Are the Tax Cuts Expiring In 2026? (What You Should Know)

• Several tax provisions connected to the Tax Cuts and Jobs Act were expected to expire after 2025, but new legislation changed the timeline and introduced additional rules beginning in 2026.
• Key updates include inflation-adjusted tax brackets, a higher standard deduction, new charitable deduction rules, and updated reporting thresholds that may affect how income is taxed and reported.
• Planning ahead by timing income, reviewing estate strategies, and coordinating with your CPA can help you use the current rules more effectively before future tax changes reduce flexibility.

What the TCJA Sunset Originally Meant

When the Tax Cuts and Jobs Act (TCJA) was passed in 2017, many of its provisions for individuals were written with an expiration date. The law lowered tax rates and expanded several deductions, but those changes were designed to last only through the end of 2025 unless Congress acted to extend them.

Because of that built-in expiration, tax professionals and financial planners spent years preparing for the possibility that the tax code would revert to older rules in 2026. For households and business owners, that potential shift created a window where planning ahead could significantly affect long-term tax outcomes.

The Original 2026 Expiration Timeline

Under the original TCJA framework, several major provisions were scheduled to expire after December 31, 2025. If nothing had changed, the tax system in 2026 would have looked very different.

Key provisions that were originally set to sunset included:

• Lower individual income tax rates, which would have reverted to higher pre-2018 levels.
• The larger standard deduction, which would have dropped roughly in half.
• The expanded child tax credit, which would have been reduced and subject to different eligibility rules.
• The 20% Qualified Business Income (QBI) deduction for many business owners would have disappeared.
• The historically high estate and gift tax exemption would have fallen significantly.

What Changed With The 2025 Tax Law

For several years, the tax planning conversation centered around would happen when the Tax Cuts and Jobs Act provisions expired after 2025.

In 2025, lawmakers revisited those provisions as part of a new tax package that reshaped the timeline for many TCJA rules. Instead of allowing the entire framework to expire, Congress extended or made permanent several of the most widely used provisions affecting individual taxpayers and business owners.

That change removed the immediate “tax cliff” many planners had been anticipating. However, the updated legislation also introduced new provisions and adjustments that begin taking effect in 2026 and beyond.

The Tax Changes Taking Effect In 2026

Even though many TCJA provisions were extended or made permanent, several important tax rules still evolve beginning in 2026. Some changes are the result of annual inflation adjustments, while others come from updates introduced in the 2025 tax legislation.

Understanding these shifts helps you anticipate how your tax situation may change and where planning ahead can still create meaningful opportunities.

Updated Tax Brackets And Standard Deduction

For the 2026 tax year, the IRS increased the standard deduction to account for inflation:

• $32,200 for married couples filing jointly
• $16,100 for single filers
• $24,150 for heads of household

The tax brackets themselves remain the same structure created under the Tax Cuts and Jobs Act, but the income ranges for each bracket shift upward each year with inflation.

For many households, this means a slightly larger portion of income may remain in lower marginal tax brackets. Even so, income timing decisions such as bonuses, equity compensation, or Roth conversions can still affect how much of your income falls into higher rates.

Higher State and Local Tax (SALT) Deduction

One of the most noticeable changes affecting taxpayers in 2026 is the expansion of the federal deduction for state and local taxes (SALT). Under prior law, taxpayers who itemized deductions were limited to deducting only $10,000 of combined state income taxes, property taxes, and certain other local taxes.

Beginning in 2025, and continuing into 2026, that cap was increased significantly to $40,000 in 2025 and $40,400 for 2026. This change is a relief for taxpayers in higher-tax states like California or for homeowners with substantial property tax bills, as it allows a larger portion of those taxes to be deducted when itemizing.

Unfortunately, the benefit begins to phase out at approximately $505,000 of modified adjusted gross income (MAGI). For taxpayers above that threshold, the allowable SALT deduction is reduced by 30 cents for every dollar of income above the limit, until it reaches the minimum deduction of $10,000.

Because the expanded deduction phases out at higher income levels, tax planning around income timing may become more important. Taxpayers near the phase-out threshold may benefit from strategies that manage or defer income in a given year, such as retirement plan contributions, timing of capital gains, or coordinating the exercise of stock options. 

In some cases, spreading income across multiple tax years may help preserve more of the SALT deduction. As always, the potential benefit of these strategies should be weighed against broader financial and tax planning goals.

Estate And Gift Tax Exemption Changes

The federal estate and gift tax exemption also increased in 2026. The amount individuals can transfer during life or at death without federal estate tax is now $15 million per person, or $30 million for married couples with proper planning.

While this exemption makes federal estate tax a non-issue for most households, it still plays an important role in planning for families with significant assets, business ownership, or concentrated real estate holdings. It’s also important to remember that state estate or inheritance taxes may apply at much lower thresholds depending on where you live.

New Charitable Deduction Rules

Beginning in 2026, charitable deduction rules become slightly more restrictive for taxpayers who itemize. A 0.5% of adjusted gross income floor now applies, meaning charitable donations are only deductible to the extent they exceed that threshold.

