Your Taxes Could Rise in 2026 If Congress Doesn’t Extend the 2017 Tax Cuts – Here’s What to Expect

The Tax Cuts and Jobs Act (TCJA) of 2017, signed into law by former President Donald Trump, introduced significant tax reductions for individuals and businesses.

However, many of these provisions are set to expire at the end of 2025, potentially leading to higher taxes for millions of Americans.

If Congress does not act to extend these provisions, taxpayers could see a significant impact on their finances starting in 2026.

What Tax Provisions Are Set to Expire?

1. Individual Income Tax Rates Will Increase

One of the most notable changes in the TCJA was the reduction of individual income tax rates across all brackets. If the law expires:

• The current 12% tax rate will revert to 15%.
• The 22% tax bracket will return to 25%.
• The top tax rate will increase from 37% to 39.6%.

2. Standard Deduction Will Shrink

The TCJA nearly doubled the standard deduction, making it more beneficial for taxpayers to take the standard deduction rather than itemizing deductions. If Congress does not renew this provision:

• The standard deduction for single filers will drop from $13,850 to approximately $6,500.
• The standard deduction for married couples filing jointly will be cut from $27,700 to around $13,000.

3. Child Tax Credit Will Be Reduced

The Child Tax Credit (CTC) was expanded under the TCJA, providing $2,000 per child for eligible families. However, if the law expires, the CTC will shrink to $1,000 per child, reducing tax relief for millions of families.

4. State and Local Tax (SALT) Deduction Cap May Be Lifted

The TCJA capped the deduction for state and local taxes (SALT) at $10,000, disproportionately impacting taxpayers in high-tax states such as California, New York, and New Jersey. If Congress does not act, this cap will be lifted, potentially benefiting homeowners in those states.

5. Estate Tax Exemption Will Drop

The estate tax exemption, which allows heirs to inherit large sums tax-free, will be cut in half if the TCJA expires. The exemption would drop from $13.61 million per person in 2025 to approximately $6.8 million in 2026.

What Does This Mean for Businesses?

While the corporate tax rate of 21% is permanent, some business-related tax benefits will expire, including:

• 100% Bonus Depreciation: Businesses will no longer be able to fully deduct the cost of new equipment in the year of purchase.
• Small Business Deduction (Section 199A): The 20% deduction for pass-through businesses, such as LLCs and S corporations, will expire.

How Will This Affect the Federal Budget?

Extending the TCJA would add an estimated $4.6 trillion to the national deficit over the next decade, according to the Congressional Budget Office (CBO). The expiration of tax cuts, on the other hand, would increase revenue but could slow economic growth.

Will Congress Extend the TCJA?

The decision to extend the tax cuts will likely be a major political issue in 2025. Here’s what to expect:

• Republicans generally support extending the tax cuts, arguing that they boost economic growth and job creation.
• Democrats may support targeted extensions, but they are concerned about the impact on the federal deficit and tax fairness.
• Compromise solutions could involve extending tax cuts for the middle class while letting some provisions for high-income earners expire.

What Can Taxpayers Do to Prepare?

1. Consult a Tax Professional: Financial planners can help navigate potential tax hikes.
2. Consider Roth IRA Conversions: If tax rates increase, converting traditional retirement savings into a Roth IRA could be beneficial.
3. Plan for Lower Deductions: Homeowners and families should prepare for reduced tax breaks.
4. Monitor Congressional Decisions: Stay updated on tax policy changes through IRS.gov and Congressional Budget Office.

Final Thoughts: A High-Stakes Tax Debate in 2025

If Congress does not act, the expiration of the TCJA will lead to higher taxes for individuals and businesses starting in 2026.

While Republicans push for extensions, Democrats weigh the fiscal responsibility of making tax cuts permanent. Taxpayers should prepare for potential changes and take steps to optimize their financial plans before 2026.

For more details, visit IRS.gov, Congressional Budget Office, and Brookings Institution.

This article has been carefully fact-checked by our editorial team to ensure accuracy and eliminate any misleading information. We are committed to maintaining the highest standards of integrity in our content.