9 Tax Changes Coming in 2026 and How to Prepare
By Mark Yatros
The Bad News: Many Americans may get unpleasant tax surprises in January 2026.
The Good News: You don’t have to be one of them.
The Tax Cuts and Jobs Act (TCJA) of 2017 significantly changed the U.S. tax code. Unless Congress acts, most of these changes are set to end (i.e., sunset) at the end of 2025. Some sunsets could bring higher taxes, while others may help lower your tax burden.
Like all financial situations, how the sunsets impact you depends on your circumstances and how you prepare. If you’d like guidance on how you’ll be affected, my team and I are happy to meet you for a free consultation. Please contact us here or call (269) 218-2100.
Here are 9 ways the TCJA changed American taxes, how the sunsets could impact you, and what you could do to head off an unfortunate outcome:
1. Higher marginal tax brackets
The TCJA reduced tax rates across income brackets. When these provisions sunset, tax rates will increase, meaning you may pay higher federal income taxes.
Impact
If the lower marginal tax brackets expire, tax rates for many income brackets will increase, resulting in higher taxes for most taxpayers. For example, the 12% bracket may revert to 15%, and the 22% bracket could revert to 25%.
Strategies to consider
Accelerate income – If possible, accelerate your income in 2024 and 2025 to take advantage of the lower tax rates. You could exercise stock options, sell appreciated assets, or take bonuses early if possible.
Defer deductible expenses – Consider delaying paying or incurring expenses that are deductible until the higher rates come into effect. These deductions would be more valuable against higher income tax rates.
2. Lower standard deduction
The TCJA nearly doubled the standard deduction, simplifying tax filings for many and reducing taxable income.
Impact
The standard deduction was nearly doubled under the TCJA, significantly reducing taxable income for those not itemizing deductions. The expiration will reduce the standard deduction to pre-TCJA levels, leading to higher taxable income. This will mean you will pay higher taxes if you currently benefit from the increased standard deduction.
Strategies to consider
Bunch itemized deductions – Plan to group itemized deductions into specific years to exceed the standard deduction. For example, if possible, concentrate charitable contributions or medical expenses in one year.
Evaluate filing status – For married couples, consider whether filing jointly or separately will maximize deductions.
3. State and local tax deductions capped at $10k
The TCJA imposed a $10,000 cap on the deduction for state and local taxes, which helps if you live in a high-property-tax area.
Impact
The cap on the deduction for state and local taxes (SALT) limited the amount you could deduct, mainly if you live in a high-property tax area. If this cap expires, you can deduct more of your SALT, potentially lowering your taxable income and overall tax liability.
Strategies to consider
Prepay property taxes – If the cap is removed, prepay property taxes to maximize deductions.
Review state tax payments – Coordinate the timing of state tax payments to maximize deductibility.
4. Elimination of most miscellaneous expenses for itemized deductions
The Tax Cuts and Jobs Act eliminated various itemized deductions, impacting those with significant deductible expenses. If these deductions are reinstated, you could see reduced taxable income.
Impact
The TCJA eliminated many miscellaneous itemized deductions, such as unreimbursed employee expenses and tax preparation fees. If these deductions are reinstated, your taxable income may be reduced if you itemize your taxes. This is particularly true if you have significant deductible expenses in these categories.
Strategies to consider
Track expenses – Keep detailed records of miscellaneous expenses that could become deductible again, such as unreimbursed employee expenses and tax preparation fees.
Consult with a tax professional – Ensure you are capturing all eligible miscellaneous deductions if they are reinstated.
5. Medical expense deduction lowered
The TCJA reduced the threshold for deducting medical expenses from 10% to 7.5% of your adjusted gross income (AGI).
Impact
If this provision sunsets, the threshold will return to 10%, making it more challenging to deduct medical expenses.
Strategies to consider
Schedule medical procedures – Schedule non-urgent medical procedures before the threshold increases to maximize deductions.
Bunch medical expenses – Concentrate medical expenses in one year to exceed the higher threshold.
6. Limitation on deductible mortgage debt
The TCJA reduced the cap on mortgage interest deductions from $1 million to $750,000 for new loans for new loans taken out after December 14, 2017.
Impact
If this limit reverts and you have a mortgage debt between $750,000 and $1 million, you may again be able to deduct interest on that additional debt. This will reduce your taxable income.
Strategies to consider
Refinance mortgages – Consider refinancing existing mortgages to take advantage of the higher deduction limits before they sunset. Of course, with today’s higher mortgage interest rates, you should consider your current interest rate and the possible new mortgage interest rate closely.
Plan new home purchases – Strategize the timing of new home purchases and related debt to maximize future deductions.
7. Limitation on itemized deductions and higher income thresholds
The Tax Cuts and Jobs Act suspended the overall limitation on itemized deductions (known as the Pease limitation) and raised income thresholds for the phaseout of itemized deductions.
Impact
If these limitations are reinstated, you may see a reduced ability to claim itemized deductions, which would increase your taxable income and tax liability.
Strategies to consider
Timing of significant expenses – Time large deductible expenses in years when you expect lower income to avoid phaseouts.
Consult with advisors— Talk with a financial planner or tax advisor to optimize itemized deductions and minimize the impact of phase-outs.
8. Increased child tax credit, expanded eligibility
The TCJA doubled the child tax credit from $1,000 to $2,000 and expanded eligibility, providing significant tax relief to families.
Impact
If this provision sunsets, the credit will revert to its lower amount and stricter eligibility criteria, reducing the tax benefit if you have children.
Strategies to consider
Maximize current credits – Be sure you claim the maximum child tax credit while the expanded eligibility and higher credit amount are available.
Plan family finances – Adjust family financial planning to account for the reduced benefit from the child tax credit starting in 2026. Remember, my team and I are happy to meet you for a free consultation to help guide your financial planning. Please contact us here or call (269) 218-2100.
9. Estate and gift tax exemption raised
The TCJA significantly raised the estate and gift tax exemption from $5.6 million to $11.2 million per person. It was also adjusted for inflation each year.
Impact
If this reverts to pre-TCJA levels, estates over the $5.6 million threshold will be subject to higher taxes, which will affect you if you have a high net worth and are planning for estate and gift transfers.
Strategies to consider
Make gifts before 2026 – Consider making large gifts before the exemption amount decreases to take advantage of the higher limits.
Review estate plans – Update your estate plans to account for reduced exemption levels and potential changes in estate tax laws.
One final word
Overall, the sunset of these provisions will result in higher taxes for most of us, either through increased tax rates, reduced deductions, or lower credits. However, with proper planning, you may be able to lower your exposure to the changes.
If you’d like guidance on planning for the sunset of the Tax Cuts and Jobs Act of 2017, consider speaking with a financial advisor. My team and I are happy to meet you for a free consultation. Please contact us here or call (269) 218-2100.
This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to ensure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.
Allegiant Wealth Strategies offers securities and advisory services through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. Allegiant Wealth Strategies has offices in Battle Creek and Portage, Michigan, from which we serve Calhoun County, Kalamazoo County, and Kent County (Grand Rapids). The Allegiant Wealth Strategies team offers no-obligation financial planning consultations; call 269-218-2100 or contact us here.