A wave of federal tax changes is reshaping planning for affluent families heading into 2026 and beyond. With permanent exemption amounts and inflation adjustments, strategies on income timing and estate planning improve after-tax outcomes.
Big Picture: What’s Changed
Several core levers now define the federal tax landscape for higher-income households and set the stage for proactive 2026 planning.
- Higher Brackets and Deductions: For 2026, federal income tax brackets and the standard deduction have been further inflation-adjusted. The standard deduction is $32,200 for married couples filing jointly and $16,100 for single filers. The top marginal rate remains 37%, but income thresholds have increased, allowing more income to be taxed in lower brackets before reaching the highest rates.
- Capital Gains and NIIT: Long-term capital gains continue to enjoy preferential rates of 0%, 15%, and 20%, with thresholds adjusted upward for 2026. The 3.8% net investment income tax (NIIT) continues to apply above fixed MAGI thresholds ($200,000 for single filers, $250,000 for married couples), layering on top of ordinary or capital gains rates for higher-income taxpayers.
- Retirement and HSA Limits: Retirement plan and Health Savings Account (HSA) contribution limits have increased again, expanding opportunities to shelter income in tax-advantaged accounts. The 401(k) contribution limit for 2026 is $24,500, with an $8,000 age-50+ catch-up. IRA limits are $7,500 with a $1,000 catch-up for those 55+.
- Estate and Gift Tax—Now Permanent: Under the One Big Beautiful Bill Act of 2025, the federal estate, gift, and generation-skipping transfer (GST) exemption is now permanently set at $15 million per person for 2026 and beyond, with inflation adjustments. This eliminates the looming threat of a steep reduction of the exemption.
- Business Owners and Section 199A: The qualified business income (QBI) deduction under section 199A has been made permanent, continuing to offer significant benefits for owners of pass-through businesses and professional practices. Recent legislative changes have also widened phase-out ranges, making the deduction accessible at higher income levels.
Ordinary Income, Brackets, and Timing
For higher-income households, the timing and structure of income are crucial. The federal system still uses seven ordinary income brackets (10%, 12%, 22%, 24%, 32%, 35%, and 37%), with all thresholds indexed for inflation annually. In 2026, the 37% rate applies to taxable income above $664,000 for single filers and $796,700 for married couples filing jointly.
Even small shifts in income—especially from wages, bonuses, or equity compensation—can push households into the highest bracket.
Case Study: The Dual-Career Couple
Mark and Jenna expect $820,000 in taxable income for 2026 from salary and bonuses. About $23,300 falls into the 37% bracket. By deferring part of Jenna’s bonus, increasing pre-tax retirement contributions, and reviewing other pre-tax elections, they can reduce taxable income and pull some income back into the 35% bracket, lowering their tax bill.
Planning Ideas:
- Proactively manage bonus and RSU vesting schedules.
- Use pre-tax deferrals (401(k), 403(b)) to sculpt taxable income around key bracket thresholds.
- Bunch charitable deductions in high-income years using donor-advised funds.
- Coordinate spousal income planning to avoid crossing thresholds for higher brackets or NIIT.
Capital Gains, NIIT, and Investment Structure
For affluent investors, capital gains, dividends, and the 3.8% NIIT often represent the biggest tax burden. Long-term capital gains are taxed at 0%, 15%, or 20%, depending on income. However, higher-income investors face both the top 20% capital gains rate and the 3.8% NIIT.
Case Study: The Concentrated Stock Position
Sara, a senior executive, has $450,000 income and a $2 million concentrated stock position. Selling the stock all at once will push her into the 20% capital gains bracket, triggering NIIT.
Instead, Sara and her advisor design a multi-year plan:
- Spread the gains over three years to manage NIIT exposure.
- Harvest capital losses during market downturns to offset gains.
- Increase pre-tax retirement contributions to reduce MAGI and shrink the NIIT base.
- Donate appreciated shares to a donor-advised fund, eliminating tax on embedded gains while securing a charitable deduction.
By spreading out the sales and incorporating tax-efficient strategies, Sara can reduce her cumulative tax liability.
Planning Ideas:
- Manage NIIT exposure by reducing MAGI below the threshold with retirement contributions and business deductions.
- Use tax-efficient investment vehicles in taxable accounts to limit realized gains.
- Harvest losses systematically to offset future gains.
- For large positions, explore charitable remainder trusts or staged diversification.
Retirement Accounts and Lifetime Tax Bracket Design
Rising contribution limits and visibility into future tax structures make retirement accounts central for lifetime tax design, aiming to minimize taxes, smooth taxable income over a lifetime, and across generations.
