The year 2026 is shaping up to be a critical one for US taxes, thanks to the expiration of many individual provisions from the 2017 Tax Cuts and Jobs Act (TCJA) and the introduction of new legislation. While recent legislation has made some changes permanent, you need to be aware of what's shifting.
Here are some of the biggest updates impacting your wallet:
1. Inflation Adjustments are Key: Many tax parameters, like the income brackets and standard deduction, are adjusted annually for inflation. For 2026, the IRS has released updated numbers, which generally means you'll need a slightly higher income to hit the same tax bracket, helping to prevent "bracket creep."
- Higher Standard Deduction: The standard deduction will increase across all filing statuses (e.g., to $32,200 for married filing jointly and $16,100 single and 24,150 head of household).
- Wider Tax Brackets: The income thresholds for each of the seven tax brackets will be higher.
2. Permanent TCJA Provisions and New Deductions: Congress has acted to make many of the popular TCJA provisions permanent, along with adding new breaks.
- Permanent Tax Rates: The seven ordinary income tax rates (10% to 37%) have been made permanent, avoiding the large rate hikes that would have occurred if the TCJA had fully expired.
- Expanded Child Tax Credit (CTC): The CTC has been expanded and its phaseout limits made permanent, meaning more families can benefit.
- New Deduction for Seniors: Taxpayers aged 65 and older may be eligible for a new temporary deduction, offering a significant tax break.
- Tipped and Overtime Income: New, but limited, deductions have been introduced for certain tipped and overtime income.
3. Estate Tax Exemption Climbs: For high-net-worth individuals, the federal estate and gift tax exclusion amount is increasing significantly to $15 million per person in 2026, and is now a permanent feature of the tax code.
The Takeaway:
Tax planning for 2026 isn't just about inflation—it involves navigating a mix of permanent tax rates, boosted credits, and new targeted deductions. Consult with a tax professional to understand exactly how these changes will impact your filing in 2027. Don't wait until the last minute!
Source: "IRS releases tax inflation adjustments for tax year 2026."
This material is for informational purposes only and is not intended to be a substitute for professional tax advice. Please consult with your DFW Wealth Strategies advisor and a qualified tax professional to understand how these changes will specifically impact your personal financial and tax situation.