2026 tax brackets: what changes when the TCJA sunsets on January 1, 2026

2026 tax brackets at a glance

In 2026, individual rates are scheduled to revert from today’s seven-bracket TCJA schedule to the prior structure topped by a 39.6% rate. Dollar thresholds for each bracket will be updated for inflation and announced closer to year-end 2025, but the rate ladder itself is expected to look like this:

Proposed 2026 marginal rate ladder (absent new law):

• 10%

• 15%

• 25%

• 28%

• 33%

• 35%

• 39.6%

Note: The income ranges that pair with each percentage will be different from a decade ago due to inflation indexing; official thresholds will be released before the 2026 filing year.

Standard deduction, personal exemptions, and itemized deductions in 2026

One of the most visible shifts will be the trade-off between the standard deduction and personal exemptions.

• Standard deduction: Expected to shrink from today’s elevated TCJA level back toward its pre-2018 size (adjusted for inflation).

• Personal exemptions: Return after being suspended—restoring a per-taxpayer (and dependent) exemption that reduces taxable income.

• Itemized deductions: The $10,000 SALT cap sunsets, reopening the potential to deduct larger state and local taxes. However, the Pease limitation (a high-income phase-out of itemized deductions) is set to return, trimming itemized deductions once income exceeds certain thresholds.

Credits and deductions that are scheduled to roll off in 2026

Several TCJA-era benefits are slated to expire, altering after-tax outcomes for families and business owners alike.

• Child Tax Credit (CTC): Reverts to a lower per-child amount with tighter income phaseouts.

• Qualified Business Income (QBI) deduction (Section 199A): The 20% pass-through deduction for many sole proprietors, partnerships, and S-corps is scheduled to sunset.

• Miscellaneous adjustments: Various education-related tweaks and other temporary provisions may roll back to prior law parameters.

Capital gains and investment income under 2026 tax brackets

Preferential long-term capital gains and qualified dividend rates (0%, 15%, 20%) continue under current law, but the income thresholds that determine who pays which rate will shift with the broader bracket reset and inflation indexing. High earners should also account for the 3.8% Net Investment Income Tax, which remains in place and applies above statutory income thresholds.

Estate and gift tax: exemption expected to fall by roughly half

The doubled estate and gift tax exemption—expanded under TCJA—is scheduled to drop by about half on January 1, 2026 (with final figures indexed for inflation). Many families who were comfortably below today’s threshold could find themselves closer to the taxable line in 2026, making 2025 a pivotal year for lifetime gifts and trust strategies.

Filing status, AMT, and payroll taxes

• Filing status: The 2026 reset revives pre-TCJA relationships among Single, Married Filing Jointly, and Head of Household brackets, including the gap between married and single thresholds that TCJA partially narrowed.

• Alternative Minimum Tax (AMT): Expect a higher likelihood of AMT exposure for some households as exemption amounts and phaseouts revert to pre-TCJA formulas (inflation-adjusted).

• Payroll taxes: Social Security and Medicare payroll tax rules are not part of the TCJA sunset and will continue to adjust annually based on separate statutes.

Planning moves to consider before the 2026 tax brackets take effect

• Income timing: Consider accelerating income to 2025 (potentially lower rates) or deferring deductions to 2026 (potentially more valuable against higher rates).

• Charitable strategy: If itemizing returns in 2026 becomes more common (SALT cap sunset), bunching gifts or using donor-advised funds may warrant a fresh look.

• Pass-through businesses: Reevaluate entity choice and compensation if the QBI deduction disappears.

• Estate planning: Review gifting strategies, spousal lifetime access trusts (SLATs), and valuation discounts ahead of the exemption reduction.

• Withholding check-up: Adjust payroll and estimated taxes late in 2025 to avoid underpayment as brackets and deductions shift.

The bottom line on 2026 tax brackets

Without new legislation, individual taxes in 2026 broadly move back toward the pre-2018 landscape: higher top rates, a smaller standard deduction paired with returning personal exemptions, restored itemized-deduction complexity, and a lower estate/gift exemption. The precise dollar thresholds will arrive in official guidance before filing season, but the direction is clear—2025 is a key year to fine-tune your strategy for the next chapter of the code.