Planning in 2026: What Colorado Taxpayers Should Know About New Tax Rules

Written By Chelsea Ziegler

In 2026, the One Big Beautiful Big Act (“OBBA”) has created some changes to tax laws and Internal Revenue Service (IRS) rules. To help you stay up to date, we’ve provided a brief summary of the general effects on retirement, financial planning, and estate planning in this article.

Tax laws and retirement rules change more often than most people realize. Some updates are small, but others can have a real impact on how much you save, how you’re taxed, and what your retirement income looks like now or down the road.

Here’s a straightforward look at the key updates for 2026 tax updates and how they may affect you:

Higher Standard Deduction

In practical terms, this means more of your income isn’t taxed at all. For many people, especially those who don’t itemize deductions, this is one of the simplest ways taxes go down from year to year. Even if your income hasn’t changed, you may end up paying a little less in tax.

For 2026, the standard deduction has increased again:

  • $16,100 for single filers

  • $32,200 for married filing jointly

  • $24,150 for heads of household

Higher Retirement Contribution Limits in 2026

One of the more positive updates this year is that standard employee contribution limits have gone up for common retirement accounts like 401(k)s and IRAs. If you have a 401(k) account or an IRA, you are effected.

For 2026 the limits are as followed:

  • 401(k) contribution limit increased to $24,500

  • Catch-up contributions (ages 50+) increased to $8,000

  • Traditional and Roth IRA contribution limit increased to $7,500

  • IRA Catch-up contribution (ages 50+) is $1,100

  • Total employer and employee limit is $72,000

This means you have more room to save on a tax-advantaged basis.

If you’re in your peak earning years, planning for retirement, or just trying to increase your retirement savings in Colorado, this is a good opportunity to revisit your contributions. Even small increases can add up over time thanks to compounding.

That said, not everyone needs to max out their contributions every year. The right approach depends on your income, expenses, and overall financial goals. If you are unsure, contact us today and we can help point you in the right direction.

High Earners Affected by New Roth Catch-Up Rules

A bigger change in 2026 that affects higher-income individuals making catch-up contributions. If you’re age 50 or older and earned more than $150,000 from one employer in the prior year, then your catch-up contributions must now be made as Roth (after-tax) contributions.

In summary:

  • You can no longer use pre-tax dollars for extra catch-up amounts

  • You no longer get the upfront tax deduction on those catch-up contributions

  • But qualified withdrawals in retirement may be tax-free

This doesn’t apply to your regular contributions, only the catch-up portion, and some plans are excluded. Still, it’s a change worth noting if you’ve been planning on pre-tax contributions.

This also does not apply to SEP Plans or SIMPLE IRAS, which are not affected by this change.

Change to Required Minimum Distributions (RMDs)

Another change that continues to affect retirement planning is the required minimum distribution age. Under current rules, most people now must begin taking RMDs at age 73. Now retirees have more time to:

  • Let retirement accounts grow

  • Manage the timing of withdrawals

  • Plan for taxes more intentionally

Once RMDs begin, they can push you into higher taxable income years if not planned carefully. These updates can shape how much tax you pay and how your retirement strategy works. A higher standard deduction, slightly wider tax brackets, and delayed RMDs all create a bit more flexibility, but they also make planning more important.

Tax Incentives for Small Business Owners

If you own a small business or if you are self-employed, there’s some more good news. Recent changes have expanded incentives for employers who offer retirement plans.

Available benefits for small business owners in Colorado may include:

  • Tax credits to help offset the cost of starting a plan for businesses with less than 50 employees

    • 100% of qualified plan start-up costs, limited at $5,000 per year for three years.

    • Qualified costs include setting up the plan, educating employees, and general administrative fees. Employers with 51 to 100 employees can claim a 50% credit for these same costs.

  • Credits for employer 401(k) contributions to employee accounts (if have less than 50 employees, can claim a credit for up to $1,000 for every employee who makes less than $100,000 a year, for five years)

  • Additional incentives for automatic enrollment features ono 402(k) or 403(b) plans (extra $500 credit for each year for three years)

For many small businesses, these changes make it easier to offer retirement benefits. It can also help with hiring and retention of employees.

