The year 2026 brings one of the most significant tax shifts in the past decade. With new legislation, scheduled sunset provisions, and renewed inflation adjustments, the Internal Revenue Service (IRS) is preparing to implement several important changes that will affect individuals, families, retirees, and business owners. Some of these hanges provide expanded tax relief, while others restore pre-2018 tax rules that had been temporarily suspended.

This article provides a detailed and clear explanation of the major IRS changes for 2026, why the changes are happening, and what taxpayers should do to prepare.

1. Background: Why 2026 Matters

Several provisions of the Tax Cuts and Jobs Act (TCJA) of 2017 were designed to expire at the end of 2025. Unless Congress passes new legislation, the United States will automatically revert to many pre-2018 tax rules beginning January 1, 2026.

At the same time, the IRS will issue its annual inflation-based adjustments, including updated standard deductions, credit thresholds, and retirement contribution limits.

Together, these create a major reset for the U.S. tax system in 2026.

2. Standard Deduction: Expected Increase

Although the TCJA expansion of the standard deduction expires in 2025, inflation adjustments ensure the 2026 deduction will still be significantly higher than pre-2018 levels.

Estimated Standard Deduction for 2026

(66official numbers will be released in late 2025, but current projections are:)

Married Filing Jointly: approx. $32,200

Single: approx. $16,100

Head of Household: approx. $24,150

Even if some TCJA provisions expire, inflation indexing keeps these higher than before.

This increase benefits taxpayers who do not itemize, which is roughly 85% of U.S. filers

3. Return of Personal Exemptions (Potential)

Before 2018, taxpayers were allowed a personal exemption for themselves and each dependent. The TCJA eliminated exemptions through 2025.

If Congress allows TCJA provisions to expire:

Personal exemptions will return in 2026.

This could restore thousands of dollars in additional deductions for families. However, Congress may extend the TCJA rules, which would keep exemptions suspended.

4. Tax Brackets: Rate Changes in 2026

One of the biggest changes involves income tax rates themselves.

Under the TCJA, many tax rates were temporarily lowered:

15% → 12%

28% → 24%

33% → 32%

39.6% → 37%

When these provisions expire:

Expected Tax Rates in 2026

10% (unchanged)

15%

25%

28%

33%

35%

39.6% top bracket

Many taxpayers will see higher marginal tax rates unless Congress acts.

Bracket thresholds will also be adjusted upward for inflation.

5. Child Tax Credit and Family Credits

The TCJA temporarily doubled the Child Tax Credit (CTC) from $1,000 to $2,000 per child.

If allowed to expire:

In 2026, the Child Tax Credit reduces back to $1,000 per qualifying child

Refundable portion becomes much smaller

Income phaseouts drop dramatically

(more middle-income households will lose eligibility)

For families, this may be one of the most impactful changes.

6. State and Local Tax (SALT) Deduction Cap

From 2018–2025, the TCJA capped the SALT deduction at $10,000.

If it sunsets in 2026:

The SALT deduction cap disappears

Taxpayers may deduct unlimited state income tax, sales tax, and property tax

Beneficial for residents of high-tax states (CA, NY, NJ, MA)

Likely to shift many taxpayers back to itemizing rather than using the standard deduction

7. Mortgage Interest Deduction

Under current rules, mortgage interest is deductible only for:

Up to $750,000 of mortgage debt, for loans after 2017.

In 2026, unless extended, the limit returns to:

$1,000,000 of mortgage principal

Plus interest on $100,000 of home equity loans

This change benefits homeowners in high-cost areas.

8. Medical Expense Deduction Threshold

TCJA temporarily lowered the medical expense deduction threshold to 7.5% of AGI.

If it expires, the threshold returns to 10% of AGI, making the deduction harder to qualify for.

9. Miscellaneous Itemized Deductions May Return

These deductions (suspended under TCJA) include:

Unreimbursed employee expenses

Tax preparation fees

Investment advisor fees

Safe deposit box fees

Hobby expenses

Union dues

If TCJA expires, these become deductible again if they exceed 2% of AGI.

10. Estate and Gift Tax Thresholds Drop — A Major 2026 Issue

Currently (2024/2025), the estate tax exemption is extremely high: About $13.6 million per person

In 2026, it is expected to drop to: $6–7 million per person (inflation-adjusted)

This is the single most impactful change for wealthy families.

Estate planning attorneys are already warning clients because:

More families will become subject to estate tax

Many need to update trusts or gifting strategies before 2026

This affects business owners, real estate owners, and high-net-worth individuals.

11. Alternative Minimum Tax (AMT)

TCJA significantly increased AMT exemption amounts.

If the law sunsets:

AMT thresholds will drop

Many more taxpayers (especially dual-income families and professionals) may fall into AMT territory again

12. Retirement Contribution Limits for 2026

The IRS will continue raising limits based on inflation.

Expected 2026 limits (approximate):

401(k) Employee Contribution: $24,500

Catch-Up (age 50+): $8,000

IRA Contribution: $7,500

IRA Catch-Up: $1,100

New rule:

Certain high-income earners must make their catch-up contributions as Roth (after-tax), not pre-tax.

This reduces upfront tax savings for some workers but increases tax-free savings later.

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13. Foreign Earned Income Exclusion (FEIE)

For Americans abroad, the FEIE increases yearly with inflation.

