Caitlin's Corner

Tax Jargon, Clarified

Every year around this time, it feels like the air gets thick with tax terms. They float around in headlines, in HR emails, in conversations we didn’t ask to be part of: "Brackets! Deductions! Credits! Limits…"

If hearing all of that makes your eyes glaze over, you’re in good company.

I remember when these terms made me want to bury my head in the sand. It so often felt like the tax language itself was weaponized, like- the sheer amount of jargon and noise is designed to keep regular people confused. And that confusion holds us back from feeling confident and free with our money.

So today I wanted to break some of this jargon down. I'm writing a tax article for you, but not just a blog full of charts. And not just numbers to memorize- but context. Here's what these changes actually mean for your financial life.

If you’ve ever felt lost or overwhelmed, please hear me: you are not alone. Our system may be complicated (and honestly, pretty broken), but sharing this information with you isn't my way of condoning that complexity. Since we exist in this system, I want to help you navigate it, so you can make informed, empowered decisions.

So let’s walk through the key IRS updates for 2026 in plain English, together.

📌 2026 Tax Brackets (What They Really Mean)

Tax brackets don’t determine the rate you pay on your entire income, just the portion that falls into that bracket. This is called a progressive tax system, and it protects your first dollars with lower rates.

When people say marginal tax bracket, they're referring to the tax percentage you paid on your last dollar of income. When people say effective tax bracket, they're referring to the average percentage of tax you paid on your total income.

For 2026, all filing statuses (single, married filing jointly, head of household, married filing separately) got small adjustments to keep pace with inflation.

Here are the 2026 tax brackets:

Here's an example: if you are a single filer, you would owe 10% on your first $12,400 of taxable income in 2026 whether that amount represents your total earnings, or if you've earned another $1 million. If you have more income than $12,400, the amount between $12,401 and $50,400 is taxed at 12%. This continues to go up as your income does, so if you make over $640,600 as a single filer in 2026, not all of that gets taxed at the 37% bracket. Only the amount above $640,600 is taxed at 37%. (See the table above for more bracket info.)

What the new brackets mean for you:

👉 Brackets still work as they have in the past; they've only been adjusted to account for inflation.

👉 Use brackets as a target for adjusting your income where possible. For example, if you're married (filing jointly) and your household income is $150,000, you may want to look at maximizing deductions such as HSA and 401(k) contributions so you can get your income below $108,801, into the 12% bracket.

👉 Don't shy away from getting a raise if it bumps you into a bigger bracket. Only the amount of new earnings above the last tax bracket is where you'll be taxed the higher percentage.

📌 Standard Deduction (Your “Tax-Free” Income)

The standard deduction is the amount of income you get to earn before the IRS taxes you at all.

Most Americans take the standard deduction because it’s simple and requires no documentation. The reason you might not take the standard deduction is because you may want to claim other deductions on your return that are only available if you're not taking the standard deduction. If that's the case, that means you probably have a sum of deductions that is greater than your standard deduction, and that's when you would opt to itemize instead of taking the standard deduction.

For 2026, the standard deduction amounts rise to:

$16,100 - Single or married filing separately
$32,200 - Married filing jointly
$24,150 - Head of household

If you’re 65+ or blind, you get an additional deduction:

+$1,650 per person if married
+$2,050 if unmarried

What the increased standard deduction means for you

👉 A larger portion of your income will be tax-free.

👉 Fewer people will benefit from itemizing deductions.

📌 IRA Contribution Limits (Roth + Traditional)

The IRS creates incentives for people to save for retirement, but puts limits on how much you can benefit from those incentives. When it comes to retirement accounts, the IRS says that you can only contribute so much to certain accounts. In 2026, you can contribute up to:

$7,500 to either a Roth or traditional IRA
+ $1,100 more if you're 50+ (catch-up contribution)

What the new contribution limit means for you

👉 These are slight adjustments to account for inflation, but if your contributions are on auto-pilot, be sure to adjust them if you can afford the higher limit.
👉 Even an extra $500–$1,000 per year can compound meaningfully over time.

