The TCJA Expiration

A man pointing straight out with a money bag labeled tax over his head to showcase the expiration of tax law TCJA.

With 2024 halfway gone, it is a good time to remind you of the potential tax changes coming at the start of 2026 with the expiration of the Tax Cuts and Jobs Act (TCJA). 

The Tax Cuts and Jobs Act (TCJA) brought major changes to the tax code in 2017. Tax rates, standard deductions, and itemized deduction phaseouts all changed due to this tax law. However, the TCJA will expire at the end of 2025. That is unless Congress passes an extension or similar law of sorts. Let’s review the expected changes that will take effect January 1st of 2026 just in case.

Federal Tax Rates 

Right off the bat, federal tax rates will increase.

In general, the average household will see their federal tax rate increase by roughly 3%. See the chart below for today’s tax rates and what they might look like in 2026. 

*Please note the income levels themselves will adjust for inflation.

Single Filer IncomeMarried Filing Jointly Income2024 Tax Rate2026 Tax Rate
$0 – $11,600$0 – $23,20010%10%
$11,601 – $47,150$23,201 – $94,30012%15%
$47,151 – $100,525$94,301 – $201,05022%25%
$100,526 – $191,950$201,051 – $383,90024%28%
$191,951 – $243,725$383,901 – $487,45032%33%
$243,726 – $609,350$487,451 – $731,20035%35%
$609,351 or more$731,201 or more37%39.6%

Tax Items That Impact Tax Liability

 Standard Deduction

The following items can impact your tax liability just as much as the tax rates themselves. Let’s look at some of these items more in depth.

Under current law taxpayers are receiving a large standard deduction that helps lower their taxable income dollar for dollar. The standard deduction will be cut by 50% when the TCJA expires. Let’s take a look!

Please note the extra standard deduction for those who are legally blind and/or age 65 or older will still be available.

 Single FilerMarried Filing Jointly
2024 Standard Deduction$14,600$29,200
2026 Standard Deduction$8,300$16,600
SALT Deduction (State and Local Tax)

The TCJA capped the SALT deduction at $10,000 in 2017. For example, if you paid $30,000 of state taxes you could only deduct $10,000 for itemized deduction purposes. When TCJA expires you will be able to deduct all state and local taxes. This could be big deal for folks with higher income!

Mortgage Interest Deduction

Taxpayers in 2024 can only deduct mortgage interest on the first $750,000 of their mortgage. This limit will increase to $1 million in 2026.

Charitable Deductions

Charitable deductions are based on your Adjusted Gross Income (AGI). In 2024, taxpayers can deduct up to 60% of their AGI as cash gifts to public charities. This will slightly decrease to 50% of AGI in 2026.

Personal Exemptions

There are currently no personal exemptions. However, in 2026 that is expected to change. The current estimate for personal exemptions in 2026 is $5,300 per person.

Child Tax Credit

The child tax credit is expected to be cut in half in 2026. Current tax law allows for a $2,000 child tax credit per child under age 17, but this will revert back to $1,000 per child in 2026.

Tax Moves to Consider Before TCJA Expiration

That’s a lot of change on the horizon! Are you planning accordingly? Consider the following:

Roth Conversions

A Roth conversion shifts traditional IRA (pre-tax money) to Roth IRA (tax-free money). You will pay tax at the time of the conversion, but it will likely be at a lower rate than withdrawal directly from the IRA in the future. The benefit of this is money in the Roth accounts grow tax-free forever and are distributed without tax withholding! 

Read more on Roth Conversion here.

Donor Advised Funds

Donor advised funds give the ability to gift appreciated stock or cash to charity. However, this is a strategy that you may want to delay until 2026.

Why? The standard deduction is higher today; therefore, it is harder to receive an actual tax benefit for gifting to charity. Remember, you only get a benefit if your itemized deductions exceed your standard deduction. And as we said above, the standard deduction should be much lower in 2026. 

83(b) Tax Election

An 83(b) election will allow you to realize the value of your restricted stock units in the current tax year. This could be a huge benefit for a couple reasons.

  1. Tax rates are likely to increase
  2. Your RSUs could be worth a lot more in a couple years than they are today.
    • Who would want to pay more tax on a higher value when they could pay less tax on a lower value today? 
Exercising Non-Qualified Stock Options (NQSOs)

For NQSOs you will pay ordinary income tax on the difference between the market price and exercise price. So, it’s cheaper realizing $50 per share at 22% than $50 per share at 25%. Don’t make it harder than it needs to be! 

Read for more on NQSOs.

Conclusion & Resources

In conclusion, there are a lot of potential changes and strategies to consider. However, in reality, this is just a small portion of the changes we can expect to see. Are you taking the necessary steps to plan for these changes? Does your financial independence plan need a deeper tax analysis?

Contact Perspective 6 Group to learn more or with any questions.

Options for Navigating the 2025 Tax Cuts and Jobs Act Expirations

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