Will Your Taxes Increase in 2026? Here's What You Need to Know

The Tax Cuts and Jobs Act (TCJA) of 2017 brought sweeping changes to tax laws. It added and removed a lot of strategies people use related to tax filing. After 8 years of this tax law, it seems like the new normal.

At this point in time (1/27/2025), many of these provisions are set to expire on December 31, 2025. Below, I created an organized breakdown of how this impacts you on the individual level and at the business level.

Key Changes for Individuals

1. Standard Deduction Reductions

• Current: Nearly doubled since 2017 (e.g., $12,950 for single filers in 2023). This change made 90% of tax filers use the standard deduction.
• Post-2025: Returns to pre-2018 levels, adjusted for inflation.
• Impact: Fewer taxpayers will qualify for the standard deduction, prompting more to itemize deductions.

2. Personal Exemptions Return

• The TCJA suspended personal exemptions (previously $4,050 per individual).
• Post-2025: These exemptions will likely return, changing taxable income calculations for households.

3. Child Tax Credit Decreases

• Current: $2,000 per child with higher income thresholds for phaseout.
• Post-2025: Reduced to $1,000, with lower phaseout thresholds.

4. Estate and Gift Tax Exemption Halving

• Current: $13.99 million per individual (2025).
• Post-2025: Drops to ~$6.99 million, leading to higher estate tax liabilities. The key here is that the estate tax exemption has fluctuated throughout history. See below historical levels:

Related: Maximize Wealth Transfer: 2025 Gifting Rules and Tax-Saving Strategies

5. State and Local Tax (SALT) Deduction

• Current: Capped at $10,000 annually.
• Post-2025: Cap removed, potentially benefiting high-tax state residents. This will also make Pass-Through Entity Tax strategies not applicable.

6. Higher Tax Rates Across Brackets

• Example: The top rate increases from 37% to 39.6%.
• Bracket thresholds shrink, pushing more income into higher brackets.

Key Changes for Business Owners

1. Qualified Business Income (QBI) Deduction

• Current: Pass-through entities (e.g., S corps, partnerships) can deduct up to 20% of qualified income.
• Post-2025: This benefit disappears, significantly increasing the tax burden on small businesses.

Related: QBI Deduction for Business Owners

2. Bonus Depreciation Phaseout

• This started at 100% immediate expensing of eligible property (introduced by the TCJA). For 2025, it is 40%.
• Continues to Phase Out: Reducing to 0% by 2027.
• Impact: Businesses must revert to traditional depreciation schedules, reducing cash flow.

3. Corporate Tax Rate Stability

• The corporate tax rate remains at 21% permanently.
• However, many smaller provisions tied to business deductions expire, reducing overall savings.

4. Interest Expense Deduction Limits

• Current: Limited to 30% of adjusted taxable income (EBITDA method through 2025).
• Post-2025: Limitation becomes stricter (EBIT method), reducing allowable deductions further.

5. Net Operating Loss (NOL) Deduction Changes

• Current: Limited to 80% of taxable income, no carrybacks allowed.
• Post-2025: Pre-TCJA rules may return, restoring full deductions and carryback options.

6. Research and Development (R&D) Expensing

• Current: R&D costs must be amortized over five years (starting in 2022).
• Future: If not amended, businesses will face ongoing cash flow challenges due to delayed deductions.

Related: Mastering Business and Wealth: A Guide for Business Owners

What Could Happen Next?

The future of the TCJA hinges on political developments. With Donald Trump officially being re-elected, here’s how an extension could play out:

• Tariffs and Revenue Generation: Trump has suggested using tariff revenue to fund an extension of tax cuts, though this faces opposition from Congress.
• Legislative Push: Extending or making provisions permanent would require bipartisan support, a challenge given the political climate. He could potentially utilize the Byrd Doctrine again to extend the law another 8 years.
• Economic Considerations: Rising deficits could make lawmakers hesitant to extend tax cuts without offsetting revenue measures.

At the end of the day, we still have $37 trillion in debt, and it will need to be addressed at some point. Below is a chart of historical tax rates and we are at the low end of the spectrum. I would not be surprised to see tax rates increase in the future.

Final Thoughts

The expiration of the TCJA will bring widespread tax changes, affecting nearly every taxpayer and business. The biggest changes for taxpayers are the increases in brackets and the change to standard deductions. For business owners, the biggest change is the QBI deduction.

Whether you’re planning for individual or business tax strategies, staying ahead of these changes is essential. At this point, the law is sunsetting, so that is what we plan for, but we do have to take into consideration the law getting extended.

At the end of the day, make sure you have a tax plan in place and you are reviewing it on a regular basis.

Remember: DON'T TIP THE IRS.

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About the author: Finn Price, CPFA, CEPA, is a business owner and wealth manager at Railroad Investment Group. He helps successful entrepreneurs & individuals with concentrated stock positions in their 30s, 40s and 50s build, organize, protect and transfer their wealth.

Note: this article is general guidance and education, not advice. Consult your money person or your attorney for financial, tax, and legal advice specific to your situation.

Securities and advisory services offered through LPL Financial, a registered investment Advisor, Member FINRA/SIPC.