Current Contribution Landscape for 2026:
- Workplace Plans: For 2026, 401(k) contributions are capped at $24,500, with an $8,000 age-50+ catch-up. Business owners can use profit-sharing and cash balance plans for larger contributions.
- IRAs: IRA contribution limits for 2026 are $7,500, with a $1,000 catch-up for those age 55+.
- HSAs: HSA contribution limits are $4,400 for self-only coverage and $8,750 for family coverage, with a $1,500 catch-up for those 55+.
Case Study: The Future Retiree Couple
Luis and Andrea, both in their 50s, earn $400,000 jointly and sit in the 32% bracket. Their advisor projects that they’ll likely be in the 22% or 24% bracket in retirement.
By maxing out their 401(k) contributions, using “mega-backdoor” Roth strategies, and funding HSAs with a long-term investment mindset, they can shift significant dollars from the 32% tax environment to a future 22–24% tax environment, enhancing their after-tax wealth over time.
Planning Ideas:
- Compare traditional versus Roth contributions based on projected lifetime tax brackets.
- Use HSAs as stealth retirement accounts by investing the balance and paying medical expenses out of pocket.
- Business owners can use cash balance or defined benefit plans to compress taxable income.
Business Owners and the Section 199A Deduction
The qualified business income (QBI) deduction under section 199A remains a valuable feature for many entrepreneurs. This deduction allows eligible taxpayers to deduct up to 20% of qualified business income, including certain REIT dividends and publicly traded partnership income.
Case Study: The Professional Practice Owner
Dr. Kim, who owns a successful medical practice structured as an S-corporation, generates about $700,000 of pass-through income. Her strategy includes:
- Ensuring a reasonable mix of W-2 wages versus pass-through profit.
- Using a combined 401(k) and cash balance plan to significantly increase deductible contributions.
- Timing capital expenditures and charitable contributions to stay within favorable QBI ranges.
This allows Dr. Kim to reduce taxable income while maximizing her tax-efficient savings.
Planning Ideas:
- Revisit entity structure and compensation design in light of permanent QBI rules.
- Manage taxable income around QBI phase-out thresholds using retirement contributions and bonus timing.
- Coordinate QBI planning with long-term exit and estate planning.
Estate, Gift, and Multigenerational Planning: A New Permanent Regime
The most significant changes for affluent families involve estate and gift taxes. Under the One Big Beautiful Bill Act, the federal estate, gift, and GST exemption for 2026 is now a permanent $15 million per individual ($30 million for a married couple), with annual inflation adjustments.
Case Study: The Business-Owning Family
The Davis family, with a $40 million net worth, faces potential estate tax exposure. To manage this, they:
- Establish spousal lifetime access trusts (SLATs) to move appreciating assets out of the taxable estate.
- Transfer minority interests in their business using valuation discounts and lifetime exemptions.
- Use grantor trusts to continue paying taxes on trust assets, reducing the taxable estate.
This strategy allows future growth to be shifted to heirs while managing both estate and income tax.
Planning Ideas:
- Consider lifetime gifting to shift future growth.
- Use annual exclusion gifts, 529 plans, and intrafamily loans to move wealth tax-efficiently.
- Coordinate estate planning with income tax strategies, particularly for highly appreciated assets.
Pulling It Together: An Annual Tax Planning Rhythm for 2026
For affluent households, a proactive annual tax planning rhythm is essential:
- Spring: Project income, identify brackets and thresholds likely to be crossed.
- Mid-year: Adjust retirement and HSA contributions, refine withholding, consider harvesting gains or losses.
- Fall: Finalize charitable plans, revisit QBI, compensation, and capital spending decisions.
- Year-end: Maximize contribution limits, execute final timing decisions, and capture opportunities for bunching deductions.
Tax planning integrated with investment management, business strategy, and estate planning becomes a powerful tool for preserving and growing wealth across generations.
About Genesis Wealth Advisor Group, LLC:
Genesis Wealth Advisor Group, LLC is an independent fiduciary firm in Mount Laurel, NJ, offering retirement planning and wealth management services across multiple states. Website: genesisadvisorgroup.com
Disclosures:
Individual circumstances may vary and may not be representative of all client experiences; no guarantee of future performance or success. Neither Osaic Wealth nor its representatives provide tax or legal advice
Securities and investment advisory services offered through Osaic Wealth, Inc. member FINRA/SIPC.
Osaic Wealth is separately owned and other entities and/or marketing names, products or services referenced are independent of Osaic Wealth.
