Major Tax Changes on the Horizon in 2026

October 30, 2024

By: David Darby , Kevin Roche, CFP? , & Herbert Kyles, CFP?

With the expiration of the Tax Cuts and Jobs Act (TCJA) of 2017 approaching at the end of 2025, significant tax changes are on the horizon for nearly all Americans if Congress does not act to renew certain provisions.

The TCJA lowered both personal income and corporate tax rates. However, Congress often includes "sunset" provisions in tax bills to manage budgetary impact, which means many TCJA benefits will expire without legislative intervention. There will be major changes in 4 key areas:

Income Taxes

• All tax rates, except the lowest, are set to increase, with the top rate rising from 37% to 39.6%.
• Income thresholds for tax brackets will adjust downward, potentially impacting a larger portion of income for many taxpayers.

Deductions

• The standard deduction will be reduced, decreasing tax savings for many filers.
• The $10,000 cap on State and Local Taxes (SALT) deductions will expire, offering potential relief to taxpayers in high-tax states.
• Mortgage interest deduction limits will increase, allowing interest on up to $1 million in mortgage debt, up from the current $750,000.

Alternative Minimum Tax (AMT)

• Lower thresholds for AMT will increase the number of taxpayers subject to this tax, particularly impacting higher-income filers.

Gift and Estate Taxes

• The lifetime gift and estate tax exemption will be halved, from nearly $14 million to $7 million per person.

In addition, both parties have proposed adjustments to corporate tax rates.

While these particular rates are not set to automatically change, we anticipate Congress will tackle these proposals alongside the key terms of the TCJA during the 2025 legislative session.

The future of the tax code will have profound implications for personal finances and financial markets alike. Over the coming months, we will be publishing a series of articles exploring these expected changes and strategies to help minimize their impact on your finances. Major Changes in 4 Key Areas