Colorado Protections for Retirees and Retirement Tax Benefits

In addition to federal tax rules, it’s important to understand how Colorado taxes retirement income.

Here are a few highlights:

  • Age 65+: You can exclude up to $24,000 of pension or annuity income from Colorado taxes, and Social Security benefits are generally deductible from Colorado tax return

  • Age 55–64: You can exclude up to $20,000 of your pension or annuity income, with additional Social Security benefits deductions depending on your income limits (below $75,000 for single filers and $95,00 for married couples filing jointly)

  • Under 55: Most of these tax benefits above don’t apply yet, but military retirees can exclude up to $15,000 of military retirement pay

These rules might make a meaningful difference in how much you ultimately keep in retirement. They may also be effected if you are a military retiree. Timing your withdrawals and understanding how your income is taxed can be just as important as how much you’ve saved.

Federal Estate Tax & Exemption Planning

Luckily, in Colorado, residents do not have to face an estate tax. However, everyone is subject to the federal estate tax.

The federal estate tax (i.e. death tax) is a tax on the transfer of property at death. It applies to the “gross estate”, which is total value of everything a person owns, such as real estate, investments, business interests, and certain trusts. After allowable deductions (like debts, administrative expenses, and transfers to a surviving spouse or charity), the remaining amount becomes the taxable estate.

For 2026, the estate tax filing threshold is approximately $15 million per individual, meaning most estates will not be subject to federal estate tax.

In summary:

  • Most individuals will not owe federal estate tax (unless over $15,000,000 threshold)

  • Married couples may be able to combine exemptions with proper planning

  • Larger estates, business owners, and high-value assets may still require careful planning

Even if your estate is below the current exemption, it is still important to plan ahead. Exemption amounts can change over time, and assets like real estate or a business can increase significantly in value. With proper planning, you can protect assets and reduce potential tax exposure for future generations. This can include tools such as trusts, gifting strategies, and coordinated estate plans.

Final Thoughts: Planning Matters

The biggest takeaway for 2026 isn’t any one rule change, it’s that retirement planning is ongoing and changes more often then you think! Even small adjustments can add up over time, such as increasing contributions, rethinking tax strategy, or updating your plan.

If it’s been a while since you reviewed your plan, this is a good opportunity to:

  • Revisit your retirement contributions

  • Look at how taxes affect your long-term goals

  • Determine how taxes affect your small business (if applicable)

  • Make sure your estate plan and financial plan are still aligned with your goals of asset protection and family peace of mind

These changes create opportunities for you, but they also make it more important to periodically revisit your estate and financial plan. Between the IRS rule updates (like contribution limits and Roth requirements) and Larger laws like SECURE 2.0 and the One Big Beautiful Bill Act, retirement planning is becoming more complex, but also more flexible.

Planning for retirement doesn’t have to be complicated, but it does require some attention. The tax rules and regulations will continue to change, and what worked five years ago, or even two years ago, may not be the best approach today. Getting guidance when needed can make a real difference over time.

Resources (IRS & Retirement Planning Tools)

If you want to explore the rules behind these updates, or take a closer look at your options, the following resources are a good place to start:

IRS Resources

Other Resources

  • Brief summary: The One Big Beautiful Bill Act, signed into law on July 4, 2025, is a broad tax and spending law that affects individuals, families, and businesses.

  • While it does not directly overhaul retirement accounts like the SECURE 2.0 Act, it shapes retirement planning indirectly by:

  • Extending or modifying major federal tax provisions, including deductions and credits

  • Introducing additional tax deductions, such as enhanced benefits for retirees and workers

  • Affecting how Social Security and other retirement income may be taxed in certain situations

Need Help Planning Ahead?

If you’re thinking about retirement planning, estate planning, or protecting your financial future in Colorado, getting guidance early can help you make the most of these changes. A thoughtful plan today can reduce uncertainty and help protect your long-term goals.

A thoughtful plan now can save time, reduce stress, and protect your family later. If you are not sure where to start, or have any questions, please do not hesitate to contact us today!

PLEASE NOTE: All materials have been prepared for general information purposes only to permit you to learn more about our firm, our services and the experience of our attorneys. The information presented is not legal advice, is not to be acted on as such, may not be current and is subject to change without notice.

Chelsea Ziegler
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