Leon here. Thank you for reading my blog. Here is some very important information for you.
Important tax regulations are changing in 2025 and will take effect 2026. Both individuals and small businesses must prepare for some significant shifts. Many of the provisions from Trump’s 2017 Tax Cuts and Jobs Act (TCJA) are set to expire, potentially altering everything from tax brackets to deductions and credits. Everyone … individuals, CFOs and business owners, must stay informed and be proactive in order to minimize tax liabilities and maximize opportunities.
Of course, everyone has a responsibility to support our country financially through our system of taxation. But we also have a responsibility to ourselves, our families and employees to take every legal and ethical opportunity to maximize the amount of money we keep to support ourselves and maximize our self-sufficiency.
Key Tax Changes for Tax Year 2026 that we must plan for now:
Expiration of Individual Tax Cuts and the higher Standard Deduction
The 2017 law, TCJA, reduced tax rates for most individuals and for businesses, but these cuts were temporary and set to expire at the end of 2025. Without legislative action, tax brackets will revert to their pre-2017 levels, potentially increasing taxes for many households.
The charts below show what percentage tax will be paid by married couples filing jointly on 2024 versus 2026 taxable income. However, another variable that may or may not change in 2026 is the amount of the “standard deduction”. Pre 2017, it was approximately 13,000. With the TJCA law, it was increased to 27,700, a substantial tax benefit for most people. If it reverts to the lower amount in 2026, that will mean higher taxes for most of us.
Pre – 2017 Tax Brackets, scheduled to return in 2026
Married Filing Jointly
Taxable Income Brackets Current Law | Tax Rate Pre 2017 and in 2026 |
Up to 18,650 | 10% |
18,651 – 75,900 | 15% |
75,901 – 153,100 | 25% |
153,101 – 233,350 | 28% |
233,351 – 416,700 | 33% |
416,701 – 470,700 | 35% |
Over 470,700 | 39.6% |
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2024 Tax Brackets, MFJ
Taxable Income Brackets 2024 | Tax Rate 2024 |
Up to 22,000 | 10% |
22,001 – 89,450 | 12% |
89,451 – 190,750 | 22% |
190,751 – 364,200 | 24% |
364,201 – 462,500 | 32% |
462,501 – 693,750 | 35% |
Over 693,750 | 37% |
What does this mean for us? Most people will pay significantly higher taxes beginning in 2026, if the TCJA expires as scheduled.
An Example
Currently, according to IRS statistics, the average taxable income for couples filing jointly in the United States is as high as 125,000. That means that before deducting the current “standard deduction” of 27,700, they make gross income of 152,700. Let’s compare that same couple’s taxes in 2024 to what they could be in 2026.
2024 (TCJA Law)
· Gross Income: $152,700
· Standard Deduction: $27,700
· Taxable Income: $152,700 − $27,700 = $125,000
Using 2024 brackets:
· 10% on first $22,000 = $2,200
· 12% on $22,001 – $89,450 = $8,102
· 22% on $89,451 – $125,000 = $7,810
Total Tax: $2,200 + $8,102 + $7,810 = $18,112 tax
2026 (Pre-2017 Law)
· Gross Income: $152,700
· Standard Deduction: $13,000 (pre-2017).
· Taxable Income: $152,700 − $13,000 = $139,700
Using pre-2017 brackets:
· 10% on first $18,650 = $1,865
· 15% on $18,651 – $75,900 = $8,580
· 25% on $75,901 – $139,700 = $15,950
Total Tax: $1,865 + $8,580 + $15,950 = $26,395 tax
What does this mean for you going forward?
· Higher marginal tax rates may certainly apply to your income.
· We will look at planning strategies, such as Roth conversions or accelerating income, which can help you mitigate the impact.
· We will evaluate whether itemizing will save you more money.
· You should start tracking deductible expenses like charitable contributions, mortgage interest, and medical costs in case itemizing makes more sense for your situation.
1. Child Tax Credit Changes
The current expanded child tax credit of up to $2,000 per qualifying child may revert to its previous amount of $1,000. Income thresholds for eligibility could also tighten.
Therefore, we will need to look at your situation if you have young children because this will lead to higher taxes. To compensate, we might consider:
· Adjusting your budget to prepare for paying higher taxes.
· Exploring other tax-advantaged options, such as dependent care accounts.
Small Business Implications
The qualified business income (QBI) deduction, which allows eligible pass-through entities to deduct up to 20% of their income, is also set to expire.
Therefore, small businesses could face higher effective tax rates.
We will need to consider if incorporating as an S-Corp would reduce your tax burden (if you are not already an S-Corp.) or exploring other structures to minimize taxes.
Let’s Be Proactive
These potential changes are complex and it is essential that we work together to help you prepare for them in advance.
My clients and I will put together a personalized plan based on each situation.
We will aim to minimize your taxes for 2024 and 2025 under the TCJA law and we will have a new strategy in place for 2026 in case taxes increase. In either case, we should plan for you to do the following, among other strategies:
Maximize contributions to Tax-Advantaged Accounts like 401Ks, IRAs and HSAs.
Stay Updated on Legislative Developments. Congress may act to extend or modify some TCJA provisions.
Conclusion: Let’s make sure you have control of your Tax Future
The tax changes coming in 2026 will affect nearly every taxpayer, from individuals to small business owners. By understanding these shifts and taking proactive steps, we can work together to minimize surprises and seize opportunities.
Leon Maynard at MyTaxPartnerPlus is here to help.
Call or text 208-871-4848. Email Leon@MyTaxPartnerPlus.com .