Updated March 2, 2026
Taxes are a critical consideration in retirement planning. Higher taxes mean less income to spend. While predicting future tax rates is impossible, understanding potential tax changes can help you prepare and build a stronger retirement tax planning strategy. Below, we’ve compiled some common tax changes that may affect your income during retirement and potential strategies to help you get the most out of your retirement planning.
Did Your Tax Bracket Change?
Your federal tax bracket determines the percentage of your income you owe in taxes. During retirement, your tax bracket may change. For example, if a spouse passes away, the surviving spouse changes from filing as married filing jointly to filing as a single filer, often resulting in higher taxes since single filers are taxed at higher rates on lower amounts of income.
This change in filing status is one of the most common and overlooked tax shifts in retirement planning.
Did Tax Brackets Change?
Even if your filing status remains the same, tax brackets themselves can change when Congress passes new laws. Under prior law, the individual tax rate reductions enacted in 2017 were scheduled to expire after 2025, which could have caused many taxpayers to revert to the higher pre-2018 bracket structure in 2026.
However, in mid-2025 Congress passed the One, Big, Beautiful Bill Act, making the current tax rate structure permanent. Now, the IRS adjusts bracket thresholds for inflation each year.
2026 Tax Year Marginal Rates
Bear in mind that 2026 tax year rates apply to that tax year, not the year filing occurs. With this being said, the marginal tax rates (ranging from 10%-37%) will not change, but the income bracket ranges have adjusted for inflation. This means you can earn more before hitting an increased tax rate. For more details, please visit the IRS website.
Were Any Deductions Eliminated?
The amount of your income subject to taxation is crucial. If you earn $100,000 a year and deduct $20,000, you pay taxes on $80,000. If next year you can only deduct $10,000, you pay taxes on $90,000. Even without a change in tax brackets, reduced deductions mean higher taxable income.
Changes to Deductions in 2026
To avoid confusion, keep in mind tax year 2026 adjustments mostly apply to taxes being filed in 2027. According to the IRS website, “For tax year 2026, the standard deduction increases to $32,200 for married couples filing jointly. For single taxpayers and married individuals filing separately, the standard deduction rises to $16,100 for tax year 2026, and for heads of households, the standard deduction will be $24,150.”
Were There Changes to How Your Assets Were Taxed?
Future tax increases could also come from changes in how retirement assets are taxed. Social Security benefits were not taxable before 1984. Legislation passed in 1983 made up to 50% of the benefits taxable, increasing to 85% in 1993.
Depending on your combined income, up to 85% of Social Security benefits may currently be subject to federal income tax. Congress could change how retirement income is treated in the future, increasing the taxable portion or adjusting thresholds.
If you want to dive deeper into taxation of Social Security benefits, check out the FAQs on this IRS website page.
Were Any New Taxes Enacted?
Congress may pass new taxes on retirement assets. In recent years, lawmakers have proposed changes that could impact retirement accounts, including adjustments to Required Minimum Distribution (RMD) rules for large account balances.
While proposals do not always become law, they highlight the importance of remaining flexible in retirement planning. Tax-advantaged accounts like IRAs and 401(k)s remain powerful tools, but their long-term tax treatment depends on future legislation.
How Can You Protect Against These Risks?
“Tax diversification” can be a useful strategy as part of a broader retirement tax planning approach. Including tax-free savings options like Roth IRAs and Roth 401(k)s into your plan can help protect against certain risks. These accounts are funded with after-tax dollars and, if terms are followed, withdrawals in retirement are tax-free.
If future tax rates rise, having some assets in tax-free accounts may reduce overall tax exposure. Making sure a portion of your retirement funds are in tax-free accounts can help create a more balanced and flexible retirement income strategy.
How Deferred Annuities May Fit Into a Tax Strategy
In addition to traditional retirement accounts, some retirees consider annuities as part of a comprehensive retirement income planning strategy. Deferred annuities grow tax deferred, giving your investment the opportunity to compound. Your earnings are not taxed until withdrawn. While withdrawals are generally taxable as ordinary income, the tax-deferred growth feature can help manage when income is recognized.
This type of coordination is especially important when planning for retirement income in Ohio, where Social Security benefits are not taxed at the state level, but other retirement income may still be subject to state taxation. To learn more about how Ohio taxes retirement income, visit this website page.
Ready to Explore Annuities Further?
We have resources to help you understand annuities and how they work. If you are interested in learning more about annuities and if they are right for you, check out this article. If you’d like to understand the difference between annuities versus traditional retirement accounts, dive in here.
Frequently Asked Questions About Taxes in Retirement
Where can I find information about changes to tax brackets, deductions, and new taxes introduced in 2026?
The IRS website is the best resource for tax information. Here are some 2026 updates based on changes ushered in by the One, Big, Beautiful Bill.
Will my taxes automatically decrease when I retire?
Unfortunately, no. Your earned income may decrease, which may move you to a lower tax bracket. However, when you start to withdraw from retirement accounts, like IRAs and pensions, this income is taxable.
Are Social Security benefits taxed?
At the federal level, up to 85% of benefits may be taxable depending on your total income. As of the date of this writing, the state of Ohio does not tax Social Security income. Keep in mind, they do tax other retirement income.
Can tax laws change after I retire?
Simply put – yes. Congress consistently changes tax laws. Always review the most up-to-date IRS guidance, so you aren’t surprised when you visit your accountant. Often, rates are adjusted to accommodate fluctuations caused by inflation.
Are annuities tax free?
If you choose a deferred annuity, you enjoy tax deferred growth of your investment account. This means your earnings are not taxed until you withdraw them. If you are interested in exploring annuities and how they work, visit this article.
Should I work with a tax professional?
Absolutely! Tax professionals, like CPAs, stay up-to-date on ever-changing tax legislation. They will provide you with strategies and advice, so you get the most from your retirement tax planning strategy.
Retirement Planning with Ianniello Agency
At Ianniello Agency, we can help families and individuals in Ohio plan for retirement with annuities and other income strategies designed to complement your broader retirement plan. Annuities can offer a steady income in retirement and grow tax deferred. Ready to invest in an annuity? Contact us today or request a quote online.
