Retirement Planning 2026 Updates

Here are some key retirement plan updates for 2026.

IRA contributions

For 2026, the IRA contribution limits are $7,500 for those under age 50 and $8,600 for those age 50 or older. That is up $500 and $600, respectively, from 2025.

SEP IRA limits

The SEP IRA contribution limit for 2026 is 25% of eligible employee compensation, up to $72,000.

If you are self-employed, you may make an employer contribution on your own behalf. If you're self-employed, your contributions are generally limited to 20%, or up to $72,000 of compensation.

OBBB—Temporary changes

The OBBB Act includes these changes to retirement planning that are part of the temporary tax code changes that run through 2028.

No tax on tips

Employees and self-employed individuals may deduct qualified tips received in occupations that are listed by the IRS as customarily and regularly receiving tips on or before December 31, 2024. Phaseouts begin when adjusted gross income exceeds $150,000 ($300,000 for joint filers).

No tax on overtime

Qualified overtime wages that exceed the regular pay rate avoid federal income tax.

For example, if you earn $20 per hour and are paid a total of $30 per hour when working overtime, only the extra $10 per hour counts toward the deduction. If you earn double time at $40 per hour, the deductible portion is still $10 per hour. Taxes will be withheld on the entire amount, and workers may deduct qualified overtime, which will be reflected on their W-2.

Employees must work more than 40 hours a week to qualify. For example, if an employee earns time-and-a-half for six hours but only works 35 hours that week, they are not eligible for the tax deduction.

The exemption is capped at $12,500 per individual (or $25,000 per couple). The deduction phases out for taxpayers with modified adjusted gross income over $150,000 ($300,000 for joint filers).