2026 Tax Law Changes: What Taxpayers Need to Know for Planning
Major tax law changes are scheduled for 2026 when key provisions of the 2017 Tax Cuts and Jobs Act (TCJA) expire. Without Congressional action, millions of Americans will face higher tax rates, reduced deductions, and significant shifts in estate and business tax rules. Understanding these changes now gives you time to plan strategically.
Why 2026 Is a Critical Tax Year
The Tax Cuts and Jobs Act of 2017 was the most sweeping overhaul of the U.S. tax code in decades. However, most of its individual provisions were written with a built-in expiration date — December 31, 2025. That means beginning January 1, 2026, the tax landscape could look dramatically different unless Congress passes new legislation to extend or make permanent these provisions.
According to the Tax Foundation, roughly 62% of filers received a net tax cut under the TCJA. If the law sunsets as scheduled, many of those same taxpayers will see their bills rise automatically — without a single vote being cast to raise their taxes.
This creates a narrow but meaningful window for proactive tax planning. Whether you're an employee, a small business owner, or someone managing an estate, the decisions you make in 2024 and 2025 could have lasting financial consequences.
Individual Income Tax Rate Changes Coming in 2026
One of the most direct impacts taxpayers will feel involves the individual income tax brackets themselves. The TCJA compressed and lowered rates across most income levels. When these provisions expire, the rates revert to their pre-2018 levels.
Current TCJA Rates vs. 2026 Sunset Rates
Under current law, the seven tax brackets top out at 37% for the highest earners. Post-sunset, that top rate climbs back to 39.6%. But it's not just the top bracket — rates shift across several income levels:
- The 12% bracket reverts to 15%
- The 22% bracket reverts to 25%
- The 24% bracket reverts to 28%
- The 32% bracket reverts to 33%
- The 35% bracket remains but covers a narrower income range
- The top 37% rate rises to 39.6%
For a married couple filing jointly with $150,000 in taxable income, the Congressional Budget Office has estimated that the average household tax increase from the sunset could exceed $1,500 to $2,000 annually, depending on deductions and credits claimed. Use our tax planning calculator to estimate how your specific situation may be affected.
Changes to Standard Deduction
The TCJA nearly doubled the standard deduction — one of its most widely felt changes. In 2024, the standard deduction sits at $14,600 for single filers and $29,200 for married couples filing jointly (IRS Revenue Procedure 2023-34). Post-sunset, those amounts are projected to fall by roughly 50% in real terms, reverting to pre-2018 baselines adjusted for inflation.
This change would push millions of taxpayers back into itemizing deductions, making record-keeping and deduction strategy far more important than it has been for most filers since 2018.
Child Tax Credit and Family-Related Provisions
Child Tax Credit Reduction
The TCJA doubled the Child Tax Credit from $1,000 to $2,000 per qualifying child. It also raised the income phase-out threshold significantly — from $75,000 (single) and $110,000 (married) under prior law, to $200,000 and $400,000 respectively.
Without extension, the credit reverts to $1,000 per child, and the phase-out thresholds drop back to the lower pre-2018 levels. For a family with two children currently claiming the full $4,000 credit, this represents a potential $2,000 annual tax increase. According to the Center on Budget and Policy Priorities, approximately 40 million families benefit from the expanded credit as it currently stands.
Personal Exemptions Return
The TCJA eliminated personal exemptions entirely, which was partially offset by the larger standard deduction and expanded Child Tax Credit. Post-sunset, personal exemptions return — currently estimated to be approximately $5,300 per person once inflation adjustments are applied. For large families, this reintroduction could partially offset losses from the reduced standard deduction, but the math varies significantly by household size and income.
Estate and Gift Tax: Major Threshold Changes
Perhaps the most dramatic single change involves the federal estate and gift tax exemption. The TCJA doubled the exemption from roughly $5.5 million per individual to approximately $13.61 million per individual in 2024 (IRS Rev. Proc. 2023-34). For married couples using portability, that represents a combined exemption of over $27 million.
Post-sunset, the exemption reverts to approximately $7 million per individual (inflation-adjusted), effectively cutting the exemption nearly in half. The IRS has already confirmed via its estate tax guidance that gifts made under the higher exemption will not be subject to a "clawback" — meaning individuals with taxable estates should consider accelerating large gifts before the end of 2025.
For high-net-worth families, this is arguably the single most time-sensitive planning opportunity created by the sunset. Trusts, annual gift exclusions, and charitable giving strategies all warrant review before the window closes.
