The 2026 TCJA Sunset: What's Set to Change

Why provisions are sunsetting

The TCJA used budget reconciliation rules that required individual provisions to expire within a 10-year window. Corporate provisions (like the 21% C-corp rate) are permanent; individual ones are not.

Tax brackets revert

Brackets revert to the higher pre-2018 rates and (less generous) bracket widths:

• Current top rate: 37% → reverts to 39.6%
• Most other brackets rise by 2–4 percentage points
• Bracket widths shrink, pushing more income into higher rates

Standard deduction is roughly cut in half

Current $14,600 / $29,200 deductions revert to roughly $8,300 / $16,600 (2026 inflation-adjusted), while the personal and dependent exemptions return (~$5,300 each). Net effect varies by family size.

SALT cap could disappear

The $10,000 SALT cap is scheduled to lapse — full state and local tax deduction returns. Big win for high-income, high-tax-state residents.

Estate exemption drops by roughly half

$13.61M (2024) → roughly $7M (2026 inflation-adjusted). Estates between $7M and $13.6M would suddenly be exposed to 40% federal estate tax. Lifetime gifts made before sunset are not clawed back (per finalized IRS regulations).

QBI deduction expires

The 20% Qualified Business Income deduction for pass-through owners ends after 2025. Effective tax rate on small-business income would jump meaningfully — back to ordinary rates with no preferential treatment.

Mortgage interest cap rises again

The $750K acquisition-debt limit reverts to $1,000,000. Home equity loan interest deduction (for non-improvement debt) returns.

What to plan for

• Consider Roth conversions in 2024–2025 at locked-in lower rates
• High-net-worth estates: use the higher gift exemption before it drops
• Business owners: max QBI-eligible income before expiration
• Don't make irreversible decisions assuming Congress will / won't extend — model both scenarios