N※N

2026 Tax Changes: What You Need to Know Now

  //business-finance.news-articles.net/content/202 .. /2026-tax-changes-what-you-need-to-know-now.html
  Published in Business and Finance on Monday, January 5th 2026 at 8:44 GMT by Investopedia

The Clock is Ticking: Understanding How Tax Brackets Will Change in 2026 & What You Can Do Now

The current U.S. tax system, enacted as part of the Tax Cuts and Jobs Act (TCJA) of 2017, is set to undergo a significant shift in 2026. Unless Congress intervenes, many provisions that have temporarily lowered taxes for individuals and businesses will expire at the end of 2025. This means tax brackets, standard deductions, child tax credits, and more are all poised to revert to pre-TCJA levels. While it might seem distant, understanding these upcoming changes now is crucial for financial planning and potentially minimizing your future tax burden.

The Core of the Change: The TCJA Sunset Clause

The Tax Cuts and Jobs Act (TCJA) brought about substantial alterations to the U.S. tax code, impacting everything from individual income taxes to corporate rates. A key feature of this legislation was a sunset clause – meaning many provisions were designed to expire after December 31, 2025. This wasn’t intended as a permanent change; rather, it allowed Congress to revisit and potentially modify these policies over time. As of late 2024, no action has been taken to extend or permanently enact these TCJA provisions, so the expiration remains on track.

What Will Change in 2026? The Tax Bracket Landscape

The most noticeable changes will be felt within individual income tax brackets. Here's a breakdown of how they are expected to shift:

• Lower Brackets Expand: The lower tax brackets (10%, 12%, and 22%) will expand, meaning more income will fall into these lower rates. For example, the current 12% bracket tops out at $47,150 for single filers in 2024. In 2026, that threshold is projected to rise significantly, potentially placing a substantial portion of what's currently taxed at 12% into the 10% bracket.
• Higher Brackets Compress: Conversely, the higher tax brackets (35%, and especially 37%) will be impacted more severely. More income will be pushed into these higher rates due to the shrinking width of each bracket. The current 37% bracket currently applies to single filers earning over $214,950 in 2024; that threshold is expected to decrease considerably in 2026.
• Standard Deduction Shrinks: The standard deduction will also revert to pre-TCJA levels. Currently at $14,600 for single filers and $29,200 for married filing jointly (in 2024), it's expected to fall to around $12,950 and $25,900 respectively in 2026. This means fewer people will likely find it advantageous to take the standard deduction; more may benefit from itemizing.
• Child Tax Credit Reduction: The enhanced Child Tax Credit, currently at $2,000 per qualifying child with a refundable portion of up to $1,600, is slated to decrease. The income thresholds for eligibility will also tighten, potentially excluding some families who currently qualify.
• Business Deductions & Pass-Through Income: The TCJA introduced a deduction for qualified business income (QBI) from pass-through entities like sole proprietorships, partnerships, and S corporations. This provision is also set to expire, meaning individuals relying on this deduction will see their tax liability increase.

Illustrative Example: Impact on a Single Filer

Let's consider a single filer earning $75,000 in 2024. Currently, they pay taxes at various rates depending on the bracket their income falls into. In 2026, with the changes outlined above, that same $75,000 income could be taxed at higher rates due to the compression of the brackets and the reduced standard deduction (if itemizing isn’t advantageous). This highlights how seemingly small adjustments can significantly impact overall tax liability.

How to Prepare for 2026 Tax Changes – Proactive Strategies

While it's impossible to predict exactly what Congress will do, taking proactive steps now can help mitigate the potential financial impact of these changes:

• Maximize Retirement Contributions: Contributing more to retirement accounts like 401(k)s and IRAs offers a double benefit: reducing your taxable income in the current year while building long-term savings. The contribution limits are currently $23,000 for 401(k)s (with potential catch-up contributions for those over 50) and $7,000 for IRAs ($8,000 if age 50 or older).
• Consider Tax-Loss Harvesting: This involves selling investments that have lost value to offset capital gains. This strategy can reduce your overall tax liability, particularly as higher tax brackets loom.
• Review Itemized Deductions: As the standard deduction shrinks, carefully evaluate whether itemizing deductions (like mortgage interest, charitable donations, and state/local taxes) would be more beneficial. Keep meticulous records of potential deductible expenses.
• Strategic Charitable Giving: If you regularly donate to charity, consider "bunching" your donations in a single year to exceed the standard deduction threshold and itemize.
• Estate Planning Review: The expiration of certain TCJA provisions could also impact estate tax planning strategies. Consulting with an estate planning attorney is advisable.
• Stay Informed: The political landscape can shift quickly, and Congress may take action before 2026. Regularly monitor news and updates from reputable sources like the IRS and Investopedia to stay abreast of any changes.

The Uncertainty Factor & Potential Congressional Action

It's crucial to acknowledge that these projections are based on current legislation. Congress could choose to extend, modify, or repeal these provisions at any time. A compromise is possible, potentially leading to a modified version of the 2017 tax law. However, given the political divisions in Congress, reaching an agreement will be challenging.

Disclaimer: This article provides general information and should not be considered as professional tax advice. Consult with a qualified tax advisor for personalized guidance based on your specific financial situation.

I hope this comprehensive summary is helpful! Let me know if you'd like any adjustments or further elaboration on specific points.