It’s something we see every time we go to the supermarket or fill up our gas tank. Inflation could be called the biggest headache for the average American citizen in recent years. However, the IRS is required by law to adjust its numbers, one of the few bright spots in this whole issue surrounding rising prices.
If you play your cards right, you can legally protect more money from taxes this year than ever before, thanks in part to the recent One Big Beautiful Bill (OBBB) and the full activation of the Secure 2.0 Act.
Why you should pay attention to your taxes… long before tax season!
Yes, nobody likes to talk about taxes. It’s boring, but they’re inevitable, like death itself. Let’s give you an example: imagine you earn $80,000 a year. If the government taxes you on the entire $80,000, the bill hurts. But if you take $20,000 of that amount and put it into your retirement account… Magic happens. The IRS says, “Okay, we’ll pretend you only earned $60,000 this year.” In other words, the agency itself encourages you to save money for your future and pay less tax today.
Two birds with one stone, if you want our opinion. You know you’ve become an adult when you see tax deductions as something beautiful. And on top of that, by 2026, the government is going to allow you to “hide” more money than before.
New IRS tax limits
And the first change affects all workers with a retirement plan. The voluntary contribution limit for 401(k) plans has risen from $23,500 to $24,500. Although that extra $1,000 may not seem like a fortune at first glance, if you’re in the 24% federal tax bracket, it means you’ll save $240 in taxes.
This money stays in your pocket—or rather, in your investment account—instead of going straight to Uncle Sam. We advise you to adjust your payroll to this new limit.
But wait, it gets even more interesting: if you were born between 1963 and 1966, pay attention. Historically, when you turned 50, the IRS allowed you to make an extra contribution, commonly referred to as a “catch-up.” Well, wait, because the Secure 2.0 Act has created a “Super Catch-Up,” which anyone who is between the ages of 60 and 63 at the end of the year can take advantage of.
These individuals will be able to contribute (as officially confirmed by the IRS) an extra $11,250. Based on the $24,500 base amount, this adds up to a total of $35,750 in your retirement account in a single year… which will be tax-deductible!
But what about fifty-year-olds?
Don’t worry, you haven’t been left out. If you are 55—or 68 and still working—the standard Cachap contribution has risen with inflation, from $7,500 to $8,000 for 2026. If you are looking to add the final touches to your pension nest egg, this is a good option to cushion it before fully retiring.
Margo, there is an important technical change in 2026 that will affect high earners. If your Social Security-covered earnings in the previous year exceeded $145,000, you are no longer allowed to make your “catch-up” contributions (that extra $8,000 or $11,250) before taxes. From now on, this money must go into a Roth account. That means you will have to pay tax on that money now, on your current paycheck.
However, the good news is that because it is a Roth account, that money and its earnings will be completely tax-free when you withdraw it in the future.
Charitable deductions
The new One Big Beautiful Bill law is a surprise for generous hearts. From now on, you can deduct cash donations. Each person can donate up to $1,000 ($2,000 for married couples). So remember to keep all your donation receipts, no matter how small.