Tax Laws Changed in 2026 — Here’s What Retirees Need to Know
Originally published: April 24, 2024
Updated: June 25, 2026
The Tax Cuts and Jobs Act of 2017 (TCJA) made sweeping changes to U.S. tax law, and several of its provisions were originally scheduled to expire on January 1, 2026, unless Congress acted to extend them. Congress did act: the One Big Beautiful Bill Act (OBBBA), signed into law in July 2025, made most of those TCJA provisions permanent. For today’s retirees, that means the income tax brackets, the larger standard deduction, and several other provisions you’ve grown used to since 2018 are here to stay — but that doesn’t mean your tax picture in retirement is set on autopilot.
Tax rates remain at 10%, 12%, 22%, 24%, 32%, 35%, and 37%, with income brackets continuing to adjust for inflation each year. For 2026, the standard deduction is $16,100 for single filers, $32,200 for married couples filing jointly, and $24,150 for heads of household. The estate and gift tax exemption, which had been projected to be cut nearly in half, was instead raised and made permanent at $15 million per individual (effectively $30 million for married couples) for 2026, with continued inflation indexing going forward.
Even with rates holding steady, many retirees still see their tax bill climb in retirement — and that has little to do with tax law and a lot to do with how retirement income works.
First, a retiree is likely to experience a loss in deductions due to less or no contributions to retirement accounts, no work or childcare expenses, and oftentimes no mortgage payment. Furthermore, many retirees have the bulk of their savings in a pre-tax environment, such as an IRA or 401(k), so when they start pulling income from these accounts, more taxes are due. This is often a factor to consider when turning age 73, the age a retiree must begin taking Required Minimum Distributions (RMDs) from their retirement accounts. Even if they don’t need the income, they’re required to take a taxable withdrawal, which can increase taxable income and sometimes bump them into a higher tax bracket.
Another problem some retirees unfortunately face is that when one spouse passes away, the tax disparities become even greater. Although household income will be the same or less without the second spouse, the surviving spouse is often taxed more as a single filer than the couple would have been under married-filing-jointly status.
Because the brackets for single filers are narrower than for joint filers, a surviving spouse can find themselves pushed into a higher bracket with no other change in their financial picture — a gap that’s just as real now that rates are permanent as it would have been if rates had risen.
At Summerlin Benefits Consulting, we’ve got a great option that can help you save on taxes, keeping more of that money in your pocket. The financial vehicle we’re referring to here is called Fixed Indexed Universal Life (FIUL).
FIUL policies are funded with an initial payment, or several smaller payments over the first few years of the policy. From there, your cash deposits into your FIUL policy grow tax-free and earn a reasonable rate of return over time. You’ll see higher earnings in market up-years but won’t lose value in down-years — your money is protected. You’ll also have access to penalty-free withdrawals from your cash value after the first year of the policy, should you need it.
Additionally, you’d want a FIUL policy that offers “living” benefits as well as a death benefit. FIUL can not only provide you with tax-free income in retirement but can also help pay for long-term care, tax-free, as well. Most people age 65 and older will have at least one long-term care event during their retirement years, and that’s usually when the cost of living can sky-rocket for a retiree.
The next step to finding out whether you’d qualify for a FIUL policy is to work with a licensed professional. Even though tax rates didn’t rise as originally projected, RMDs, Medicare IRMAA surcharges, and the taxation of Social Security benefits are all still very real factors in retirement. Now remains a smart time to look at transitioning some of your pre-tax retirement savings into a tax-free environment.
Note: This content is for informational purposes only and does not constitute tax or legal advice. Summerlin Benefits Consulting does not provide social security, specific advice related to taxes, or legal advice. Consult a tax/legal professional for guidance with your individual situation.
Frequently Asked Questions
Q: How did the TCJA changes affect my retirement taxes in 2026?
A: They didn’t change the way many people expected. In July 2025, Congress passed the One Big Beautiful Bill Act, which made the TCJA’s lower tax rates (10% to 37%) and larger standard deduction permanent instead of letting them expire. The estate and gift tax exemption was also raised, to $15 million per individual for 2026, rather than being cut in half. That said, retirement income from sources like IRA and 401(k) withdrawals, RMDs, and Social Security can still increase your tax bill regardless of where the brackets sit.
Q: How can a Fixed Indexed Universal Life (FIUL) policy help reduce my retirement tax burden?
A: FIUL cash value grows tax-free and can be accessed as tax-free income in retirement through policy loans and withdrawals — unlike traditional IRA or 401(k) withdrawals, which are taxable. FIUL can also provide tax-free long-term care benefits through its living benefit riders, protecting you from large taxable withdrawals at the exact moment care costs spike. This makes FIUL a powerful tax-diversification tool alongside pre-tax retirement accounts.
Q: What is an RMD and how can it increase my taxes in retirement?
A: A Required Minimum Distribution (RMD) is a mandatory annual withdrawal from your traditional IRA or 401(k) beginning at age 73 under current law. Even if you don’t need the income, you must take the withdrawal — and pay ordinary income tax on it. For retirees with large pre-tax balances, RMDs can push taxable income into a higher bracket, increase Medicare IRMAA surcharges, and even make more Social Security benefits taxable. Strategies like Roth conversions or FIUL can help manage this exposure.
