New Year, New Rules: Updates that Matter Most

multiple children in college at the same time was considered when determining the level of aid provided. Now, FAFSA will continue to ask about the number of children in college, but that information is not used when calculating the SAI.

Reminder, the definition of the “parent of record” is now based on which parent provides the most financial support, not the custodial parent. This shift has significant implications for separated or divorced households and emphasizes the importance of accurate documentation and clear financial structure.
Parent PLUS loans are also undergoing structural changes under the OBBB, with new borrowing caps of $20,000 per year and $65,000 lifetime per dependent student. Pell Grants have also been adjusted, now considering both income and family assets when determining eligibility. The maximum grant size for this school year is $7,395.

These updates reinforce the need to approach college planning as a multi-year financial strategy, not a last-minute senior year scramble.

Retirement Savings Increases

Great news for savers: retirement contribution limits are getting a boost in 2026.

IRAs (Roth & Traditional)
You’ll now be able to contribute up to $7,500, with an additional $1,100 catch-up available for those age 50 and older. The Roth IRA income phase-out range is also increasing, giving more households the chance to qualify.

401(k)s (Roth and Traditional)
The annual contribution limit is rising by $1,000 bringing the new contribution maximum to $24,500.

     – Age 50-59: you can contribute an additional $8,000, for a total of $32,500
     – Age 60-63: you can contribute an additional $11,250, for a total of $35,750

Tax Adjustments

The IRS has released its annual inflation adjustments for tax year 2026, affecting everything from standard deductions to estate tax thresholds. While many of these changes are incremental, they can add up to meaningful differences for households and business owners alike.

For 2026, the standard deduction increases to:
     – $16,100 for single filers
     – $32,200 for married couples filing jointly
     – $24,150 for heads of household

The top tax bracket remains at 37%, applying to incomes above $640,600 for single filers and $768,700 for married couples filing jointly. Alternative Minimum Tax exemptions also rise, with the threshold increasing to $90,100 for single filers and $140,200 for married couples. High net worth families also benefit from a higher estate tax exemption, now $15 million, offering more flexibility for wealth transfer. Additionally, adoption credits receive a small bump, and the employer-provided childcare credit expands from $150,000 to $500,000 (and up to $600,000 for eligible small businesses), creating strong incentives for companies investing in family-supportive workplace benefits.

Small adjustments like higher FSA limits, transportation benefits, and medical savings thresholds also take effect, creating new opportunities to fine-tune income and benefits planning.

What This Means for Your Planning

Together, these updates underscore the value of proactive and coordinated planning. Whether it’s reassessing cash flow, optimizing 529 usage, or preparing for next year’s tax landscape, small adjustments made now can have a significant impact later.

At Damefender, we work with clients to bring these pieces together, connecting the dots between education funding, tax strategy, and long-term wealth planning. We’re here to ensure you move into 2026 with clarity, confidence, and a plan designed to support your family’s goals – today and for years to come. Please don’t hesitate to reach out with any questions.