How 2026 Tax Brackets Would Change if the TCJA Expires

American taxpayers are scheduled to see taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. hikes when the temporary tax cuts from the 2017 Tax Cuts and Jobs Act (TCJA) sunset after 2025. The Congressional Budget Office (CBO) has published projections of what the tax system could look like in 2026 if the TCJA’s changes go away as scheduled. From a smaller standard deductionThe standard deduction reduces a taxpayer’s taxable income by a set amount determined by the government. It was nearly doubled for all classes of filers by the 2017 Tax Cuts and Jobs Act (TCJA) as an incentive for taxpayers not to itemize deductions when filing their federal income taxes. to higher tax rates and narrower tax bracketsA tax bracket is the range of incomes taxed at given rates, which typically differ depending on filing status. In a progressive individual or corporate income tax system, rates rise as income increases. There are seven federal individual income tax brackets; the federal corporate income tax system is flat. , we estimate that 62 percent of filers would experience a tax increase if the TCJA expires.

2026 Tax Brackets and Rates

The TCJA retained the seven-bracket structure for the individual income taxAn individual income tax (or personal income tax) is levied on the wages, salaries, investments, or other forms of income an individual or household earns. The U.S. imposes a progressive income tax where rates increase with income. The Federal Income Tax was established in 1913 with the ratification of the 16th Amendment. Though barely 100 years old, individual income taxes are the largest source of tax revenue in the U.S. but lowered five of the seven rates and adjusted the widths of the tax brackets. Tables 1 through 4 illustrate where tax rates and brackets would be under continuation of the TCJA based on our own projections, and how tax rates will rise and how tax brackets will adjust in 2026 upon expiration of the TCJA based on CBO projections.

Standard Deduction, Personal Exemption, and Child Tax CreditA tax credit is a provision that reduces a taxpayer’s final tax bill, dollar-for-dollar. A tax credit differs from deductions and exemptions, which reduce taxable income, rather than the taxpayer’s tax bill directly.

The TCJA nearly doubled the standard deduction and expanded the child tax credit by doubling the maximum to $2,000 and extending the phaseout range, among other changes (like creating a nonrefundable $500 other dependent credit). The TCJA also set the personal exemption to $0, essentially swapping exemptions for a larger standard deduction and child tax credit.

In 2026, personal exemptions would return and be valued at $5,300. The standard deduction would shrink, and be valued at $8,350 for single filers, $16,700 for joint filers, and $12,250 for head of household filers, compared to $15,450, $30,850, and $23,150, respectively, if the TCJA instead continued. The maximum child tax credit would revert back to $1,000 from $2,000 under TCJA and begin phasing out at $75,000 in adjusted gross incomeFor individuals, gross income is the total pre-tax earnings from wages, tips, investments, interest, and other forms of income and is also referred to as “gross pay.” For businesses, gross income is total revenue minus cost of goods sold and is also known as “gross profit” or “gross margin.” for single filers and $110,000 for joint filers, compared to $200,000 and $400,000, respectively, under the TCJA.

Itemized Deductions, Pease Limitation, and the Alternative Minimum Tax

To offset part of the cost of cutting taxes, the TCJA imposed limitations on certain itemized deductions like the state and local tax deductionA tax deduction is a provision that reduces taxable income. A standard deduction is a single deduction at a fixed amount. Itemized deductions are popular among higher-income taxpayers who often have significant deductible expenses, such as state and local taxes paid, mortgage interest, and charitable contributions. (SALT) and the mortgage interest deductionThe mortgage interest deduction is an itemized deduction for interest paid on home mortgages. It reduces households’ taxable incomes and, consequently, their total taxes paid. The Tax Cuts and Jobs Act (TCJA) reduced the amount of principal and limited the types of loans that qualify for the deduction. . The TCJA also temporarily eliminated the Pease limitation, which acted as a surtaxA surtax is an additional tax levied on top of an already existing business or individual tax and can have a flat or progressive rate structure. Surtaxes are typically enacted to fund a specific program or initiative, whereas revenue from broader-based taxes, like the individual income tax, typically cover a multitude of programs and services. on higher-income taxpayers, and significantly raised the thresholds for when the alternative minimum tax (AMT) kicks in. While expiration of the TCJA would mean the limitations on itemized deductions go away, more taxpayers would also face Pease and the AMT.

Conclusion

The Tax Cuts and Jobs Act reduced tax rates for taxpayers across all income levels, on average. If Congress allows the TCJA to expire as scheduled, most aspects of the individual income tax would undergo substantial changes, resulting in more than 62 percent of tax filers experiencing tax increases in 2026.

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