Key Takeaways -
- Federal income tax brackets are now permanent providing longer-term clarity for planning around compensation and equity.
- The standard deduction, child tax credit, and dependent care FSA all increased, offering incremental but meaningful savings for families.
- The SALT deduction expansion creates new opportunities for some households, but the sharp phase-out limits its reach for many high earners.
- Estate and gift tax exemptions remain historically high, reducing short-term urgency but keeping long-term planning front and center.
- New tax provisions like the ‘Trump accounts’ and 529 eligibility expansion may not move the needle for every household but are worth understanding in the context of broader family planning.
New Tax Laws- What Changed
Federal Income Tax Rates
The tax rates that were set to expire at the end of 2025 are now permanent. For many high-earning professionals, the most valuable part of this bill is the clarity it provides. Knowing income tax brackets won’t suddenly change makes it easier to model future stock option exercises, portfolio withdrawals, and plan for taxes across a multi-year time frame.
Standard Deduction
The standard deduction increases to $15,750 for single filers and $31,500 for married couples. While the increase is modest, it remains fully indexed to inflation going forward. This is particularly relevant for households in states where itemizing offers little benefit, as the standard deduction will continue to grow each year.
SALT Deduction
The state and local tax deduction cap rises from $10,000 to $40,000—but only if your adjusted gross income stays under $500k. By the time you reach $600k of AGI, the deduction fully phases back down to $10,000. The steep phase-out means this provision has limited benefit for many dual-income tech households in high-tax states. However, for families hovering near the $500k mark, it can provide thousands in tax relief. Unfortunately, the same thresholds apply whether you’re single or married, which may intensify the so-called “marriage penalty.”
Charitable Deduction for Standard Filers
Starting in 2026, even taxpayers who don’t itemize will be able to deduct charitable gifts (up to $1,000 for individuals and $2,000 for married couples filing jointly). While the tax benefit is relatively small, this provision makes charitable giving slightly more tax-efficient for families who would otherwise claim the standard deduction (thus not getting ‘credit’ for their charitable contributions).
Dependent Care FSA
The annual cap increases from $5,000 to $7,500, the first adjustment in almost four decades. For parents paying for daycare or after-school programs, this change provides real tax savings. However, there are still compliance hurdles, including the benefits test that limits how much some employers allow employees to contribute. Households with two working parents may want to coordinate contributions across employers to maximize the benefit.
“Baby Accounts”
Children born between 2025 and 2029 will automatically receive a $1,000 government-funded contribution into a new type of account. Parents can contribute up to $5,000 per year, and at age 18, the account converts to an IRA. On paper, the accounts look appealing, but they come with quirks. Contributions beyond the government seed money are made with after-tax dollars and withdrawals will eventually be taxed as income—making the long-term advantage unclear. The biggest upside may come if an employer offers tax-free contributions on behalf of employees. Otherwise, many families may prefer 529 plans or custodial accounts.
Child Tax Credit
The credit increases to $2,200 per child, with the income phaseout beginning at $200k for single filers and $400k for married couples. The credit is also indexed to inflation, meaning it should retain more value over time than in the past. For high earners, though, the phaseouts still mean this benefit won’t be fully realized by many tech households.
HSA Expansion
Eligibility for Health Savings Accounts (HSAs) has been broadened to include all bronze and catastrophic-level health plans offered on the exchanges. HSAs still remain one of the most powerful tax tools available due to the following benefits – 1) Contributions reduce taxable income, 2) Investment growth is tax-free, and 3) Withdrawals for qualified medical expenses are also tax-free.
Estate & Gift Tax Exemption
The estate tax exemption has been permanently set at $15M for individuals and $30M for married couples. These exemptions will be indexed to inflation in future years. This is a material change, as the exemption was previously set to be cut in half in 2026. For families well above these levels, estate planning still matters, but for many high-earning tech employees, the risk of being exposed to federal estate taxes in the near term is greatly reduced.
Other Notable Tax Law Changes
- Up to $10k of car loan interest is deductible, though the income limits ($100k single, $200k married) make this irrelevant for most high earners.
- Alternative Minimum Tax (AMT) rules have been made permanent, though fewer households are impacted today than in prior decades.
- 529 plans can now cover up to $20k per year in K–12 tuition and additional “qualified expenses,” expanding flexibility for families who want to use these accounts earlier.
- No changes to Backdoor Roth IRAs or Mega Backdoor Roth 401(k)s. These strategies that remain extremely valuable for high-income savers.
Closing Thoughts
While many of the new provisions are modest in scope, they do add up. Couples with ~$500k-$600k of household income would likely benefit most from proactive tax planning, given the aggressive SALT deduction phase-out.
If you have questions or would like to learn more, please schedule time with me here so we can have a personalized conversation.
Ryan Nelson, CPA, CFP® is a Wealth Advisor based out of Minneapolis / St. Paul and serves clients virtually across the United States. Outside of work Ryan enjoys collecting memories by traveling to tropical locations with loved ones, hosting family and friends at his lake home in Northwest Wisconsin, running, searching for great Italian food, and enjoying an americano from an independent coffee shop.
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