The tax landscape is ever-changing, and as we look ahead to 2026, several key areas deserve your attention. While the biggest changes from the Tax Cuts and Jobs Act (TCJA) of 2017 are set to expire, a few other crucial elements will shape how you file your taxes. Get ready to sail smoothly through the upcoming tax season by understanding these potential shifts!
The Looming Sunset of TCJA Provisions: Are Your Taxes Going Up?
Perhaps the most significant factor influencing 2026 taxes is the scheduled expiration of many individual tax provisions from the TCJA of 2017. This means that without new legislation, we could see a return to pre-TCJA tax rates and rules.
What does this mean for you?
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Individual Income Tax Rates: Many individual income tax brackets are slated to revert to higher pre-TCJA rates. This could mean a larger portion of your income falls into a higher tax bracket, potentially increasing your overall tax liability.
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Standard Deduction: The significantly increased standard deduction from the TCJA is also set to expire. If you currently take the standard deduction, you might see a smaller deduction amount, making itemizing deductions more appealing for some.
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Child Tax Credit: While the Child Tax Credit (CTC) has seen recent changes, its structure and amounts could be affected by the TCJA sunset. The increased maximum credit and higher income phase-outs might revert to older limits, impacting families.
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State and Local Tax (SALT) Deduction Cap: The $10,000 cap on the SALT deduction, a contentious provision of the TCJA, is also set to expire. For those in high-tax states, this could mean a significant increase in deductible state and local taxes, providing more tax relief.
It’s important to remember that Congress could act to extend, modify, or permanently alter these provisions before they expire. However, planning for the current scheduled sunset is a prudent approach.
Beyond TCJA: Other Key Areas for 2026
Even if Congress intervenes with the TCJA provisions, other areas will be important:
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Inflation Adjustments: Each year, many tax provisions, including retirement contribution limits, some credit amounts, and income thresholds, are adjusted for inflation. Expect these annual updates to continue, potentially offering slight increases in various limits. Keep an eye out for the official IRS announcements!
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Gig Economy and Digital Assets: The IRS continues to refine its guidance and enforcement for the gig economy and digital assets (like cryptocurrency). Expect ongoing scrutiny and potentially new reporting requirements for these areas. If you’re involved in either, meticulous record-keeping will be more crucial than ever.
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Affordable Care Act (ACA) Taxes: The ACA’s premium tax credits and net investment income tax (NIIT) are largely unaffected by the TCJA sunset and will continue to be relevant for many taxpayers, especially those with higher incomes.
Preparing for What’s Ahead
So, what should you do to prepare for 2026?
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Stay Informed: Follow reputable tax news sources and consult with a tax professional. Legislative changes can happen quickly.
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Review Your Withholding: With potential changes to tax rates and deductions, now is a good time to review your W-4 to ensure your withholding is accurate.
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Optimize Deductions and Credits: Understand which deductions and credits you might qualify for, especially if the standard deduction reverts to lower amounts.
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Plan for Investments: Consider the tax implications of your investment strategies, especially with potential changes to capital gains rates.
2026 promises to be a dynamic year for US taxes.