At the same time, a new deduction allows taxpayers who do not itemize to deduct a limited amount of charitable contributions. Non-itemizers may now deduct up to $1,000 for single filers or $2,000 for married couples filing jointly.

These changes may influence how donors approach strategies such as bunching donations or timing larger gifts.

Changes To 1099 Reporting Rules

Starting in 2026, the reporting threshold for payments made to independent contractors increases. Businesses now issue Form 1099-NEC or 1099-MISC only when payments exceed $2,000, up from the previous $600 threshold.

This change mainly affects freelancers, consultants, and individuals with side income. However, it’s important to remember that all taxable income must still be reported, even if a 1099 form is not issued.

Temporary Tax Deductions That Won’t Last Forever

Alongside the broader tax law changes, the 2025 legislation introduced several new deductions that are temporary. Most of these provisions apply from 2025 through 2028, which means they create a limited planning window.

These deductions are tied to specific types of income or expenses, which is why taxpayers who qualify can benefit from understanding how they work before they expire.

Deduction For Tips

Workers who receive tips in traditionally tipped industries may deduct the maximum of $25,000 of qualified tip income per year from federal taxable income.

This deduction starts to phase out for taxpayers whose modified adjusted gross income exceeds:

• $150,000 for single filers
• $300,000 for married couples filing jointly

Tips must still be properly reported to employers, and payroll taxes may still apply.

Deduction For Overtime Pay

Employees may deduct up to $12,500 of qualified overtime income or $25,000 for married couples who file together.

Like the tip deduction, this benefit phases out once income exceeds:

• $150,000 for single filers
• $300,000 for married couples

The deduction only applies to the overtime premium portion of pay, not the full overtime wage.

Car Loan Interest Deduction

Taxpayers can deduct up to $10,000 per year of interest paid on qualifying auto loans.

Key rules include:

• The purchased vehicle must be new and assembled in the United States
• The deduction phases out for higher incomes
• The vehicle must be purchased for personal use

Because auto loan rates have increased in recent years, this deduction may provide meaningful relief for buyers financing a vehicle.

Additional Senior Deduction

Taxpayers age 65 and older can claim an additional deduction of $6,000 per person. The deduction gradually phases out when modified adjusted gross income rises above:

• $75,000 for single filers
• $150,000 for married couples

The deduction is available whether taxpayers itemize or take the standard deduction, which makes it broadly accessible for retirees.

Planning Strategies To Consider Before Rules Tighten

Tax law changes create planning windows. The years before the rules shift are often when you can make the most effective decisions, especially when it comes to income timing, charitable giving, and estate planning. 

Here’s what you can do:

Consider Timing Income And Deductions

If you expect tax rates to rise in future years, it may make sense to recognize income sooner, such as realizing capital gains, exercising stock options, or completing Roth conversions while rates are lower. In other situations, accelerating deductions into the current year can help reduce taxable income.

These decisions depend heavily on your broader financial picture, but thoughtful timing can help you take advantage of the current rules before they change.

Revisit Charitable Giving Strategies

Some households benefit from combining several years of donations into one year to exceed the standard deduction and receive a larger tax benefit. Others may consider donating appreciated securities instead of cash, which can avoid capital gains tax while still allowing a full charitable deduction.

Charitable giving can support causes you care about while also playing a role in tax planning when structured thoughtfully.

Review Your Estate Plan

The estate and gift tax exemption remains historically high, but it is scheduled to drop significantly unless future legislation changes it again.

That makes the current environment an important window for families with larger estates to revisit their planning. Strategies such as lifetime gifting, trust planning, or family transfers may allow you to use today’s higher exemption levels before they potentially shrink.

Even if your estate is well below current thresholds, reviewing beneficiary designations and overall estate documents periodically is still a good practice.

Coordinate With Your CPA Early

Many of the most effective tax strategies require planning before the end of the year, not after. Waiting until tax season often limits what can still be adjusted.

Working with your CPA or financial planner early in the year allows time to evaluate options such as income timing, retirement contributions, charitable planning, and estate strategies while they can still make a difference.

Tax laws will always evolve. Coordinating with professionals before deadlines approach gives you the best chance to make the rules work in your favor.

Tax Rules Change, but Good Planning Doesn’t

Tax laws evolve constantly. Rates adjust, deductions come and go, and new provisions appear while others quietly expire. What matters most isn’t predicting every change but building a strategy that adapts as the rules shift.

The changes taking effect in 2026 highlight that planning ahead creates options. Whether it’s timing income, structuring charitable giving, reviewing your estate plan, or taking advantage of temporary deductions, thoughtful planning can help you reduce taxes while keeping your broader financial goals intact.

The earlier you start those conversations, the more flexibility you usually have.

If you want help understanding how these tax changes may affect your situation, I invite you to start with my short questionnaire. It’s a simple way to share a bit about your financial picture and see whether working together could help you make smarter tax decisions in the years ahead.