Expected for 2026:

Approx. $132,900 exclusion

This helps expatriates reduce U.S. taxable income.

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14. Business Tax Changes Coming in 2026

1. 20% Pass-Through Deduction (Section 199A) Expires

LLCs, S corporations, partnerships, and sole proprietors currently enjoy a:

20% deduction on qualified business income (QBI)

This ends after 2025 unless Congress renews it.

2. Bonus Depreciation Phaseout

100% bonus depreciation is already phasing down.

By 2026, bonus depreciation will be:

40% of the cost of eligible property

This affects businesses that invest heavily in equipment or vehicles.

3. Interest Deduction Limits

TCJA tightened business interest deductions.

If it expires, pre-TCJA rules return, which may allow:

Higher interest deductions

Different EBITDA/EBIT calculations

15. Earned Income Tax Credit (EITC)

EITC is inflation-adjusted annually.

In 2026, the max credit for a family with 3+ children is expected to be around $8,231

Low-to-moderate income households benefit most.

16. IRS Enforcement Expansion

The IRS continues to expand:

Digital auditing

AI-based fraud detection

High-income taxpayer monitoring

Cryptocurrency reporting enforcement

Starting in 2026:

Crypto brokers must report

Cost basis

Proceeds

transaction totals

To both IRS and taxpayers

This is a major compliance shift for crypto users.

17. Planning Strategies for 2025 and 2026

✔ 1. Maximize gifting before 2026

Use the historically high estate/gift exemption before it cuts in half.

✔ 2. Evaluate Roth vs. Traditional strategies

With higher future tax rates, Roth may become more valuable.

✔ 3. Prepare for itemizing

Itemized deductions may return as a better option.

✔ 4. Business owners should plan for the loss of the 20% QBI deduction

This may shift how businesses structure income.

✔ 5. Recalculate tax withholding

New brackets in 2026 may require adjustments.

✔ 6. Families should prepare for a smaller Child Tax Credit

Child-related benefits shrink in 2026 unless new laws intervene.

18. Why These Changes Are Happening

Most provisions expiring in 2026 were temporary, designed to fit within Congressional budget rules. When TCJA was passed, lawmakers had to make certain cuts “sunset” to comply with deficit limits.

Inflation adjustments are separate and occur annually.

Together, these two forces reshape the tax system every few years — but 2026 is one of the biggest shifts since 2018.

19. Conclusion

The tax landscape in 2026 is undergoing substantial transition. Many of the TCJA’s taxpayer-friendly reductions may expire, restoring previous tax structures. Meanwhile, the IRS continues its annual inflation adjustments and updates to retirement, credit, and deduction limits.

Whether these changes mean higher or lower taxes depends on your income, your family situation, your investments, and your long-term planning.

For many taxpayers:

Standard deduction rises

IRS thresholds increase

Retirement contribution limits expand

But for others:4

Tax rates rise

Family credits shrink

Estate tax exposure increases

Business deductions disappear

The best approach is to prepare early, especially in 2025, and consult a tax professional if your situation involves business ownership, real estate, high income, or estate planning.1

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The Importance of Life Insurance

Life insurance is a crucial component of financial planning that provides a safety net for your loved ones in the event of your passing. It offers financial security and peace of mind, ensuring that your family is taken care of even when you are no longer there to provide for them.

Types of Life Insurance Policies

There are various types of life insurance policies available in the market, each designed to meet different needs and preferences. Understanding the differences between these policies can help you make an informed decision:

1. Term Life Insurance

Term life insurance provides coverage for a specific period, typically ranging from 10 to 30 years. It offers a death benefit to your beneficiaries if you pass away during the policy term. Term life insurance is often more affordable compared to other types of policies, making it a popular choice for individuals seeking temporary coverage.

2. Whole Life Insurance

Whole life insurance is a permanent policy that provides coverage for your entire lifetime. It offers both a death benefit and a cash value component that grows over time. The premiums for whole life insurance are typically higher than term life insurance, but the policy accumulates cash value that you can borrow against or withdraw.

3. Universal Life Insurance

Universal life insurance is another type of permanent policy that combines a death benefit with a cash value component. It provides flexibility in premium payments and coverage amounts, allowing you to adjust them as your financial situation changes. Universal life insurance offers the potential for cash value growth and tax advantages.

Factors Influencing Premiums

When purchasing life insurance, several factors can influence the premiums you will pay:

1. Age

Your age at the time of purchasing the policy plays a significant role in determining the premium. Generally, the younger you are, the lower the premium will be, as you are considered to be at a lower risk of mortality.

2. Health

Your overall health and medical history are taken into account when calculating premiums. Insurance companies may require a medical examination or review your medical records to assess your health status. Individuals with pre-existing conditions or unhealthy habits, such as smoking, may have higher premiums.

3. Coverage Amount

The amount of coverage you choose will impact the premium. Higher coverage amounts will result in higher premiums. It's important to carefully consider your family's financial needs and obligations when determining the appropriate coverage amount.

Making Informed Decisions

When it comes to life insurance, it is crucial to make informed decisions that align with your financial goals and circumstances. Consider consulting with a financial advisor or insurance professional who can provide personalized guidance based on your specific needs.

By understanding the different types of life insurance policies, the factors that influence premiums, and seeking professional advice, you can make confident choices that protect your family's future financial security.