Business Tax Provisions and the QBI Deduction
The 20% Pass-Through Deduction (Section 199A)
One of the most valuable provisions for self-employed individuals and small business owners is the Section 199A deduction, which allows eligible pass-through business owners to deduct up to 20% of qualified business income (QBI). This deduction is not available to employees — only to sole proprietors, S-corp shareholders, partners, and LLC members.
According to the Joint Committee on Taxation, the QBI deduction has benefited an estimated 25 million pass-through entities annually. When the TCJA sunsets, this deduction disappears entirely. For a small business owner reporting $200,000 in QBI, losing the deduction could mean paying taxes on an additional $40,000 of income — a significant increase depending on their marginal rate.
If you're a business owner, calculating your exposure is a critical first step. Our free tax estimator tool can help you model scenarios before and after the sunset to quantify your potential liability change.
Bonus Depreciation Phase-Down
The TCJA introduced 100% bonus depreciation for qualifying business assets. This has already begun phasing down — falling to 60% in 2024, 40% in 2025, and potentially disappearing or shifting further depending on legislative action. Businesses with planned equipment purchases should factor this timeline into capital expenditure decisions for 2024 and 2025.
Alternative Minimum Tax Changes
The TCJA significantly raised the AMT exemption and phase-out thresholds, effectively removing millions of middle- and upper-middle-income taxpayers from AMT exposure. For 2024, the AMT exemption is $85,700 for single filers and $133,300 for married couples filing jointly, per IRS Topic 556.
Post-sunset, those thresholds revert to much lower levels, and the Tax Policy Center estimates that the number of AMT-affected taxpayers could jump from roughly 200,000 under current law to over 5 million. Taxpayers with significant investment income, large state and local tax deductions, or incentive stock options should specifically model AMT scenarios for 2026 onward.
Frequently Asked Questions About 2026 Tax Changes
Will Congress extend the TCJA provisions before they expire?
This remains one of the most watched legislative questions in Washington. There is bipartisan acknowledgment that a full, abrupt sunset would represent the largest tax increase for middle-income Americans in modern history. However, full extension of all TCJA provisions carries an estimated $4.6 trillion cost over ten years, according to the Congressional Budget Office. Partial extensions, modifications, or phased approaches are all possible. Taxpayers should plan for multiple scenarios rather than assuming extension is guaranteed.
Should I accelerate income or defer it given the 2026 changes?
This is the key tactical question for 2024 and 2025 planning. If rates rise in 2026, recognizing income sooner — such as through Roth conversions, capital gains harvesting, or accelerating business income — could lock in lower current rates. Conversely, if Congress extends the TCJA, early income acceleration may be unnecessary. The right answer depends heavily on your projected income, bracket, and assumptions about legislative outcomes. A scenario-based modeling approach is strongly recommended.
How do the 2026 changes affect retirement account strategy?
The potential rate increases make Roth conversion planning particularly relevant. Converting traditional IRA or 401(k) balances to Roth accounts in 2024 or 2025 means paying taxes at today's (potentially lower) rates, with future qualified distributions being entirely tax-free. This is especially compelling for individuals currently in the 22% or 24% bracket who expect to be in the 25% or 28% bracket post-sunset. The math depends on your current balance, conversion amount, and expected retirement income.
What should high-net-worth taxpayers do about the estate tax exemption change?
Individuals with estates between $7 million and $13 million per person face the most direct exposure. The recommended action is to consult an estate planning professional and consider using the current elevated exemption through large gifts, irrevocable trusts, or other transfer strategies before December 31, 2025. The IRS anti-clawback rule protects gifts made under the current higher exemption, so this window is meaningful — but time-limited.
Key Takeaways for Your 2026 Tax Planning
The potential sunset of TCJA provisions represents one of the most consequential tax planning moments for American households in nearly a decade. While the exact legislative outcome remains uncertain, the strategies that make sense under a sunset scenario — accelerating income, maximizing retirement contributions, reviewing estate plans, and stress-testing business structures — are largely sound planning moves regardless of how Congress ultimately acts.
The taxpayers who will fare best are those who model multiple scenarios now, rather than waiting for certainty that may arrive too late to act. Start by understanding your current effective tax rate, then estimate how rate bracket shifts, standard deduction changes, and lost credits would affect your household specifically. Planning tools can help you run those numbers quickly and clearly.