The 2026 tax sunset is approaching quickly, bringing significant changes to income tax rates and deductions. These changes will reverse many of the benefits introduced by the Tax Cuts and Jobs Act (TCJA) in 2017, meaning you could face a higher tax burden if you’re not properly prepared. Here’s what you need to know about these changes, and how Your Choice Financial can help you navigate them.
Expected Changes to Income Tax Rates
As the TCJA provisions expire in 2026, income tax rates will revert to pre-2017 levels:
- The 12% tax bracket will rise to 15%.
- The 22% bracket will increase to 25%.
- The 24% bracket will jump to 28%.
- Higher income brackets will also face increased rates.
These increases could significantly impact your income, especially if you’re nearing retirement or have significant taxable income.
Deductions That May Be Affected
Several key deductions will also revert to their pre-2017 levels:
- Standard Deduction: The standard deduction will decrease, reducing the amount of income you can shelter from taxes.
- State and Local Tax (SALT) Deduction: The $10,000 SALT cap could remain or be further limited, especially affecting those in high-tax states.
- Child Tax Credit: The child tax credit is expected to decrease from $2,000 per child to $1,000, reducing the available benefits for families with dependents.
How Your Choice Financial Can Help
Your Choice Financial offers strategies to help mitigate these changes:
- Income Tax Rate Management: We can help you structure income distributions and withdrawals in a way that minimizes the impact of higher tax rates.
- Maximizing Deductions: Our team will review your deductions to ensure you’re taking advantage of everything available before the tax changes take effect.
- Advanced Tax Planning: We’ll help you implement strategies like charitable giving or accelerating expenses to lower taxable income before 2026.