What's going to happen in 2026?
A Republican house enacted the Tax Cuts and Jobs Act in 2017.
While the main premise of the bill was to simplify the tax code, it also provided a variety of tax breaks.
As of 2026 these provisions are set to expire.
Before then, congress will likely make a decision on whether or not they will extend these measures or replace them with new/previous tax legislation.
Here’s what can change
Halving the standard deduction
Most Americans choose the standard deduction for 2 reasons
1. It’s simple (they don’t need to track medical expenses, mortgage interest, etc).
2. Next to maxing their 401k it is their biggest tax write off.
A change here means that most will likely have higher tax bills in a post-TCJA era.
Higher marginal income tax rates
Most tax rates were 2-3% higher before the TCJA was implemented (across all income ranges).
A reversion here means we all pay more in taxes.
Halving the current estate tax exemption
Currently for families worth more than $27 Million estate taxes are an issue.
In 2021 taxable estates paid a collective $18 Billion in taxes with an average tax bill of $7 Million per estate.
In 2026 this issue would become relevant for families worth $13M.
How to prepare
Vote Republican… just kidding
I’d consider
Roth Conversions: If you were already intending to convert pretax 401k/IRA money to Roth (to avoid paying taxes later) doing it now makes sense if we think taxes will be higher in the future.
Gifting: The estate tax exemption is a “use it or lose it” proposition. Gifting assets outside of your estate now will allow you to lock in the $27 Million exemption (no estate tax on these assets) before it is potentially halved.
Charitable Giving: A less known provision of the TCJA was a 10% increase in charitable giving deductions. If you give with regularity you may want to give more now while the deduction is higher.
Feel free to reach out with any inquiries
Cheers,
Rush