By Chris Cebula, CPA
The annual inflation adjustment updates for 2026 have come out without too many surprises. You can see a condensed list in the chart below. One change that is more significant relates to updates to retirement plan catch-up contributions.
On September 15th, 2025, the Internal Revenue Service (IRS) issued final regulations addressing catch-up contributions for provisions under the SECURE 2.0 Act. Under these new regulations, if you are age 50 or older and earned more than $150,000 in 2025, you are required to make catch-up contributions to your workplace retirement plan (401(k), 403(b), and governmental 457(b) plans) into an after-tax Roth account.
Instead of reducing your taxable income today with pre-tax contributions, you will have to contribute after-tax dollars. These funds will then be tax-free in retirement. It is important to note that if your employer’s plan does not offer a Roth option, you may not be able to make catch-up contributions. Please check the specifics of your employer’s plan and update accordingly, or even lobby to have them add Roth as a feature. It usually isn’t a big deal to make that change at the plan level.
Also worth considering as part of this change is the nature of what you are investing in. It may make sense not to have the same investment choices selected on the funds invested in the different account structures.
Pre-tax traditional savings accounts are taxed when money is withdrawn, so you may want to choose to hold more conservative or income-producing investments. Slower-growing assets can help manage future tax bills.
Roth accounts, on the other hand, have tax-free distributions. It may be ideal to put higher-risk investments with higher return potential in these accounts. The potential growth avoids future taxation, so maximizing growth in these accounts can significantly increase after-tax returns. By intentionally placing different types of investments in pre-tax vs Roth accounts, you can better control taxes over time and create more flexibility when drawing income during retirement.
There are changes to the tax laws pretty much every year. This year, most of us won’t see big changes, but it always pays to see if there are ways to improve your situation, either by being able to save more or by lowering the tax bite.
IRS 2026 COLA – Inflation Adjustments
| Unified Tax Credit | 2026 | 2025 | Change |
|---|---|---|---|
| Annual gift tax exemption per person | $19,000 | $19,000 | – |
| Federal estate tax, generation skipping transfer tax, & lifetime gift tax exemption | $15,000,000 | $13,990,000 | $1,010,000 |
| 401(k) Defined Contributions Limits | 2026 | 2025 | Change |
|---|---|---|---|
| Maximum employee deferral | $24,500 | $23,500 | $1,000 |
| Employee catch-up contribution (age 50+) * | $8,000 | $7,500 | $500 |
| Employee catch-up contribution (age 60-63) * | $11,250 | $11,250 | – |
| * Beginning in 2026, catch-up contributions to employer sponsored plans must be made on after tax basis if the employer earns more than $150,000. | |||
| Defined contribution maximum (employee + employer) | $72,000 | $70,000 | $2,000 |
| Defined contribution maximum (employee + employer age 50+) | $80,000 | $77,500 | $2,500 |
| Employee compensation limit for calculating contributions | $360,000 | $350,000 | $10,000 |
| Key employee top-heavy plan compensation test threshold | $235,000 | $230,000 | $5,000 |
| HCE nondiscrimination testing threshold | $160,000 | $160,000 | – |
| HSAs & High-Deductible Health Plans | Coverage Type | 2026 | 2025 | Change |
|---|---|---|---|---|
| HSA contribution limit (employer + employee) | Self | $4,400 | $4,300 | $100 |
| HSA contribution limit (employer + employee) | Family | $8,750 | $8,550 | $200 |
| HSA catch-up contributions (age 55+) | Self | $1,000 | $1,000 | – |
| HDHP minimum deductions | Self | $1,700 | $1,650 | $50 |
| HDHP minimum deductions | Family | $3,400 | $3,300 | $100 |
| HDHP maximum out-of-pocket expenses (excludes premiums) | Self | $8,500 | $8,300 | $200 |
| HDHP maximum out-of-pocket expenses (excludes premiums) | Family | $17,000 | $16,600 | $400 |
| Health Care Flexible Spending Accounts (FSAs) Max salary deferral | – | $3,400 | $3,300 | $100 |
| Earnings Subject to Social Security Payroll Tax | 2026 | 2025 | Change |
|---|---|---|---|
| Max earnings subject to 12.4% FICA tax (6.2% employer, 6.2% employee) | $184,500 | $176,100 | $8,400 |
| IRA Contributions Limits | 2026 | 2025 | Change |
|---|---|---|---|
| Traditional or ROTH IRA Contribution Limit | $7,500 | $7,000 | $500 |
| Catch-Up Contribution (50+) | $8,600 | $8,000 | $600 |
| IRA AGI Deduction Phase-out Starting at | 2026 | 2025 | Change |
|---|---|---|---|
| Joint Return | $129,000 | $126,000 | $3,000 |
| Single or Head of Household | $81,000 | $79,000 | $2,000 |