The Optometry Money Podcast Ep. 145: What’s Changing in 2026: Five Key Financial and Tax Updates for Optometrists

Evon: Hey everybody. Welcome back to the Optometry Money Podcast. We’re helping ODs all over the country make better and better decisions around their money, their careers, and their practices.

I am your host, Evon Mendrin, Certified Financial Planner (TM) practitioner, and owner of a Optometry Wealth Advisors.

Thank you so much for listening. I am happy to be back. Happy New Year. It’s been a little while. But we’re back with brand new episodes, and today we’re gonna dive into five key financial and tax updates every optometrist needs to know about and for the listeners, we also put together a two page guide to all of the 2026 financial and tax numbers you need to know about as you go through the tax year.

You can download that guide by clicking on the link in the show notes. But let’s go ahead and dive right in.

Update # 1 – Adjustements to Tax Brackets, Standard Deduction, and Retirement Plan Contributions

Evon: And the first key financial update you need to know about are, number one, the usual suspects.

And that is every year there are updates to tax brackets. There are updates to the standard deduction amount [00:01:00] each family gets, and there are updates to the contribution limits to retirement accounts and health savings accounts.

And of course there are inflation adjustments to those tax brackets. The income amounts in each tax brackets increase. there are changes to the standard deduction amount for this year. So for 2026, the standard deduction amount is $32,200 If you’re married, filing jointly, or $16,100 if you are single or filing separately.

But what I really wanna get into here are the changes to retirement plan contributions, and that’s gonna impact your 401k contributions. It’s gonna impact your simple IRA contributions and your IRA contributions as well.

The amounts that you as an employee can put into a 401k plan Is $24,500. Of course there is a catch up amount, so if you are age 50 or older, you get an extra amount, a wisdom bump of an additional $8,000 you can put in if you are within the specific ages of 60 and 62.

If you are [00:02:00] within age 60 through 63, you actually get a special additional bump. So you can put in $11,250 this year, starting this year rather than that smaller $8,000. So just for that small band of ages, there’s a very specific bump in your catchup amount,

and then the total amount that you can put into a 401k plan across all of the different types. So the employee amounts, the employer match profit sharing is $72,000 this year. And that is before the Catchup contribution. So if you are 50 and older, you can add on top of that, that catch up amount.

Now, I don’t necessarily wanna bore you by just reading off the numbers for the other accounts, but there are updates to the simple IRA contribution amounts. HSA contribution amounts as well. And then regular traditional IRA and Roth IRA contributions. So you can find those numbers in the guide I’ve added to the show notes, uh, which you can download or you can search the internet for that.

But just keep [00:03:00] in mind, these amounts have changed for the new year.

So that’s the usual suspects. I guess the last thing to bring up is the social security wage base. So the amount of your wages. That subject to Social security taxes is $184,500 for this year.but those are the usual suspects. Those are the things that if we’re gonna take action here, look at those maximums and if you are trying to hit the maximum amount for the year.

Look at how many pay periods are left through the end of the year. So it might be 24, it might be 26. Divide that maximum amount by that by 24 pay periods or 26 pay periods, and that’s the amount you want to contribute each and every pay period. And some of you, it may allow you to do actual dollar amounts for others of you, It may not. It may force you to do percentage contributions. And so what you wanna do, you wanna take that dollar amount, divide it by your gross. Per pay period paycheck. And that’s the percentage that you want to aim for. [00:04:00] And you can adjust this through the year if you have variable pay throughout the year.

If you have pay increases throughout the year, you, you wanna keep an eye on this? I’ll keep an eye on this for clients throughout the year to make sure that we are getting as close to that max as we can, without going over or without being substantially under.

Update #2 – OBBBA Updates Taking Effect in 2026

Evon: number two. The other thing I wanna bring up is there, there are a few updates from last year’s, One Big Beautiful Bill Act that are coming into effect this year. The first one is that there’s an expanded phase out threshold for the qualified business income deduction. That’s a 20% deduction that you are eligible for if you own a pass through business entity.

