Merrill Bank of America Releases Comprehensive Tax-Saving Guide for 2026
Bank of America's Merrill division has unveiled a detailed financial guidance report this week outlining ten tax-efficient strategies designed to help American taxpayers capitalize on significant legislative changes introduced by the "One Big Beautiful Bill Act" (OBBBA), which was signed into law on July 4, 2025. The report, delivered by tax accountant Vinay Navani of WilkinGuttenplan, addresses the sweeping tax law modifications that have created new planning opportunities for individuals and families across multiple financial categories.
State and Local Tax Deductions Have Expanded Substantially
The most immediate impact for itemizing taxpayers comes from a dramatic expansion of the state and local tax (SALT) deduction. The deduction has increased from $10,000 to $40,000 for the 2025 through 2029 tax years, though the additional $30,000 phases down for taxpayers with adjusted gross income (AGI) above $500,000 and terminates entirely at $600,000. Merrill advisors have recommended that qualifying taxpayers consider prepaying state or local taxes through 2025 to capture the full deduction benefit.
Concurrently, the standard deduction has been permanently raised to $31,500 for married couples filing jointly (up from $30,000) and $15,750 for individuals (up from $15,000), with annual inflation adjustments. For the 2026 tax year specifically, these figures climb to $32,200 for married couples and $16,100 for single filers.
A particularly notable provision targets seniors aged 65 and older, who may now claim an additional $6,000 deduction for individuals or $12,000 for married couples filing jointly during the 2025 through 2028 tax years. This deduction applies regardless of whether taxpayers itemize or claim the standard deduction and phases out gradually for individuals with modified AGI exceeding $75,000 or couples exceeding $150,000.
Estate Planning Uncertainties Have Been Resolved
The OBBBA has permanently established the federal gift and estate tax exemption at elevated levels, removing years of uncertainty that had prompted many high-net-worth individuals to accelerate gifting decisions. The exemption will now rise to $15 million for individuals and $30 million for married couples beginning in 2026, adjusted annually for inflation thereafter.
Navani has emphasized that this permanence allows for more deliberate, fundamentals-based estate planning rather than rushed year-end transactions. He specifically highlighted the value of gifting appreciated assets when valuations are temporarily depressed, enabling taxpayers to move more assets out of their estates without triggering tax consequences.
Charitable Giving Has New Tax Incentives
The legislation has introduced nuanced provisions affecting charitable giving timing and strategy. Beginning in 2026, taxpayers using the standard deduction will be able to claim up to $1,000 in charitable contributions to public charities ($2,000 for married couples), provided the contributions are made directly to qualifying charities rather than through donor-advised funds (DAFs).
Conversely, itemizers face a new 0.5% contribution base floor beginning in 2026, meaning they must contribute at least 0.5% of their AGI before claiming charitable deductions. Additionally, overall itemized deductions—including charitable gifts—will be modestly reduced for top-bracket taxpayers ($640,601 for individuals and $768,701 for couples) starting in 2026. These changes have led Merrill advisors to recommend that itemizing taxpayers consider accelerating charitable giving into 2025 before the new limitations take effect.
Investment Loss Harvesting Remains a Powerful Tool
Merrill has reiterated the value of tax-loss harvesting strategies for investors with significant capital gains. By offsetting realized gains with capital losses from underperforming positions, taxpayers may reduce their federal income tax burden. The strategy permits up to $3,000 in net capital losses annually ($1,500 for married filing separately) to offset ordinary income, with excess losses carrying forward indefinitely.
Navani has stressed the importance of avoiding wash sale rules, which disallow losses when substantially identical securities are repurchased within 30 days before or after the sale. He has also cautioned that loss harvesting should serve long-term investment objectives rather than driving portfolio decisions.
Retirement Account Contributions Offer Dual Benefits
Maximizing 2026 retirement contributions has taken on enhanced importance as a strategy to reduce AGI and preserve eligibility for various OBBBA deductions that phase out at higher income levels. The 401(k) contribution limit for 2026 stands at $24,500, while the traditional or Roth IRA limit is $7,500.
