Navigating Tax Law Changes in 2026

The tax landscape is shifting again. In July 2025, Congress passed the “Big Beautiful Bill” (BBB), a sweeping tax package that modified several provisions of the Tax Cuts and Jobs Act and introduced new rules that will affect retirees, investors, and high-income households beginning in the 2025 and 2026 tax years.

For households in Northern Virginia, where incomes, property taxes, and investment portfolios tend to be higher than the national average, these changes can materially impact your tax bill.

As a fee-only financial planner, our goal is to help you anticipate tax law changes before they show up on your return, so more of your wealth supports your lifestyle and long-term goals instead of going to the IRS.

Below are several provisions worth understanding as you plan for 2026 and beyond.

Increase in the SALT Deduction Cap 

One of the most discussed provisions in the Big Beautiful Bill is the expansion of the State and Local Tax (SALT) deduction cap. Since 2018, regardless of how much you paid in Virginia state income tax and property tax on your home, you could only deduct a combined $10,000 on your federal return. For many of our clients in Northern Virginia whose property taxes alone often exceed this limit, this has been a significant limitation.

For the 2025 tax year the SALT deduction cap has increased from $10,000 to $40,000 for single or married couples filing jointly who made up to $500,000 in income.

The $40,000 cap begins to phase down for taxpayers with a modified adjusted gross income (MAGI) over $500,000. For those with a MAGI of $600,000 or more, the deduction cap remains at $10,000.

Be sure to consider SALT deductions when you file your 2025 returns, especially if you: 

• Itemize your deductions
• Pay significant property, income, or sales tax at the state and local level
• Earned less than $600,000 in 2025

Because of the higher SALT limit, more households may benefit from itemizing deductions again rather than taking the standard deduction, something we evaluate during annual tax planning.

Why Your Investment Income May Lead to a Surprise Bill

A common misconception among retirees is that because they are no longer earning a salary, their tax bills will plummet. However, well-constructed investment portfolios generate income through dividends, interest, and capital gains — and the IRS taxes much of that activity whether or not you withdraw the money. Many retirees are surprised to find they owe significant taxes, even without touching their principal. Here are a few important nuances of the tax law to consider: 

A. The Net Investment Income Tax (NIIT)

This is a 3.8% surcharge that applies to the lesser of your net investment income or the amount by which your Modified Adjusted Gross Income (MAGI) exceeds certain thresholds. For married couples filing jointly, that threshold has been $250,000. Your required minimum distributions (RMDs), dividends, rental income, and capital gains may push you past this limit, adding an extra 3.8% tax on top of your capital gains rates.

B. Dividend and Capital Gains Taxation

While long-term capital gains and qualified dividends enjoy preferential tax rates (commonly 15%, or 20%), they are not tax-free. If your income is high enough, a significant portion of your investment portfolio's growth will be taxed at the top 20% rate. Thoughtful asset location—placing higher-income investments inside tax-deferred accounts—can help reduce the tax drag on your portfolio.

C. Required Minimum Distributions (RMDs)

RMDs from traditional IRAs and 401(k)s are treated as ordinary income. These mandatory withdrawals can be substantial, potentially pushing you into higher marginal tax brackets. Failing to take RMDs by the deadline (usually Dec. 31) results in a 25% excise tax on the amount not withdrawn. 

D. Medicare Premium Surcharges (IRMAA)

Many retirees are surprised to learn that higher income can also affect Medicare premiums.

Medicare uses a measure called Modified Adjusted Gross Income (MAGI) to determine whether you must pay higher premiums through Income-Related Monthly Adjustment Amounts (IRMAA). Income from:

• Required Minimum Distributions
• Roth conversions
• Capital gains, Interest & Dividends
• Large IRA withdrawals

can push households into higher Medicare premium brackets. Strategic tax planning can often help avoid unnecessary IRMAA increases while still meeting spending needs.

Tax Optimization Strategies

Tax planning in retirement isn't just about paying less; it’s about timing, location, and structure. At Massie Financial Planning, we specialize in helping retirees across Northern Virginia implement strategies such as:

• Asset Location: Placing tax-inefficient investments—such as bond funds, REITs, or high-dividend strategies—inside tax-deferred accounts while holding more tax-efficient assets in taxable brokerage accounts to reduce ongoing tax drag.
• Roth Conversions: Strategically converting portions of traditional retirement accounts to Roth accounts during lower-income years, helping fill lower tax brackets today and potentially reducing required minimum distributions and tax exposure later in retirement.
• Charitable Giving: For charitably inclined retirees, several tax-efficient strategies may apply. Qualified Charitable Distributions (QCDs) allow individuals over age 70½ to donate directly from IRAs to nonprofits while satisfying required minimum distributions and keeping the amount out of adjusted gross income. Other strategies—such as donor-advised funds (DAFs) or gifting appreciated securities instead of cash—can also increase the tax efficiency of charitable giving.
• Estimated Tax Planning: Many retirees transition from wage withholding to income that arrives in less predictable ways—RMDs, investment income, capital gains, or Roth conversions. The IRS still expects taxes to be paid throughout the year. Understanding safe harbor rules—generally paying at least 90% of the current year’s tax liability or 100%–110% of the prior year’s tax depending on income—can help avoid underpayment penalties. Coordinating withholding from retirement distributions or making quarterly estimated payments can help smooth cash flow and prevent surprises at tax time.

The smartest financial moves are proactive, not reactive. Schedule a call with our team to start a conversation for how to be more tax efficient and intentional with your financial plan.

Massie Financial Planning (MFP) is an investment adviser registered with the state of Virginia. MFP may only transact business in states where it is registered, exempt, or excluded from registration.

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