So for practice owners that are taxed as, sole proprietors. S corporations, even partnerships, or if you are 1099 contractor, you are technically a small business as well. you’re potentially eligible for this. However, once your taxable income, so your income after all of the deductions are gonna deduct, before the QBI deduction starts to get to certain phase out levels, [00:05:00] because of the type of businesses you are as service businesses, you start to phase out of this deduction, you start to qualify for less and less of it, and then at some points you lose it all together. Due to the change in law starting this year, there’s an expanded threshold.

So you get an extra, if you’re filing taxes jointly, you get an extra $50,000 to go through before you phase out of that. And if you’re single or filing separately, you get an extra $25,000. So this is one of those important tax planning levers, the QBI deduction, specifically for practice owners.

And very often a practice owner gets into this sort of gray zone where your income is high enough that you’re starting to phase out of multiple things at once. So for example, this QBI deduction, child tax credits, potentially higher state and local income tax deduction amounts.

So you’re starting to phase outta these different tax planning levers. And this. This wider threshold just gives you a little bit of a longer planning runway for tax planning starting this year.

The other thing that’s starting this year are Trump accounts, and [00:06:00] this is expected to be available, I believe June of this year.

this is essentially a traditional IRA for minors where you don’t get a deduction for contributing, so you’re just putting into it after tax amounts. you can only contribute while they’re under 18. there are limitations on what you can invest in likely , a US stock market index fund.

and at age 18 for the kid, once they turn 18, it essentially becomes a regular Traditional IRA. So I’m not overly excited about it, but there are some uses for it. I think I’m gonna do a, an entirely separate episode on this when it starts to get closer to that point.

but Trump accounts are something to look forward to starting midyear of this year. so that’s number two.

Update #3 – Student Loan Rule Changes Continue to Take Effect

Evon: Number three, change are student loan rule changes that are starting to really continue and come into effect. this year, 2026, if we remember last year, the One Big Beautiful Bill Act, along with all the tax really extensions, of the rules.

There was a pretty major change in [00:07:00] student loan planning, particularly for those that are on income-driven repayment plans. And this year is a continuation of that with an importance. date in the middle of the year. Essentially what the law did last year is it’s consolidating for currently graduated optometrists. So for you that have graduated or currently practicing, it’s essentially consolidating your income-driven repayment plan, your IDR payment plan options, into either the income based repayment plan. And it’s either the old version of that or if you’re lucky enough, the new version of that, depending on when you took out your very first federal loans, or the newly created RAP plan.

And that new RAP plan is expected to be available, July of this year. I believe we should hear more about that as we get closer to that. and so for current ODs that have already graduated. You’re starting to pay off your loans, you can still use the pays You earn plan until sometime between [00:08:00] now and July of 2028, where you’re gonna need to choose between either IBR or the new RAP plan.

for future borrowers, so for those that are still in school or for any borrowers that are going to be taking out federal loans On or after July 1st of this year, or if you consolidate your loans after that point of this year, you’re gonna only be able to choose between the RAP plan and the standard repayment plans. So your payment options are gonna be much more limited, compared to currently graduated ODs.

It’s a different planning world we’re getting into for those that are still in school or those that are entering Optometry school.

And one important deadline for currently graduated ODs is July 1st. If you take any additional federal loans, for example, maybe you’re going back to school for an MBA or something like that, if you take any additional federal loans on or after July 1st, or if you are [00:09:00] consolidating your loans on or after this date, you’re going to lose access to IBR, and for now, Pay As You Earn. RAP is gonna be your only income-driven option. So be very careful about consolidating your federal student loans into consolidated loans in general for two reasons. Number one is credit towards forgiveness. because when the SAVE plan was created, the rule that created it, the rule that allowed for it, I should say, also gave you the weighted average of credit towards forgiveness of all of the different loans you’re consolidating, which is really important because.

