The IRS has released its inflation adjustments for tax year 2026, and several key numbers have moved. If you are an individual, a family, or a small business owner in the Bay Area, now — before December 31 — is the best time to review your situation and make moves that could lower your bill next April.

Here is a plain-language summary of what has changed and what you can do about it before the year ends.

Standard Deduction Increases

For tax year 2026, the IRS has increased the standard deduction. According to the IRS newsroom release, the standard deduction for married couples filing jointly rises to $30,000, up $800 from 2025. For single filers and married individuals filing separately, it increases to $15,000, up $400. For heads of household, the standard deduction is $22,500, up $600.

What this means for you: If your itemized deductions — mortgage interest, state and local taxes, charitable contributions — are close to the standard deduction amount, run the numbers both ways. A higher standard deduction may mean itemizing is no longer worth the paperwork.

Tax Bracket Thresholds Have Shifted

The IRS adjusts the income thresholds for each tax bracket each year to account for inflation. For 2026, those thresholds have moved upward. This means a portion of income that would have been taxed at a higher rate in 2025 may fall into a lower bracket in 2026.

Year-end move to consider: If you expect your income to be similar in 2027, consider whether it makes sense to accelerate income into 2026 (to take advantage of potentially lower effective rates) or defer it. This is especially relevant for self-employed individuals and small business owners who have flexibility over when they invoice or receive payments.

Alternative Minimum Tax (AMT) Exemption

The AMT exemption amount for 2026 is $137,000 for married couples filing jointly and $88,100 for single filers, according to the IRS release. The phase-out thresholds have also increased.

Bay Area note: AMT is a real concern for tech professionals in the South Bay and San Jose who hold incentive stock options (ISOs). If you exercised ISOs in 2026, your AMT exposure depends on the spread at exercise. Do not wait until April to find out — a mid-year or year-end review can prevent a large surprise.

Retirement Account Contribution Limits

The IRS has also adjusted contribution limits for retirement accounts. Maximizing these contributions before December 31 is one of the most straightforward ways to reduce your taxable income for 2026.

Check the IRS release for the exact figures applicable to your account type (401(k), IRA, SEP-IRA, SIMPLE IRA), and confirm with your plan administrator that contributions will be credited to the 2026 tax year.

Charitable Contributions

If you plan to make charitable donations before year-end, keep in mind that cash donations to qualifying organizations are deductible if you itemize. Donating appreciated stock directly to a charity — rather than selling it first — can be especially tax-efficient, because you generally avoid capital gains tax on the appreciation while still deducting the full fair market value.

What Small Business Owners Should Do Now

• Review your estimated tax payments. If your income was higher than expected in 2026, you may owe a penalty if you have not paid enough through quarterly estimates. The fourth-quarter estimated payment for 2026 is due January 15, 2027.
• Accelerate deductible expenses. If you are a cash-basis business, paying deductible expenses before December 31 — software subscriptions, office supplies, professional fees — moves those deductions into 2026.
• Check your Section 179 and bonus depreciation eligibility. If you purchased equipment or business property in 2026, you may be able to deduct a significant portion immediately rather than depreciating it over several years.

Sources

• IRS Newsroom: IRS releases tax inflation adjustments for tax year 2026, including amendments from the One Big Beautiful Bill

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This article is for general information only and is not tax advice. Contact Bay Tax Services at (408) 378-9303 to discuss your situation.