2026 Tax Changes: What to Expect After the Tax Cuts and Jobs Act
As the sunset nears for the temporary tax cuts implemented by the Tax Cuts and Jobs Act (TCJA) in 2017, American taxpayers are bracing themselves for potential tax increases in 2026. The Congressional Budget Office (CBO) has painted a picture of what the tax landscape could look like once the provisions of the TCJA come to an end. Let’s delve into the possible changes that await taxpayers in 2026.
2026 Tax Brackets and Rates
The TCJA reshaped the individual income tax system by tweaking tax rates and bracket widths. If the TCJA expires, tax brackets would revert to their pre-TCJA levels, leading to increased taxes for a majority of filers. Key points to consider include:
- Seven-bracket structure maintained
- Five of the seven rates lowered under TCJA
- Tax rates projected to rise in 2026
- Adjustments in tax brackets expected
Standard Deduction, Personal Exemption, and Child Tax Credit
The TCJA brought significant alterations to the standard deduction, personal exemption, and child tax credit. For 2026, if the TCJA expires, we anticipate the following changes:
- Personal exemptions to return at $5,300
- Reduced standard deduction values
- Maximum child tax credit reverting to $1,000
- Phaseout thresholds for child tax credit adjustments
Itemized Deductions, Pease Limitation, and Alternative Minimum Tax
The TCJA introduced limits on certain itemized deductions, eliminated the Pease limitation temporarily, and raised thresholds for the alternative minimum tax (AMT). Upon expiration of the TCJA, taxpayers could see:
- Removal of limitations on itemized deductions
- Reinstatement of Pease limitation and AMT implications
In Conclusion
The Tax Cuts and Jobs Act brought tax relief for individuals at all income levels. However, if Congress allows the TCJA to sunset in 2026, significant changes are expected in the tax system, potentially resulting in tax increases for a majority of filers. Stay informed about these potential tax policy shifts to be prepared for what lies ahead.
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