Prior to that, if you consolidated your federal loans, you’re essentially creating new loans and you lost all progress towards forgiveness.

But since recent court cases essentially ended the safe plan and the entire rule connected to it, it took away that weighted average credit towards forgiveness. [00:10:00] And now we’re back to those old rules where if you consolidate, you may be seeing all of that past payment history towards forgiveness erased.

So until we see further rulemaking fixing this issue. I’d be very cautious and consolidating. Now that doesn’t apply for those going for PSLF. You still get weighted average progress across your loans when you consolidate. Based on a separate rule that doesn’t appear to be impacted at all. this is only for going for taxable forgiveness over 20 or 25 years.

So that’s the first reason. The second reason I’d be very cautious about consolidation is that consolidating too close to or after July 1st. Removes eligibility for IBR or for now, Pay As You Earn. And it’s only gonna leave you with the RAP plan or the standard plan that’s gonna be available. So be very cautious about that if you are really set on consolidating your loans or if you need to get that early in the year, get that done early in the year [00:11:00] so that progress or that process doesn’t drag on too close to July.

but be very cautious about that July date. Something you wanna keep in mind. And then four. any new borrowers or any current students that are listening, we’re entering sort of a new world starting July 1st, and, there are, less pathways towards forgiveness for you than there were for, for ODs that came before you.

Now that all being said, now that all being said, all of the same planning opportunities with student loans for currently practicing ODs still exist. Which are lowering your AGI through, deductions and pre-tax contributions to retirement accounts to lower that student loan payments or a tax filing status, deciding whether or not if you’re married, to file taxes separately, particularly in community property states.

So a lot of those planning opportunities still exist. there’s just some changes we need to navigate. So that’s number three.

Update #4 – Changes to ACA Health Insurance Premium Tax Credits and Expanded HSA Eligibility

Evon: Number four, health insurance changes. And there are two changes we need to keep in [00:12:00] mind related to health insurance.

Number one are , the rules around Affordable Care Act premium tax credits reverting back to pre COVID rules. And, this is important if you are cold starting a practice or for those that have just purchased a practice, you have a lot of those assets to depreciate.

Your taxable income is lower than it might be in the future. as well as for those planning for the early years of retirement where there’s low enough income after deductions to benefit from, premium tax credits and health insurance is consistently, a headache for ODs, especially for families.

And the cost can very often be shocking. Premium tax credits help to mitigate some of that by providing an upfront credit Against your premiums if you are on a an ACA marketplace plan, helping to lower that cost of health insurance.

Conceptually, it’s trying to limit the amount of out of pocket insurance premiums so that they aren’t over a certain [00:13:00] percentage of your household income. And so if you’re using a marketplace plan, usually what you’ll do as you’re signing up for coverage at the end of last year or maybe, right now, if you’re, if you’re getting to it late.

You’re usually using your estimated income and family size at the, and then at the end of the year when you’re filing your tax return, the actual credit you’re eligible for based on your actual income is squared away. And so it’s either gonna lead to an amount that you pay back if your income was higher than you estimated and you qualify for a lower credit or a higher credit amount.

And like those IDR plans for student loans. this premium tax credit is one of those stealth taxes you want to keep an eye on and plan around for tax planning. And you can only qualify for it based on, primarily on your income.

and the way the income is defined here is modified. AGI modified adjusted gross income, modified AGI Here is your AGI, which is line 11 on your personal tax [00:14:00] return plus social security benefits that aren’t taxed. Plus any tax free income like muni, municipal bond income and then finally excluded foreign income. So you’re adding those things back to AGI. Now that being said, realistically for working optometrists, it’s probably just gonna be your AGI.

If you have some municipal bonds or muni bond funds, maybe you’re adding back that interest and so your gross income and so your AGI is your all of your gross income. Minus a whole bunch of deductions, like business deductions or pre-tax contributions to retirement accounts, HSA contributions, things like that.

