Understanding 2026 Tax Changes: Impact of the TCJA Expiry on Taxpayers
Starting 2026, American taxpayers could face tax increases due to the expiration of the temporary tax cuts introduced by the 2017 Tax Cuts and Jobs Act (TCJA). The Congressional Budget Office (CBO) has published projections highlighting potential changes to the tax system post-2025. These changes include a reduction in the standard deduction and increased tax rates with narrower tax brackets. It is estimated that 62% of filers might see a tax increase if the TCJA ends.
2026 Tax Brackets and Rates: Projected Changes
The TCJA maintained a seven-bracket system for individual income tax but reduced rates for five brackets and altered their widths. Tables 1 through 4 show the projected tax rates and brackets under TCJA’s continuation and the anticipated changes for 2026 if it expires.
Changes to the Standard Deduction, Personal Exemption, and Child Tax Credit
The TCJA nearly doubled the standard deduction and expanded the child tax credit. With its potential expiration, personal exemptions would reappear in 2026, valued at $5,300. The standard deduction would decrease to $8,350 for single filers, $16,700 for joint filers, and $12,250 for head of household filers, in contrast to higher amounts if the TCJA remains. The child tax credit could revert from $2,000 to $1,000, with phase-out thresholds returning to pre-TCJA levels.
Itemized Deductions, Pease Limitation, and the Alternative Minimum Tax (AMT)
The TCJA had capped certain itemized deductions like the state and local tax deduction and mortgage interest deduction. It also temporarily removed the Pease limitation and raised AMT thresholds. With the TCJA’s expiration, more taxpayers could face Pease and AMT, although itemized deduction limits would be lifted.
Conclusion
The TCJA provided tax relief across income levels. If it expires as planned, significant changes to individual income taxes will occur, with over 62% of filers likely facing higher taxes by 2026. Stay informed and prepared for these changes by engaging with our regular updates and expert insights.
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