Introduction
Taxes are a vital component of financial planning for individuals and businesses alike. In 2026, the U.S. tax system may undergo significant changes, potentially impacting millions of taxpayers. These changes stem from the expiration of several provisions in the Tax Cuts and Jobs Act (TCJA) of 2017. While the TCJA introduced lower tax rates and increased deductions, these benefits were designed to be temporary. This article examines the potential tax increases in 2026, who is likely to be most affected, and how you can start preparing today.
What Is Changing in 2026?
The Tax Cuts and Jobs Act brought sweeping changes to the U.S. tax code when it was implemented in 2018. However, many of these provisions were set with an expiration date of December 31, 2025. Here’s a closer look at the key changes expected:
- Higher Tax Rates: The reduced income tax brackets introduced under the TCJA will revert to their pre-2018 levels. For example, the top rate of 37% may increase to 39.6%, and lower brackets will also see incremental hikes.
- Smaller Standard Deduction: The TCJA nearly doubled the standard deduction, simplifying tax filing for many. However, this benefit will shrink in 2026, resulting in higher taxable income for those who don’t itemize deductions.
- Changes to Child Tax Credit: The expanded child tax credit, which provided significant relief to families, will decrease. The maximum credit amount will drop, and eligibility thresholds may tighten.
- State and Local Tax Deduction: The $10,000 cap on state and local tax (SALT) deductions might be reconsidered, although it remains uncertain how Congress will address this issue.
These changes collectively could mean higher tax bills for many households, especially those in middle and higher income brackets.
Who Will Be Most Affected?
Not all taxpayers will experience the same impact from the 2026 changes. Certain groups are more likely to feel the effects due to the nature of the expiring provisions:
- Middle-Class Families: Families in the middle-income range often benefited from the increased standard deduction and child tax credit. When these provisions expire, their tax liabilities may rise significantly, leading to smaller refunds or higher payments.
- Large Families: Families with multiple dependents stand to lose more with the reduced child tax credit and a smaller standard deduction. These changes could substantially alter their tax planning and annual liabilities.
- High Earners: Wealthier individuals who currently benefit from the lower top tax rate and deductions may face the steepest increases. This group will also see the return of limitations on itemized deductions, which had been lifted under the TCJA.
While some taxpayers may remain unaffected or see only modest changes, these groups are likely to experience noticeable increases in their overall tax burden.
How Can You Prepare?
The prospect of higher taxes in 2026 can be daunting, but there are practical steps you can take now to mitigate the impact:
- Review Your Finances: Begin by assessing how the expiration of TCJA provisions might affect your taxable income and overall liabilities. Understanding the specific changes is the first step toward effective planning.
- Maximize Deductions: Take advantage of the current tax rules while they’re in place. For example, make larger contributions to tax-advantaged retirement accounts, like 401(k)s and IRAs, or consider charitable giving to reduce taxable income.
- Plan for Future Tax Brackets: If you expect your income to increase in 2026 or beyond, explore strategies like Roth IRA conversions or deferring income to manage your tax exposure.
- Consult a Professional: Tax professionals can offer tailored advice and strategies to minimize the impact of upcoming changes. They can also help you identify deductions and credits you may have overlooked.
By acting now, you can better prepare for the changes ahead and ensure your financial stability, even in a higher-tax environment.
Conclusion
The expiration of TCJA provisions in 2026 is likely to bring widespread changes to the U.S. tax landscape. For many taxpayers, these changes will result in higher rates, reduced deductions, and smaller credits. While these shifts may seem overwhelming, proactive planning and informed decision-making can help mitigate their impact. By staying ahead of these changes and consulting with financial experts, you can protect yourself from unnecessary financial strain and ensure you’re prepared for the tax realities of 2026.
