In 2026, federal income tax brackets return to the higher pre-2018 rates, with the top bracket increasing from 37% back to 39.6%. Middle-income brackets will also shift upward, reducing the current tax rate benefits that taxpayers have enjoyed for the past several years.

This means households should expect:

• Higher marginal tax rates
• Faster phase-outs of credits and deductions
• Stronger incentives for tax planning strategies like deferring income or accelerating deductions before the end of 2025

With IRS inflation adjustments layered on top, the 2026 brackets will look different from the old 2017 tables, but the rate structure largely returns to the pre-TCJA design.

The Standard Deduction is Dropping Significantly

The TCJA nearly doubled the standard deduction. In 2026, it shrinks back to roughly half its current size.

Estimated 2026 standard deduction amounts (before final IRS inflation adjustments):

• Single: approx. $8,300
• Married Filing Jointly: approx. $16,600
• Head of Household: approx. $12,450

This is a major shift. Millions of taxpayers who have used the standard deduction for years may suddenly find it more beneficial to itemize, especially in high-tax states.

The SALT Deduction Cap Ends After 2025

The $10,000 cap on state and local tax deductions (SALT) expires after 2025.
In 2026:

• SALT becomes fully deductible again
• Itemizing may return as the norm for many NY & CA taxpayers
• Couples may see dramatically higher allowable deductions for property tax, state income tax, and local levies

This single change could reshape tax planning for clients with significant property holdings or high AGI.

Child Tax Credit, Personal Exemptions, and Other Provisions Reset

Other major changes taking effect in 2026:

• Child Tax Credit reduces from $2,000 back to ~$1,000.
• Refundability becomes capped again.
• Personal exemptions return after being suspended since 2018.
• AMT thresholds shrink, pulling more taxpayers into the Alternative Minimum Tax.

These shifts mean families should reassess their withholding and planning strategies now—not after the IRS releases final numbers.

Why Tax Planning in 2025 Matters More Than Ever

The 2025 tax year will be the last opportunity to take advantage of:

• Higher standard deduction
• Lower tax brackets
• Bonus depreciation at favorable levels
• PTET savings where applicable
• Favorable estate/gift tax exemption (which drops by roughly half in 2026)

Thoughtful planning in 2025 can prevent unnecessary surprises in 2026.

If you want help evaluating how these changes will affect your business or personal tax situation, VV Taxhouse is ready to guide you through every step.