As Americans and Canadians alike look ahead to the 2026 tax season, a mix of new federal laws, inflation adjustments, and evolving tax credits promise to reshape the financial landscape for millions of households. From the United States’ sweeping updates to tax brackets and credits under President Donald Trump’s recent legislation to Canada’s recalibrated contribution limits and income-splitting rules, taxpayers on both sides of the border face a year of both opportunities and potential pitfalls.
In the United States, the Internal Revenue Service (IRS) announced in January 2026 a set of inflation-based updates to federal income tax brackets, standard deductions, capital gains brackets, and other provisions. According to CNBC, the two lowest tax brackets saw their income ranges increase by about 4%, while higher brackets rose roughly 2.3% compared to the previous year. Notably, these changes are layered on top of the adjustments enacted by President Trump’s “big beautiful bill,” signed into law in July 2025, which permanently extended the 2017 tax cuts, boosted the standard deduction, increased the child tax credit, and introduced a host of temporary tax breaks.
For many workers, these changes will translate into slightly larger paychecks in 2026, as the IRS also updates its withholding tables. “Folks will see slightly larger paychecks, assuming their income stays the same as 2025,” explained Andrew Lautz, director of tax policy for the Bipartisan Policy Center, in an interview with CNBC. However, Lautz cautioned that for most, the increase will be modest—"we’re talking about a couple of dollars a paycheck, unless you’re claiming the tips and overtime deductions," he said. The impact will vary, as not every worker will feel the difference, especially if their earnings or withholdings change.
The rationale behind these bracket adjustments is to keep pace with inflation, ensuring that taxpayers aren’t pushed into higher tax rates solely due to rising prices. Yet, as Garrett Watson of the Tax Foundation pointed out to CNBC, “tax bracket adjustments are a lagging measure of inflation over the prior year,” which means they may not fully keep up with the real cost of living. The Bureau of Labor Statistics reported that the consumer price index rose 2.7% in November 2025 compared to the previous year—higher than most of the 2026 tax bracket adjustments—highlighting the ongoing challenge of maintaining tax fairness in an inflationary environment.
But the story doesn’t end with bracket changes. Tax professionals across the U.S. are urging caution as the IRS prepares to accept 2025 tax returns starting January 23, 2026. According to irs.gov and echoed by advisors speaking to WBRZ News in Louisiana, taxpayers should resist the urge to file early. The reason? A host of significant federal tax changes and lingering legislative uncertainties could mean mistakes, delays, or missed opportunities for those who rush the process.
Among the most consequential changes are those stemming from the Inflation Reduction Act, adjustments to standard deductions, and modified energy tax credits. The expanded child tax credit, in particular, presents a nuanced challenge: while some pandemic-era enhancements expired at the end of 2025, other provisions have been extended or rewritten. This makes determining eligibility and the correct credit amount especially tricky for families with changing incomes or new dependents.
Another area demanding careful attention is the earned income tax credit (EITC), which saw eligibility expansions that reduce barriers for low- and middle-income workers. As WBRZ News reported, tax professionals warn that “rushing to file without fully evaluating EITC qualifications could leave eligible taxpayers shortchanged.” Retirement account rules have also shifted, with the IRS updating contribution caps and phase-out thresholds for traditional IRAs and 401(k) plans—changes that can affect deductions and taxable income, especially for high earners and small-business owners.
Energy tax credits remain popular but complex, with credits for solar installations, electric vehicles, and energy-efficient home improvements varying based on income, purchase timing, and product eligibility. Incorrect claims can trigger IRS reviews, leading to delays or even audits. According to IRS data cited by WBRZ News, millions of amended returns were processed in 2025 due to rushed filings—often because taxpayers overlooked new deductions or misreported credits.
Given these complications, experts emphasize patience and thorough preparation. “We want to make sure that they’re taking the correct credits and that they’re not filing incorrectly in a rush,” a Louisiana tax advisor told WBRZ News. The consensus is clear: gathering all relevant documents, understanding the new rules, and seeking professional advice can save both money and stress in the long run.
North of the border, Canadians are also navigating a shifting tax landscape in 2026. As reported by The Globe and Mail, the federal indexation rate for tax brackets is set at 2%, effective January 1, down from 2.7% in 2025. In a significant move, the government cut the lowest tax bracket rate to 14% from 15% as of July 1, 2025, resulting in a full-year rate of 14.5% for 2025. These changes, like their U.S. counterparts, are designed to reflect inflation and keep taxes fair for ordinary Canadians.
For savers, the annual Tax-Free Savings Account (TFSA) contribution limit remains at $7,000 for 2025, with the lifetime limit rising to $109,000 in 2026 for those eligible since 2009. Retirement savers also see a boost: the RRSP maximum contribution limit for 2026 is $33,810, up from $32,490 in 2025. The deadline for 2025 contributions is March 2, 2026, giving Canadians a bit more time to maximize their tax-advantaged savings.
Retirees will want to pay close attention to the Old Age Security (OAS) clawback threshold, which increases to $95,323 in 2026. Those with 2025 incomes above $93,454 will face a 15% recovery tax on the difference, up to the total amount of OAS received. Meanwhile, couples using prescribed rate loans for income splitting must ensure that interest on outstanding 2025 loans is paid by January 30, 2026, to maintain the strategy’s effectiveness. Jacqueline Power of Fidelity Investments Canada ULC told The Globe and Mail that the borrowing spouse should pay interest from an account in their name only to reduce the risk of the Canada Revenue Agency (CRA) challenging the transaction during an audit.
Other notable Canadian changes include an increase in the lifetime capital gains exemption to $1.275 million in 2026, and expanded trust reporting rules that will require “bare trusts” to file returns for 2026 and beyond, after exemptions for 2023 through 2025.
As both countries gear up for a busy and potentially confusing tax season, the message from experts is simple: take your time, get informed, and don’t let the rush to file early lead to costly mistakes. The evolving tax codes on both sides of the border offer new opportunities for savings and planning—but only for those who approach them with care and patience.