While your brains (and ours!) might still be thinking about 2025 taxes, here are some new provisions that take effect beginning in 2026:

Child and Dependent Care Tax Breaks

The maximum child and dependent care credit will now be between $1,050 and $1,500 for one dependent and between $2,100 and $3,000 for two or more dependents, depending on income level.

Participants in a dependent care flexible spending account (FSA) can now contribute $7,500 per year on a pretax basis, up from the $5,000 limit that has existed for many, many years. Maybe the government finally realized that day care is expensive??

Employers who provide child care for their employees can receive a tax credit of 40% up to $500,000 (large businesses) and 50% up to $600,000 (eligible small businesses).

1099 Threshold Increases

Until now, a Form 1099 generally needed to be filed if payments exceeded $600 in a year. This filing threshold has now increased to $2,000.

New Rule for 401(k) Catch Up Contributions

Participants who are age 50 and older are eligible to make catch up contributions to their 401(k) accounts. The new rule beginning in 2026 requires those participants whose compensation exceeded $150,000 in 2025 to make those catch up contributions only on a Roth (after-tax) basis, even if other salary deferrals were made pretax.

Exception to 10% Penalty for Early 401(k) Withdrawals

Individuals can withdraw up to $2,600 (indexed annually for inflation) from 401(k) accounts before reaching age 59 1/2 in order to pay long term care insurance premiums. Ordinary income tax rates will apply to the withdrawal, but not the 10% penalty for early withdrawals.

529 Plan Withdrawals Expanded

Beginning in 2026, up to $20,000 can be withdrawn per year to cover K-12 education expenses. This limit was previously $10,000. As before, there’s no limit on the amount that can be withdrawn to cover college expenses.

Gift Tax Limits for 2026

The annual federal gift tax exclusion for 2026 is $19,000. This means you can gift up to $19,000 per person in 2026 without having to file a gift tax return or affect your lifetime estate and gift tax exemption. Joint filers can each gift $19,000 per person.

The lifetime estate and gift tax exemption for 2026 is $15 million.

To see FAQs on gift taxes from the IRS, click here.