Major tax law changes for 2026 investments are now in effect following the passage of the One Big Beautiful Bill Act of 2025, according to recent reports. President Donald Trump signed the legislation into law last year, making permanent many aspects of his 2017 tax cuts and introducing new provisions that will significantly impact how taxpayers save and invest. Additionally, the IRS provided crucial guidance on the SECURE 2.0 Act, clarifying retirement savings rules for millions of Americans.
The One Big Beautiful Bill Act of 2025 represents one of the largest changes to the Internal Revenue Code in recent times. For individual taxpayers, the legislation increased state and local tax itemized deductions from $10,000 to $40,000, created $1,000 tax-advantaged savings accounts for children, and eliminated taxes on certain tip and overtime wages for lower- and middle-income earners.
Tax Law Changes for 2026 Impact All Taxpayers
Two aspects of the new legislation apply universally to all taxpayers. First, individual income tax rates remained steady at 10% to 37%, though the rates increase more rapidly across brackets. Second, the larger standard deduction of $16,100 for single filers and $32,200 for married couples filing jointly remains intact for 2026.
However, from a corporate perspective, the act allows full expensing of domestic research and experimentation, permanent bonus depreciation, and enhanced opportunity zone investment benefits. The legislation also retains the advantageous 21% corporate income tax rate, according to tax policy analysts.
SECURE 2.0 Act Modifies Retirement Contributions
The second major development affecting 2026 investments involves clarification of rules surrounding the SECURE 2.0 Act, which Congress passed in 2022. Under this act, individuals ages 60 to 63 can make additional contributions up to $11,250 to their retirement accounts. Meanwhile, higher-income earners with adjusted gross income over $145,000 must make incremental contributions on a Roth, or after-tax, basis.
This change effectively closes a loophole that allowed older individuals to contribute more on a pre-tax basis and withdraw funds at retirement when tax rates are typically lower. The modification represents a significant shift in retirement savings strategy for high-earning Americans approaching retirement age.
Investment Incentives Transform Under New Tax Rules
The widespread impacts of these two acts extend across multiple areas of taxpayer behavior. The legislation was designed to alter incentives everywhere from investments and entrepreneurship to philanthropy and innovation, according to policy experts. The changes reflect the Trump administration’s broader domestic agenda priorities.
In contrast, the SECURE 2.0 Act focused more narrowly on retirement savings opportunities. Nevertheless, the modifications substantially weaken tax benefits for higher-income taxpayers contributing to retirement accounts, as they can no longer defer the tax burden on catch-up contributions.
Capital Gains and Investment Income Rates for 2026
Long-term capital gains and dividend income continue to be taxed at rates of 0%, 15%, or 20%, depending on taxable income levels. These preferential rates only apply to gains on assets held for one year or longer, the IRS confirmed. Assets held for shorter periods will be classified as short-term and taxed at ordinary income tax rates.
Additionally, taxpayers can now obtain substantially more tax benefits by investing in qualifying small-business stocks and opportunity zones. These programs, enhanced under the new legislation, provide tax deferral or tax-free treatment for taxpayers who realize significant earnings from investments outside traditional brokerages.
Retirement Contribution Limits Increase
The amounts taxpayers can set aside for retirement under tax-preferred accounts grew from 2025 to 2026. According to the IRS, 401(k) contribution limits increased to $24,500, while IRA contribution limits rose to $7,500. The catch-up contribution amounts for older taxpayers also increased for both account types.
Higher-income taxpayers looking to make additional catch-up contributions must carefully weigh the benefits now that these portions must be on an after-tax basis. This requirement creates new complexities for retirement planning among affluent Americans nearing retirement age.
Trump Accounts Offer New Savings Option
Parents can now contribute to Trump accounts for their children, with children born between 2025 and 2028 receiving $1,000 in seed money from the government. Parents can contribute up to $5,000 per child annually on an after-tax basis, and children can withdraw funds penalty-free after age 18 for qualified purchases such as first-time home purchases and higher education expenses.
These accounts differ from 529 education plans in their financial features, providing parents another tool when setting aside money for their children’s future. The contributions do not have earned-income requirements, making them accessible to all families regardless of employment status.
Taxpayers may experience larger refunds when filing 2025 returns due to the timing of the legislation’s passage and unchanged withholding tables. The IRS has not announced whether additional guidance or adjustments to withholding procedures will occur for the remainder of 2026.
