Tax Planning for 2026: New Income Tax Brackets Impacting Your Bonus, RSUs, and Retirement Savings ☕

By: Tommy Lopez Jr., CFP®, Founder | Financial Advisor

It's mid-October, and the IRS has released the 2026 tax updates, including inflation-adjusted federal tax brackets, higher standard deduction amounts, and a few rule changes worth noting. At Coffeehouse Capital, we're keeping up with these shifts so you can stay ahead financially. 

At Coffeehouse Capital, we believe tax planning isn’t just about what you earn—it’s about what you keep through thoughtful and strategic money management and financial planning . Current year tax planning, AND lifetime tax planning. A little awareness and early preparation can help you keep more of your wealth and “coffee money” working toward your goals.

For retirees, there’s also an additional deduction available for those aged 65+ or blind, plus a temporary “senior bonus deduction” through 2028. These changes offer a little extra cushion before taxes start brewing.

If you’d like to review how these new brackets and deductions will impact your 2026 tax year and your broader financial plan, let’s schedule a virtual coffee chat to talk strategy. Sometimes, a quick conversation can help you brew up meaningful savings.

Book a complimentary 30-minute virtual coffee chat and let’s zoom out—investments, retirement, taxes, and beyond—so you can move forward with clarity and confidence. 📅 Book a meeting here. 

Grab your favorite cup of joe, and let's pour over what's new. ☕️

☕ Key Tax Changes Worth Noting

Here are a few 2026 updates worth keeping on your radar:

• Roth-Only Catch-Up Contributions: High earners (those making $145,000+ the previous year) must now make 401(k) catch-up contributions as Roth rather than pre-tax.
• Expanded SALT Deduction Cap: The state and local tax (SALT) cap has been lifted to $40,000 through 2029.
• Inflation-Indexed Credits: Key tax credits like the Child Tax Credit and Earned Income Tax Credit have increased slightly. 
• Bracket Extensions: The seven-bracket system and lower individual rates remain in place, thanks to recent legislation.

☕ Planning Moves to Keep More in Your Cup

A few proactive strategies can make these updates work in your favor:

• Max Out Retirement Savings: Contribute to your 401(k), IRA, or HSA to lower taxable income.
• Harvest Smartly: Use investment losses to offset capital gains where possible.
• Take Advantage of Credits: Explore education and child-related tax credits that directly reduce your tax bill.
• Revisit Timing: Adjust the timing of income and deductions—especially if your income fluctuates.
• Consider Roth Conversions: With today’s rates relatively low, converting part of a traditional IRA may pay off over time.

☕ 2026 Federal Income Tax Brackets

The tax rates remain the same—10%, 12%, 22%, 24%, 32%, 35%, and 37%—but the income thresholds have increased for 2026 to account for inflation. Here’s a quick side-by-side comparison by filing status:

2026 Federal Income Tax Brackets (Taxable Income)

Sources: IRS, Tax Foundation .

These small upward adjustments help prevent “bracket creep,” where inflation pushes income into higher tax brackets without real spending-power gains.

Inflation Adjustment: 2026 Tax Brackets for Single Filers

Sources: IRS, Tax Foundation .

Inflation Adjustment: 2026 Tax Brackets for Married Filing Jointly

Sources: IRS, Tax Foundation .

Inflation Adjustment: 2026 Tax Brackets for Heads of Households

Sources: IRS, Tax Foundation .

🌤️ Updated Standard Deductions

The standard deduction—the amount you can subtract from taxable income—has also increased for 2026:

Standard Deduction: 2025 vs 2026 (Federal)

Sources: IRS, Tax Foundation .

🌤️ Updated Long-Term Capital Gains 

☕ Quick Take: Long-Term Capital Gains | RSUs at All-Time Highs

Given the bullish out on AI and AI-related stocks, when your RSUs vest at record prices, taxes deserve just as much attention as market timing. (Estimated quarterly tax payments may need to be adjusted to avoid a large tax surprise come tax time, or at a minimum, work with your advisor to project your tax bill and help avoid any surprises.)

At vest, RSUs are taxed as ordinary income, but any additional growth after vest qualifies for long-term capital gains (LTCG) if you hold the shares for more than a year. However, watch out for concentration risk.  For high earners, that’s a potential rate difference between 37% and 20%—plus avoiding the 3.8% NIIT can sweeten the cup.

If you’re sitting on concentrated stock, consider a few smart moves:

• Sell-to-cover and diversify to manage risk.
• Stagger sales or use a 10b5-1 plan to lock in profits gradually.
• Donate appreciated shares or harvest losses to offset gains.
• Monitor withholding—employers often under-withhold on large vests.
• Hold strategically: hitting the 12-month mark can turn ordinary income into LTCG.

Whether you’re in tech or healthcare, planning around equity and tax brackets can help you keep more of your gains and your peace of mind.

As always, it's crucial to plan and coordinate with your fiduciary financial planner and CPA before making tax and investment decisions around your financial picture. 

Long-Term Capital Gains Tax Rates: 2025 vs 2026 Comparison

Note: Taxpayers with modified adjusted gross income (MAGI) above $200,000 (single) or $250,000 (married filing jointly) may also owe the 3.8% Net Investment Income Tax (NIIT).

Sources: IRS, Tax Foundation.

☕ Final Thoughts

Tax updates may not be the most exciting topic to sip over, but understanding how these changes affect your income, investments, retirement savings, and overall financial plan can make a meaningful difference over time. At Coffeehouse Capital, we help clients turn complex tax shifts into clear, actionable strategies.

If you’d like to see how the 2026 brackets fit into your broader financial plan, let’s connect for a complimentary 30-minute virtual coffee chat. A few thoughtful adjustments today could help you brew up lasting savings at every stage of your financial journey. 

📅 Book your meeting here. ☕️

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