Prepare for Major Tax Changes Coming in 2026: What You Need To Know

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The Tax Cuts and Jobs Act of 2017 brought sweeping tax reform to the U.S. tax code, including lower tax rates, higher standard deductions, and a host of personal and business tax changes designed to lower taxes for families and business owners.

But many of the provisions in the TCJA are set to expire on Jan. 1, 2026, and this may have a major impact on U.S. taxpayers. Here’s what you need to know.

Key Tax Changes Expected in 2026

There are quite a few changes that could happen to the tax code if nothing is done about the expiring Tax Cuts and Jobs Act provisions. Here are a few of the key changes that might impact your tax bill:

• Higher individual income tax rates with new 2026 tax brackets
• Lower standard deduction, but reintroduction of the personal exemption
• Lower child tax credit amount
• Increase in state and local tax deductions, plus higher mortgage interest 
• The reduction of the alternative minimum tax will expire
• Lower estate tax limits

These changes will have an impact on individuals and businesses. Here’s what you can expect starting in 2026.

Tax Impact on Individuals and Families

As an individual or married taxpayer, there are several high-impact changes that could affect your tax refund in a big way.

Higher Tax Rates

The Tax Cuts and Jobs Act lowered the overall tax rates for most individuals and adjusted income tax brackets. When the TCJA expires, new 2026 tax brackets will rise for many. According to the Tax Foundation, this is what the changes may look like.

Married Filing Jointly Rates Example

When the TCJA expires, some tax rates are set to rise, and the income thresholds for those higher rates will drop. For example, under the TCJA, a married couple earning $200,000 falls within the 22% bracket. After expiration, that same income would be taxed at 28%, meaning a higher tax bill for the same income level.

This shift could impact middle and upper-middle-class households the most, as they might see a significant increase in the percentage of their income taxed at higher rates.

Lower Standard Deduction

One of the biggest changes introduced by the TCJA was a much higher standard deduction. If the TCJA expires in 2026, the standard deduction may fall drastically. Currently, the standard deduction for a single filer is $14,600, but it could drop to $8,300. And the married filing joint standard deduction is currently at $29,200, but it could fall to $16,600.

But while the lower standard deduction may raise taxable income for some filers, others may benefit, and the personal exemption would come back. Families with a lot of dependents may be able to claim more exemptions, outpacing the previous standard deduction. With the estimated personal exemption set at $5,300, if you have two parents and four dependents, this could mean a $31,800 deduction — higher than the current standard deduction.

Lower Child Tax Credit

The Child Tax Credit under TCJA law provides up to $2,000 deduction per child, with up to $1,400 of that credit being refundable. The tax credit is available to families with children under 17 years of age and under $400,000 in income. If the TCJA expires, the tax credit could revert back to $1,000 per child, with a low phase-out income for married filing joint couples of $110,000.

There is also a $500 dependent care credit for other dependents who are not eligible for the child tax credit. This would completely go away if the TCJA expires.

Lower Estate Tax Limits

There was a large increase in the estate tax exemption in 2017, but when the TCJA expires, it could nearly be cut in half.

The current lifetime estate and gift tax exclusion is $13.61 million per person. When the TCJA expires in 2026, this amount could drop to $7.15 million per person.

Lower Alternative Minimum Tax

The alternative minimum tax is designed to have high net-worth taxpayers pay a minimum tax rate. The TCJA raised the exemption amount and lowered the AMT tax rates. Once it expires, these rates could increase and more taxpayers would be required to pay AMT.

Mortgage Interest Deductible on More Expensive Homes

Mortgage interest is currently deductible on mortgage debt of $750,000 or less, but once the TCJA expires, this will increase to $1,000,000. This means taxpayers who itemize (which may be more common with a lower standard deduction) can deduct more interest than before on higher mortgage loan amounts.

HELOC Loan Interest Becomes Deductible

Interest paid on home equity lines of credit used to be deductible for any reason but the TCJA removed that provision and required the home equity be used for improving the property to be deductible. Once the TCJA expires, homeowners can deduct interest on HELOC balances up to $100,000 for any reason.

Tax Impact on Businesses

While some of the biggest impacts are on the personal side, the expiration of the Tax Cuts and Jobs Act will impact small and large businesses as well. Here are a few of the potential changes coming in 2026.

Removing Qualified Business Income Deduction

The Tax Cuts and Jobs Act introduced a 20% qualified business income deduction for pass-through entities, such as S-Corps. This lowered the tax burden on small business owners. This 20% QBI deduction goes away when the Tax Cuts and Jobs Act expires in 2026. 

Removing Bonus Depreciation

Bonus depreciation allows business owners to deduct a large portion of the cost of new equipment. Under the TCJA, they could deduct up to 100% starting in 2022. However, this allowance is phasing out by 20% each year and will end in 2026.

Less Limitations on R&D Deductions

The TCJA lowered the corporate tax rate from 35% to 21%, a change made permanent. However, a provision was added requiring companies to spread out deductions for research and development expenses over several years:

• Domestic expenses: 5 years
• International expenses: 15 years

This limits immediate R&D deductibility. If the TCJA expires, businesses may be able to deduct R&D costs more quickly, potentially impacting tax revenues.

Tax Planning Strategies

With drastic potential upcoming changes to both personal and business taxes, there are a few strategies you can pursue now to prepare.

Recognize More Income

If you’re a small business owner or have the ability to sell off investments, you may be able to save money by recognizing that income before 2026.

With lower personal tax rates and a higher standard deduction, it may be wise to pay taxes on a higher income now versus later. And if you plan on harvesting losses in your taxable accounts — it may be more valuable to delay those losses until rates are higher again.

Give More

If you have accumulated a large pile of assets and are worried about eclipsing the lifetime gift tax limits, you may want to max out your lifetime gifts before the limit resets in 2026.

You can give up to $13.61 million lifetime per person, but this amount drops down to $7 million when the TCJA expires. With a 40% tax on gifts and estate transfers above the lifetime exclusion, it may save a lot of money to give more now.

Invest More

With rates staying low until 2026, it may be wise to take advantage of lower income tax rates by maxing out Roth accounts. Whether it’s a Roth 401(k) or Roth IRA, maxing out post-tax accounts lets you take advantage of lower rates now, while building your wealth for more tax-free income in retirement. You may want to switch back to investing in pre-tax accounts when rates reset in 2026.

Conclusion

The tax code is a complicated beast but understanding the major tax changes coming up can help you save thousands in taxes and maximize your tax planning for retirement. While some of these changes may not come to fruition, it’s a good idea to be prepared for the upcoming expiration of the TCJA temporary provisions.

Taking action now for the impact of the 2026 tax brackets and changes can put you in a better position to be able to manage the changes, and possibly even benefit from them. But it’s also a good idea to hire a licensed tax professional to help navigate upcoming tax changes to save more money in the long run.

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