2026 Tax Law Changes: Prepare Your Finances Now
The year $\text{2026}$ marks a crucial point in U.S. tax history: the scheduled expiration of the majority of the individual tax provisions enacted by the $\text{2017}$ **Tax Cuts and Jobs Act (TCJA)**. Unless Congress acts to extend them, millions of Americans will see their tax situations revert to pre-$\text{2018}$ levels, meaning **higher tax bills** for many. Here is a breakdown of the three biggest changes and how to prepare now.
The TCJA Sunset: What Reverts in $\text{2026}$
The expiration will not affect corporate taxes, which were made permanent, but it will dramatically restructure the taxes paid by individuals and pass-through businesses.
1. Individual Income Tax Rates and Brackets Revert
The lower, simplified tax rates introduced by the TCJA will revert to the higher rates of $\text{2017}$ (adjusted for inflation). Most Americans will see a jump in their marginal tax rate.
Impact: Higher Marginal Tax Rates
The seven tax brackets will remain, but the rates will increase:
- The lowest rate will revert from $\mathbf{10\%}$ to $\mathbf{15\%}$ (for inflation-adjusted portions of the bracket).
- The $\mathbf{22\%}$ bracket will revert to the $\mathbf{25\%}$ bracket.
- The highest rate will revert from $\mathbf{37\%}$ to $\mathbf{39.6\%}$.
Action Item: Consider accelerating income into $\text{2025}$ (e.g., executing Roth conversions or taking investment gains) to lock in the lower $\text{2025}$ rates.
2. Standard Deduction is Halved
One of the TCJA's most impactful changes was the near doubling of the standard deduction. In $\text{2026}$, this benefit will be cut roughly in half (adjusted for inflation).
| Filing Status | Approx. $\text{2025}$ Standard Deduction | Approx. $\text{2026}$ Standard Deduction (Reversion) |
|---|---|---|
| **Married Filing Jointly** | $\approx \mathbf{\$31,500}$ | $\approx \mathbf{\$16,300}$ |
| **Single** | $\approx \mathbf{\$15,750}$ | $\approx \mathbf{\$8,150}$ |
Impact: Return of Itemizing
The lower standard deduction means far more taxpayers will benefit from **itemizing deductions** (e.g., mortgage interest, state and local taxes). This also means the $\mathbf{\$10,000}$ limit on the State and Local Tax ($\text{SALT}$) deduction, which was a TCJA provision, will disappear in $\text{2026}$, allowing high-income earners in high-tax states to deduct all of their property, income, and sales taxes.
3. Personal Exemptions Return
The TCJA eliminated personal exemptions. In $\text{2026}$, the ability to claim an exemption for yourself, your spouse, and your dependents will return (adjusted for inflation, likely around $\mathbf{\$5,000}$ per person).
Impact: Complexity and Child Tax Credit Change
- **Offsetting Benefit:** The return of personal exemptions will offset some of the pain from the lowered standard deduction, particularly for large families.
- **Child Tax Credit (CTC) Reduction:** The current enhanced CTC ($\mathbf{\$2,000}$ per child) will revert to its pre-TCJA level of $\mathbf{\$1,000}$ per child.
How to Prepare Your Finances Now
The overarching strategy is to prioritize tax moves that exploit the favorable $\text{2025}$ tax environment and delay deductions until $\text{2026}$ when they will be more valuable.
- **Accelerate Income (Roth Conversions):** If you anticipate being in a higher tax bracket in $\text{2026}$, consider converting funds from a Traditional $\text{IRA}$ to a **Roth IRA** in $\text{2025}$. You pay the tax now at the lower rate, and future growth is tax-free.
- **Delay Deductions (Tax Bunching):** If you are close to the $\text{2026}$ itemization threshold, postpone charitable contributions or non-essential medical expenses until $\text{2026}$. Since the standard deduction will be lower, itemizing will be more beneficial next year.
- **Review Estate Planning:** The temporary doubling of the Estate and Gift Tax Exemption is also scheduled to expire. If you have a high net worth, review your estate plan with an attorney immediately.
The $\text{2026}$ tax changes are not minor tweaks; they represent a fundamental reset of the individual tax code. Proactive planning in $\text{2025}$ is essential to mitigate the shock of higher tax bills next year.
Download our free Tax Sunset Planning Guide detailing Roth conversion strategies and tax bracket comparisons.
Start your side hustle today with FinRise Pro USA!
© 2025 FinRise Pro USA. Plan for the tax sunset.