What the 2026 Tax Changes Mean for Minnesota Families and Business Owners
Every fall, we start hearing the same question from clients walking into our firm: is there anything I should be doing before December 31 to lower my tax bill? This year the answer is a little more interesting than usual, because 2026 brought some real changes worth knowing about, not just the usual reminders to top off a retirement account.
The One Big Beautiful Bill Act reshaped a lot of the tax code that used to be scheduled to expire, and the IRS has now rolled out the official numbers for the 2026 tax year. If you have not looked closely at what changed, now is a good time, while there are still a few months left to act.
The Standard Deduction Went Up Again
For 2026, the standard deduction climbs to $32,200 for married couples filing jointly, $16,100 for single filers and married people filing separately, and $24,150 for heads of household. That is a meaningful jump, and it means a lot of taxpayers who barely itemized before may find it makes even less sense to do so this year. If you have been itemizing out of habit, this is worth a second look with your accountant rather than assuming last year’s approach still fits.
Charitable Giving Rules Are Changing
This is the one that catches people off guard. Starting January 1, 2026, charitable donations only count toward an itemized deduction once they exceed 0.5 percent of your adjusted gross income. On top of that, if you are in the top 37 percent bracket, the tax benefit of your itemized deductions, including charitable giving, is now capped at 35 percent. If you give each year generously, talk with us about whether bunching a couple of years of donations into 2026, or timing a large gift before year end, makes more sense under the new rules.
There is some good news too. If you take the standard deduction and do not itemize at all, you can now deduct up to $1,000 in cash donations to qualified charities, or $2,000 for joint filers. That deduction did not exist a few years ago, and plenty of taxpayers still do not know it is back.
Higher SALT Cap and a Much Larger Estate Exemption
The cap on state and local tax deductions rose to $40,400 for 2026, though it starts phasing down once income passes certain thresholds, so higher earners should not assume the full amount applies to them. Separately, the federal estate and gift tax exemption jumped to $15 million per person, or up to $30 million for a married couple. That is a big shift for local business owners and families who have been putting off estate planning conversations. A larger exemption does not mean the planning goes away. It often means there is a real opportunity to revisit how assets, trusts, and business interests are structured.
Business Owners Have New Numbers to Work With
If you run a business in the Twin Cities area, note that the federal excess business loss threshold for 2026 drops to $256,000 for non-joint individual filers, down from $313,000 in 2025, with double those amounts for joint filers. Combined with permanent 100% federal bonus depreciation and updated Section 179 limits, year-end can be an important time to review equipment purchases and capital spending you have been considering, since timing can affect what you are able to deduct this year versus next. Minnesota taxpayers should also consider state conformity rules, because Minnesota does not fully follow federal bonus depreciation treatment.
A Good Time to Sit Down Before the Year Closes Out
None of these changes are the kind of thing you want to discover for the first time when your return is being filed in the spring. Whether you are a longtime Bayerkohler, Ltd. client or are considering working with us, our team is here to help you understand what these updates could mean for your household or business before December 31 arrives. Reach out to schedule a time to talk through your options and ensure you head into the end of the year prepared. As we like to say around here, our job is to make life less taxing.