’ve come to know and trust, and to view tax updates as more than a policy change--but as an opportunity with fiduciary-focused recommendations to help you DO MORE for your future.

Part One --“Retirement Planning Under the New Tax Framework: More in Your Pocket”

This article focuses on how the One Big Beautiful Bill Act (OBBBA) affects pre-retirees and current retirees and their spendable income. Pre-retirees may be able to re-strategize their retirement income distributions, and current retirees will better understand how enhanced deductions put more money back into their pockets.

The recently passed One Big Beautiful Bill Act (OBBBA) is more than just a new law—it’s a game-changer for retirees and those preparing for retirement. This bill brings tax changes that could put more money in your pocket, simplify your income planning, and create opportunities for long-term growth.

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%.

Senior (age 65+) “Bonus” Deduction

Taxpayers age 65 and older will enjoy a bonus deduction of $6,000 for tax years 2025-2028. Whether you itemize or not, this additional deduction will lower your taxable income, helping to potentially reduce Medicare premiums, minimize taxes on investment income, and may open opportunities for Roth IRA conversions at lower tax rates.

If married, filing jointly, and both individuals are age 65 or over, that bonus deduction increases to $12,000.

Be aware: There are income limits, and the bonus deduction begins phasing out if your income is over $75,000 (for singles) or $150,000 (for married, filing jointly).

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%.

SALT Deduction Cap Increase

From 2025 until 2029, the SALT deduction cap increases from $10,000 to $40,000 (and increases by 1% until 2030), offering meaningful tax relief for retirees, especially those living in high-tax states. For retirees who itemize deductions, you can now deduct up to $40,000 in state and local taxes, including property taxes, state income taxes, and personal property taxes.

For all filers (single and married, filing jointly), there is a $500,000 income threshold, and the deduction will be reduced by 30% of the amount by which it exceeds that threshold (but will not fall below $10,000).

With simplified filing and more after-tax income, you have fresh opportunities to:

  • Revisit your withdrawal strategy to ensure you’re liquidating accounts in the most tax-efficient order.
  • Consider strategic Roth IRA conversions while taking advantage of higher deductions.
  • Reallocate resources towards health care, travel, gifting, or charitable giving.

Remember, these are not “set it and forget it” decisions—they require collaboration and flexibility as laws and life changes.

If you’re still earning income in retirement, our next post will explain the best way to prepare for the tax changes that creates more opportunities for the self-employed and working retirees.

At TS Prosperity Group, we help clients adapt to changes using our Four Pillars of Financial Planning: investment planning, retirement planning, estate planning, and tax planning. While these tax changes are good news for most retirees, every situation is different. The real opportunity comes from understanding how the new rules fit into your plan.

We invite you to schedule a complimentary Discovery Meeting so we can help you maximize your eligible deductions and keep your plan aligned with your retirement vision. Call us or fill out the form below to book your meeting today.