📌 401(k), 403(b), and 457(b) Limits

Just as the IRS imposes limits on IRA contributions, it also limits the amount you can contribute to workplace retirement plans- like a 401(k), while getting tax advantages. Here are the new contribution limits for 2026:

$24,500 - employee contribution limit
$8,000 - catch-up for 50+
$11,250 - special catch-up for ages 60–63
$72,000 - total possible contribution (employee + employer, in cases of matching benefits)

What these limits mean for you

👉 If you're contributing to an employer-sponsored retirement plan (like a 401(k), you can now deduct another $1,000 more of your taxable income than last year, and contribute that amount (totaling $24,500) to your retirement plan (see tax bracket example- that can make the difference between a 24% vs. a 32% marginal tax rate).

👉 Just as in previous years, it's a great strategy to take the amount of tax money you're saving due to your workplace retirement contribution, and invest that savings (e.g. in a taxable brokerage account).

👉 A reminder that tax-advantaged accounts are a great way to grow wealth (and save on taxes). 401(k)s might not sound sexy to you, but by having one, you're an investor, and you're making huge strides to have a comfortable retirement.

📌 Health Savings Accounts (HSA)

HSAs are one of the most powerful financial tools available, thanks to their triple tax advantage. We talked about these in detail in our 2026 Open Enrollment Webinar.

For 2026, the limits are:

$4,400 - self-only
$8,750 - family coverage
$1,000 - catch-up for age 55+ (unchanged)

What this means for you

👉 Nothing much has changed here (slight bumps in contributions to account for inflation), but this is still a wonderful investing tool if you're eligible for an HSA.

📌 Qualified Charitable Distributions (QCDs)

For those age 70½+ (yea, ONE HALF 🤦‍♀️), a QCD is a way to donate directly from your IRA without it counting as taxable income.

The 2026 limit rises to:

$111,000 per person

For married couples, each spouse can use the limit individually.

What this means for you

👉 This can lower your tax bill and satisfy required minimum distributions (RMDs). If you, or your parents, are worried about higher tax bills because RMDs are kicking in, QCDs might offer a great alternative to paying higher income tax. Was that enough alphabet soup for one sentence? 🤨

📌 Capital Gains + Qualified Dividends

Are you still with me?! We're almost done, but this one is important. Investment income gets its own tax brackets. In the finance world, we call this "preferential tax treatment".

0% up to certain income levels
15% for most middle-income taxpayers
20% for higher incomes

If you have earned income and investment income, you take the total amount of that taxable income to calculate your capital gains rate.

So, let's use the same example as before: you're married filing jointly with a taxable income of $150,000 from your W2 jobs. But then that year, you decide to sell stocks for a gain of $10,000. The tax you'd pay on those stocks would be 15% of $10,000 because your total taxable income is $150,000 (your combined taxable W2 income) + $10,000 investment income.

Here are the specific brackets for long-term capital gains and qualified dividends:

2026 Long-Term Capital Gains and Qualified Dividends Brackets.

What these investment brackets mean to you

👉 For 2026, there aren't any changes to these brackets, although the income limits have shifted slightly. Despite the minimal change, it's worth understanding the significance of these different brackets. Let's say you use the standard deduction (and maybe some other deductions) to get your married-filing-jointly income to $90,000. You now have room to cash out on a gain of $8,900 in long-term (1 year+) investments tax-free (because long-term gains are taxed at 0% if total taxable income is under $98,901.)

👉 Investment income is often taxed more favorably than earned income. If you're thinking about early retirement (or retirement), and you plan to live off of your portfolio, you can get better tax treatment by selling securities rather than living off of dividends. (Most dividends are taxed at ordinary income rates, which are the tax brackets in the very first point in the newsletter. Investments that have been held for one or more years can be sold at these preferential capital gains brackets.)

👉 These thresholds affect decisions about selling investments, rebalancing portfolios, and tax planning in retirement. I lean heavily on these brackets now to make decisions about roth conversions, gains harvesting, and when to sell properties.

You Don’t Have To Decode This Alone

The tax system can feel overwhelming, and that feeling is 100% valid.

But guess what? We have two ways we can now help you:

📆 Check out our December Wealth Wednesday on Year-End Tax Moves! It's free and packed with info and great visuals.

🤝 We're now offering a tax strategy package to help you personalize your tax strategy, and arm you with a blueprint to use for your own tax prep, or the one you hand to your CPA in a few months 😘

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