Individuals aged 50 or older benefit from enhanced catch-up contributions, with 401(k) limits reaching $32,500 for those over 50 and $35,750 for those aged 60 to 63 (subject to plan terms). IRA catch-up contributions for those 50 and older total $8,600 for 2026. Contributors have until December 31 to fund 401(k) plans for the current year and until April 15 of the following year for IRA contributions.
New "Trump Accounts" Create Youth Retirement Savings Opportunities
The OBBBA has introduced a novel savings vehicle called "Trump Accounts" designed specifically for children under age 18. Unlike traditional IRAs, these accounts may be opened without earned income, addressing a longstanding barrier to youth retirement saving. Annual aggregate contributions are capped at $5,000 through age 18, indexed for inflation starting in 2028.
A significant incentive applies: children born between 2025 and 2028 whose parents establish these accounts become eligible for a one-time federal "seed" contribution of $1,000. However, contributions cannot be made until July 4, 2026, and distributions are prohibited until January 1 of the calendar year in which the child attains age 18. The Internal Revenue Service is expected to release additional guidance regarding account creation and administration in coming months.
Roth Conversions Merit Consideration in Down Markets
While the OBBBA did not modify rules governing Roth IRA conversions, Navani has noted that converting traditional IRA assets to Roth accounts during periods of depressed valuations can prove advantageous. Conversions trigger federal income tax on the converted amount, but subsequent qualified distributions from the converted Roth assets receive tax-free treatment, provided the account has been held for at least five years and the account holder is age 59½, disabled, or deceased.
A critical consideration: Roth conversions increase AGI, which can trigger phase-outs of various OBBBA deductions, including the SALT and senior deductions. Coordination with a qualified tax professional is essential.
Tax-Aware Investment Strategies Reduce Ongoing Burden
Merrill has highlighted tax-aware investing approaches, particularly the use of tax-free municipal bonds, which generate interest income exempt from federal taxation. Investors should note that those with modified AGI of at least $200,000 (or $250,000 for married couples filing jointly) remain subject to a 3.8% Net Investment Income Tax on the lesser of net investment income or the amount by which MAGI exceeds statutory thresholds. Municipal bond income is excluded from this tax.
529 Education Savings Plans Have Expanded Flexibility
The OBBBA has significantly enhanced the utility of 529 education savings plans. Beginning in 2026, funds may be used for up to $20,000 annually in qualified primary and secondary school expenses per beneficiary (increased from $10,000), with an expanded definition of eligible expenses now including books, digital tools, and testing fees in addition to traditional tuition.
Distributions made from 529 accounts after July 4, 2025, qualify for these expanded benefits. Merrill advisors have recommended that account holders review their 529 investment allocations to ensure they remain appropriately positioned relative to education funding timelines.
Healthcare Accounts Offer Pretax Savings Opportunities
Health savings accounts (HSAs) and health flexible spending accounts (health FSAs) remain powerful vehicles for sheltering healthcare expenses from taxation. HSAs, which require enrollment in high-deductible health plans, offer superior flexibility compared to health FSAs, as unused balances roll over annually without expiration (whereas health FSA balances typically expire at year-end, though employers may permit rollovers up to $660 for 2026 or grace periods up to 2½ months).
Importantly, HSA contributions may be made through the tax filing deadline of April 15 in the following year while still receiving a deduction for the prior tax year. Health FSA contributions, by contrast, are generally limited to open enrollment periods or qualifying life events.
Professional Guidance Remains Essential
Throughout its guidance, Merrill has emphasized that tax strategies should be evaluated on an individual basis in consultation with qualified tax professionals and financial advisors. The firm has noted that while many of these strategies apply generally across multiple situations, their appropriateness and effectiveness depend heavily on individual circumstances, income levels, and long-term financial objectives.
Bank of America's Merrill division continues to offer personalized advisor consultations and matching services to help clients navigate the complex tax landscape created by 2025's legislative changes. The firm has stressed that no tax-driven decision should be made in isolation from broader investment and financial planning considerations.
