High-Income Tax Planning for 2026: What Changed and What Still Works

High-income tax planning in 2026 centers on three changes from the One Big Beautiful Bill Act (OBBBA), signed July 4, 2025: a larger but income-limited SALT deduction cap of $40,400, a new 0.5 percent of AGI floor on charitable deductions paired with a 35 percent ceiling on their value for top-bracket taxpayers, and permanent extension of the 2017 rate structure. The 3.8 percent net investment income tax is unchanged. The durable strategies remain bracket management, charitable bunching, pass-through entity tax elections, tax-loss harvesting, and use of the $15 million estate exemption.

What did the One Big Beautiful Bill Act change for high earners?

The most important change is what did not happen. The individual provisions of the 2017 Tax Cuts and Jobs Act were scheduled to expire at the end of 2025; OBBBA made them permanent. The seven-bracket structure with a 37 percent top rate, the larger standard deduction, and the 20 percent qualified business income deduction for pass-through owners all continue without a sunset date.

For 2026, the 37 percent rate applies to taxable income above $640,600 for single filers and $768,700 for married couples filing jointly, according to IRS Revenue Procedure 2025-32. The 3.8 percent net investment income tax still applies above $200,000 of modified adjusted gross income for single filers and $250,000 for joint filers; those thresholds were never indexed for inflation and OBBBA did not change them.

OBBBA also made the federal estate, gift, and generation-skipping transfer tax exemption $15 million per person, $30 million per married couple, effective January 1, 2026, permanent and inflation-indexed thereafter. For many families, that shifts planning attention from estate tax avoidance toward income tax efficiency and basis management.

How does the new SALT cap work in 2026?

OBBBA raised the cap on deducting state and local taxes from $10,000 to $40,000 for 2025, rising to $40,400 for 2026 and increasing 1 percent annually through 2029 before reverting to $10,000 in 2030, according to analyses of the final legislation by the Bipartisan Policy Center and others. The higher cap phases down for high earners: above $505,000 of modified adjusted gross income in 2026 (for joint and single filers alike), the cap is reduced by 30 percent of the excess, but never below a $10,000 floor.

Hypothetical example: a married couple in Madison has $600,000 of MAGI and pays $58,000 in Wisconsin income tax and property tax. Their 2026 SALT cap starts at $40,400. Their MAGI exceeds $505,000 by $95,000, so the cap is reduced by 30 percent of that amount, or $28,500, leaving a $11,900 deduction. At roughly $606,000 of MAGI the cap bottoms out at $10,000.

Two planning implications follow. First, inside the phase-down range, each additional dollar of income also strips 30 cents of deduction, which can add several points to the effective marginal rate; deferring income or accelerating deductions to stay below $505,000 can be worth real money in a borderline year. Second, the final law left state pass-through entity tax (PTET) elections intact, so owners of partnerships and S corporations in states with PTET regimes, including Wisconsin, may still deduct state taxes at the entity level without regard to the individual cap. Confirm the math with your CPA each year, since PTET is not always favorable.

Charitable deductions now have a floor and a ceiling

Beginning in 2026, itemizers may deduct only the portion of charitable contributions that exceeds 0.5 percent of AGI, according to the Tax Foundation's analysis of OBBBA. A taxpayer with $2 million of AGI loses the first $10,000 of charitable deductions each year. Separately, taxpayers in the 37 percent bracket now receive a deduction benefit capped at a 35 percent rate, modestly raising the after-tax cost of large gifts.

These rules reward concentration. Bunching several years of giving into one tax year, often through a donor-advised fund, incurs the 0.5 percent floor once instead of annually. Gifts of appreciated securities held more than one year remain doubly efficient: the donor avoids the capital gain and deducts fair market value, subject to the 30 percent of AGI limit for appreciated property and the now-permanent 60 percent limit for cash. For IRA owners age 70.5 and older, qualified charitable distributions bypass the floor and the ceiling entirely because they never enter AGI.

What still works in 2026?

Most of the core playbook survives intact.

• Bracket and threshold management. Timing bonuses, equity compensation, Roth conversions, and capital gains around the 37 percent threshold, the NIIT thresholds, and the SALT phase-down range remains the foundation of annual planning.
• Tax-loss harvesting and direct indexing. Realized losses still offset gains dollar for dollar, plus $3,000 of ordinary income, with indefinite carryforward.
• Qualified small business stock. For stock acquired on or after July 4, 2025, Section 1202 now offers an exclusion up to the greater of $15 million or 10 times basis, with a tiered 50/75/100 percent exclusion at three, four, and five years.
• Bonus depreciation. OBBBA permanently restored 100 percent bonus depreciation for qualified property acquired and placed in service after January 19, 2025, which matters for real estate investors using cost segregation.
• Estate exemption use. The $15 million exemption is permanent, but funding trusts early still moves future appreciation out of the taxable estate.

Key numbers for 2026

Frequently asked questions

Is the SALT cap increase permanent?No. The cap is scheduled to rise about 1 percent per year through 2029 and then revert to $10,000 in 2030, which argues for using the higher cap while it lasts.

Did OBBBA change the net investment income tax?No. The 3.8 percent NIIT continues to apply above $200,000 (single) or $250,000 (married filing jointly) of MAGI, and those thresholds remain unindexed.

Should I accelerate charitable gifts because of the new floor?Often, yes. Bunching multiple years of giving into a single year, frequently through a donor-advised fund, limits how often the 0.5 percent AGI floor applies, though the right cadence depends on your income pattern.

Does the PTET workaround still function under the new SALT cap?Generally yes. The final law did not curtail state pass-through entity tax elections, so eligible business owners may still deduct state taxes at the entity level, though the benefit varies by state and situation.

Is the 20 percent QBI deduction still available?Yes. OBBBA made the Section 199A qualified business income deduction permanent, subject to the existing wage, asset, and specified-service limitations for high earners.