And the typical rules for this tax credit said you phased out of eligibility once your modified AGI was above 400% of the federal poverty line amount based on your family size, and that’s a hard cliff. So even if you’re a dollar over, you lose eligibility. During COVID, Congress [00:15:00] created an enhanced form of this credit, and from 2021 through 2025, they removed that hard cliff and allowed more families to qualify for more of that tax credit, lowering those healthcare costs. Now this year, 2026, it’s going back to those old rules. So Cliff is back on making it another important tax planning threshold to keep a close eye on as you go through the year.

The second health insurance related change is that starting this year. Any Affordable Care Act, bronze and catastrophic health plans automatically qualify as HSA eligible plans. And before this, it was only those high deductible health plans that had a strict limit on deductibles and a strict limit on maximum out-of-pocket costs. This expands the coverage amount that you can pick from giving you more options that are gonna be eligible for those, HSA accounts which is great. Those HSA accounts are [00:16:00] sort of a stealth retirement account. If you aren’t going to need those dollars in the short term for healthcare expenses, you can choose to invest those funds.

really tax efficiently and treat that essentially as another retirement account because pretty much everybody has healthcare expenses throughout retirement. so that’s number four.

Update #5 – Mandatory Roth Catch-Up 401(k) Contributions for High Earners

Evon: And then number five. Catch up contributions. this is something that’s from the Secure Act 2.0 that was kicked down the road a little bit and is now in effect for 2026 for 401k plans.

And so as we talked about earlier, those age 50 and above get an additional $8,000 you can add to that 401k plan. And then for age 60 to 63, there’s the additional, there’s the even higher amount. for high earners, You can no longer make pre-tax catchup contributions.

That is if your prior year W2 wages were $150,000 or higher last year for this year, your, [00:17:00] Your catch-up contributions have to be Roth. They can’t be pre-tax. And if your 401k plan doesn’t allow for Roth contributions, which should be super rare at this point, but if it doesn’t for some reason, you’re not gonna be able to make catch-up contributions.

So a reason to check in with your plan administrator to make sure that you are, good to go there. and then keep in mind, this is looking back at your prior year, W2 wages from the last year. For the same company that you’re at right now or technically the same plan sponsor. So if you switch jobs midyear last year or at the end of last year, it’s only going to look at wages from the prior year for the current employer that you’re at right now.

And why does this matter? the Roth Catchup contributions are now forced, which may make sense for many ODs out there.

But for tax planning through the year, you’ll wanna keep in mind that your catch-up contributions may not help defer taxes this year. So if you’re trying to load up on pre-tax [00:18:00] contribution, whether it’s to phase back into, or whether it’s ’cause you’re at a high marginal tax rate, or you’re trying to phase back into those certain deductions or tax credits.

Unfortunately, catchup contributions may not help you there.

Episode Wrap Up

Evon: So those are five things that we wanna keep an eye on as we go into 2026. Number one, those annual updates to different tax provisions plus those retirement account contributions. number two, the expansion of the QBI as well as the addition of Trump accounts this year. number three, student loan changes and an important July 1st dates this year. number four, health insurance changes in terms of the premium tax credit as well as HSA eligibility.

And number five. Roth only catchup contributions for high earners, age 50 year older.

And of course for those listening, we distilled everything we talked about today and so much more into a free two page 2026 Financial and T ax Planning Guide. Basically everything you [00:19:00] need to know about the tax year onto two pages.

You can find that by going to the show notes, clicking on the link there, and from there you can download that as well as sign up for our Eyes on the Money Weekly newsletter.

If you wanna get a head start on your planning for this year, you can schedule a no pressure introductory call. We can talk about what’s on your mind financially and we can share how we serve optometrists like you all over the country.

With that, we will catch you on the next episode. Happy New Year. Have a phenomenal 2026. And take care. [00:20:00]