The 2017 Tax Cuts and Jobs Act (TCJA) brought significant tax relief to many Americans. However, these benefits are set to expire after 2025. If Congress doesn’t act, taxpayers could face a substantial tax increase in 2026. Let’s break down the potential changes.
Higher Tax Rates and Narrower Brackets
One of the most significant changes brought by the TCJA was the reduction of tax rates and the expansion of tax brackets. If these provisions expire, we’ll see a return to higher rates and narrower brackets.
Table 1: How 2026 Tax Rates Will Increase
| Bracket | Rates Under TCJA | Rates if TCJA Expires |
|---|---|---|
| 1 | 10% | 10% |
| 2 | 12% | 15% |
| 3 | 22% | 25% |
| 4 | 24% | 28% |
| 5 | 32% | 33% |
| 6 | 35% | 35% |
| 7 | 37% | 39.6% |
Smaller Standard Deduction, Fewer Exemptions
The TCJA nearly doubled the standard deduction and eliminated personal exemptions. If these changes revert, taxpayers will have a smaller standard deduction and can claim personal exemptions again.
Table 5: Changes to Family-Related Provisions
| Provision | If TCJA Continues | If TCJA Expires |
|---|---|---|
| Standard Deduction | Increased | Decreased |
| Personal Exemption | Eliminated | Restored |
| Child Tax Credit | Increased | Decreased |
| Other Dependent Credit | Introduced | Eliminated |
Itemized Deductions, Pease Limitation, and AMT
The TCJA also made changes to itemized deductions, the Pease limitation, and the Alternative Minimum Tax (AMT). If these changes expire, taxpayers may see less favorable rules for these provisions.
Table 6. How Itemized Deductions, Pease, and the AMT Will Adjust if the TCJA Expires
| If the TCJA Continues | If the TCJA Expires | |
|---|---|---|
| Itemized Deductions | $10,000 limit on SALT | Uncapped SALT |
| $750,000 principal limit on HMID | $1 million principal limit on HMID | |
| Miscellaneous Itemized Deductions eliminated | Miscellaneous Itemized Deductions restored | |
| Pease Limitation | Eliminated | Restored |
| AMT Exemption | $90,400 single filers | $70,900 single filers |
| $140,700 joint filers | $110,400 joint filers | |
| AMT Exemption Phaseout | $642,950 single filers | $157,700 single filers |
| $1,285,950 joint filers | $210,300 joint filers |
The Bottom Line
The expiration of the TCJA could lead to significant tax increases for many Americans. It’s crucial to stay informed about these potential changes and plan accordingly.
Note: This article is intended for informational purposes only and does not constitute tax advice. Please consult with a tax professional for personalized guidance.
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