Upcoming 2026 Tax Changes from the Tax Cuts and Jobs Act Expiration

What is the Tax Cuts and Jobs Act?

Before we get into 2026 Tax Changes on TCJA, a quick overview of TCJA. In late 2017, a transformative piece of legislation known as the Tax Cuts and Jobs Act was passed by Congress and signed into law. This significant measure represented the most substantial reform of the American tax system since 1986, ushering in widespread tax reductions for individuals and businesses alike. Among the notable provisions was a permanent cut in the corporate tax rate, plummeting from a high of 35% to a flat 21%.

In light of the Tax Cuts and Jobs Act, there are twenty-three critical provisions scheduled to lapse by the conclusion of 2025, unless legislative action is taken. The upcoming 2024 election and ensuing policy discussions add a layer of uncertainty about the potential extension of these provisions.

2026 Tax Changes on Tax Cuts and Jobs Act (TCJA) provisions for individuals

In recent tax legislation, the TCJA made significant changes to the income tax structure by lowering the highest marginal tax rate from 39.6% to 37% and adjusting the income thresholds for various tax brackets.

One strategy to potentially reduce the impact of increasing ordinary income tax rates in 2026 is for taxpayers to explore the option of shifting income scheduled for 2026 or beyond into the years 2024 or 2025. Additionally, another approach could involve investing in a Roth IRA as a means of proactively managing tax liabilities.

Following the Tax Cuts and Jobs Act (TCJA), the standard deduction saw a significant increase, reaching $15,000 for individuals and $30,000 for couples filing jointly. This change, coupled with restrictions on itemized deductions, resulted in a shift towards the standard deduction for numerous taxpayers seeking tax savings.

As of 2026, there will be a shift back to pre-TCJA levels for the standard deduction. Additionally, the itemized deductions for state and local taxes, mortgage interest, moving expenses, and miscellaneous expenses are expected to expire.

In a significant change, the limit of $10,000 on the deduction for state and local income taxes against federal taxes is set to be removed, while the deductible amount for mortgage interest is proposed to increase to $1,000,000 from the previous cap of $750,000 as per the TCJA.

With the looming end of these measures, it is anticipated that numerous taxpayers who have been relying on the standard deduction under the TCJA may opt to revert to itemizing tax deductions for the tax year 2026.

Moreover, the upcoming change in the charitable deduction threshold will see a shift back to a cap of 50% of adjusted gross income (AGI)

In compliance with the TCJA regulations, the child tax credit saw a substantial rise to $2,000 per eligible child from the previous amount of $1,000. Moreover, the income cap for the gradual reduction of the credit was also bumped up to $400,000 for couples filing jointly. By 2026, the credit is expected to revert back to its pre-TCJA value of $1,000, with the income threshold for phaseout set at $110,000.

In addition, affluent individuals benefitted greatly from the Tax Cuts and Jobs Act (TCJA) with the significant increase in estate and gift tax exemptions. As of the year 2025, individuals now enjoy a lifetime exemption of $13.99 million, while married couples can take advantage of a combined exemption of $27.98 million.

In the event of a rollback to pre-TCJA standards, the exemption thresholds are poised to return to approximately $7.25 million for individuals and $14.5 million for married couples by the dawn of January 1, 2026.

Consider discussing the sunset provisions that affect the Generation Skipping Transfer Tax (GSTT) exemption with a financial advisor at J.P. Morgan in conjunction with your estate planning lawyer to explore various strategies for gift and estate planning.

2026 Tax Changes on Tax Cuts and Jobs Act (TCJA) provisions for businesses

With the introduction of the Tax Cuts and Jobs Act (TCJA), the qualified business income deduction, commonly referred to as the Section 199A tax deduction, emerged. This particular deduction enables eligible business proprietors to tax deduct a certain percentage of their qualified business income, potentially up to 20%. The sunset provision of the qualified business income deduction could pose a risk for business owners, leading to a potential loss of this deduction and, consequently, higher taxable income.

Exploring the option of running a business under a “C” corporation structure could become more favorable compared to operating as a partnership or an “S” corporation if tax rates for C corporations continue to decrease. This shift could impact the attractiveness of “flow-through” entities for business operations.

Under the Tax Cuts and Jobs Act (TCJA), companies were granted the opportunity to apply 100% “bonus depreciation,” enabling them to deduct the entire cost of specific qualified assets in the same tax year they are put into use. This marked a significant increase from the previous rate of 50% allowed for bonus depreciation prior to the TCJA implementation.

With the deadline of January 1, 2027, looming, the opportunity for businesses to benefit from a 100% bonus depreciation will come to an end. To maximize tax advantages, entrepreneurs should consider hastening their capital investments before the deadline to take full advantage of the current favorable depreciation rule.

Find your free and dedicated tax professional from PriorTax.com to walk you through from start to finish.

This entry was posted on Thursday, May 8th, 2025 at 8:00 am and is filed under Tax and Life Changes, Tax Deductions and Credits, Tax for Business, Tax News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.