Key Tax Changes Expected in 2026
Specific tax provisions introduced by the TCJA will revert to pre-2018 levels and aller the way individuals and establishments calculate taxation liabilities. The following changes are among the most significant:
1. Higher Tax Rates
The current tax brackets will likely revert to pre-TCJA levels and result in an increase in tax rates for many income groups.
- The 12% bracket may rise to 15%.
- The 22% bracket could increase to 25%.
- The highest bracket of 37% is expected to return to 39.6%.
2. Reduced Standard Deduction
The increase in the standard deduction introduced in 2018 will expire. It is expected to return to lower thresholds:
- Single filers: From $15,000 (2025) back to approximately $8,350.
- Married filing jointly: From $30,000 (2025) to around $16,700.
3. Return of Personal Exemptions
The elimination of personal exemptions under the TCJA will likely be reversed and enable taxpayers to claim deductions in terms of dependents and household members.
4. Lower Child Tax Credit
The current $2,000 child tax credit per qualifying child may be projected to drop to $1,000, to pre-2018 levels.
5. Higher Estate Tax Threshold
The exemption for estate and gift taxes is projected to drop from over $12 million per individual to approximately $5 million, adjusted for inflation. In other words, more estates will be subject to federal estate taxes.
6. Limits on Certain Deductions
- State and Local Tax (SALT) Deduction: The current $10,000 cap on SALT deductions may be modified or removed in accordance with future legislation.
- Mortgage Interest Deduction: The deduction limit is expected to revert to interest on the first $1 million of mortgage debt, up from the TCJA-imposed $750,000 limit.
7. Alternative Minimum Tax (AMT) Expansion
The AMT exemption amounts were increased under the TCJA. These numbers are slated to revert to lower thresholds, and potentially more taxpayers will be subject to additional taxation liability.
Final Thoughts
The scheduled tax changes in 2026 will undoubtedly alter tax liabilities for individuals and establishments. Taxation professionals might present guidance on optimal financial strategies before 2026.
