Major U.S. Tax Changes Expected in 2026: What Individuals and Small Businesses Should Prepare For

Introduction

The 2026 tax year is expected to bring important updates for individuals and small businesses in the United States. While many rules originally came from the Tax Cuts and Jobs Act (TCJA), the One Big Beautiful Bill Act (OBBBA) and other recent legislation have modified, extended, or permanently adjusted several key provisions. Taxpayers should review changes to deductions, credits, and tax planning strategies to optimize outcomes.

Standard Deduction

The standard deduction remains historically high under OBBBA and other extensions. The TCJA sunset initially suggested a return to pre‑2018 levels, but most standard deduction amounts are now permanent through at least 2026. While itemizing may still benefit certain taxpayers with high mortgage interest, medical expenses, or charitable contributions, the reduction in the SALT cap (temporarily increased to ~$40,400 in 2026) and standard deduction increases may influence whether itemizing provides additional benefit.

Personal Exemptions

Personal exemptions removed under TCJA have not returned for 2026 under current law. Taxpayers should continue to plan based on current standard deduction and credit structures, rather than anticipating a reinstatement of personal exemptions.

Income Tax Rates

Most income tax rates established by the TCJA remain permanent under current law. While historical sunsets suggested a return to higher pre‑2018 rates, the OBBBA preserved the current seven‑bracket structure through 2026 and beyond. Taxpayers should review withholding and tax‑planning strategies, but large rate increases are not currently expected.

Child Tax Credit (CTC)

The enhanced CTC from pandemic‑era legislation has partially expired, and for 2026:

• Refundable portions of the credit have reverted to pre‑enhancement rules.

• Phase-out thresholds and maximum credit amounts remain lower than the 2021–2025 levels.

Families should monitor IRS guidance and plan accordingly for dependent-related tax benefits.

Homeowner Considerations

• The SALT deduction cap has been temporarily increased to ~$40,400 for 2026, offering higher deductibility than the $10,000 TCJA limit, but it will phase down gradually through 2029.

• Mortgage interest deductions remain largely unchanged, though limits on new acquisitions may apply. Homeowners should review property tax payments, mortgage interest, and itemization opportunities for planning purposes.

Business Tax Planning

• Bonus depreciation continues to phase down gradually under current law. The 100% first-year write-off for qualified property is permanent under OBBBA.

• Small business owners should assess equipment purchases, financing strategies, and QBI deduction optimization, as the 20% QBI deduction is now permanent.

• Reviewing entity structure, compensation, and retirement plan contributions remains critical for minimizing tax liabilities.

Preparing Ahead

Early planning is essential to maximize benefits and avoid surprises. Taxpayers should:

• Track receipts, deductions, and itemizable expenses.

• Review withholding and estimated payments to align with 2026 thresholds.

• Consult reliable sources such as IRS releases, professional guidance, and updated legislative analysis.

Conclusion

While some TCJA provisions originally faced sunset, recent legislation has preserved many core tax rules, including standard deductions, QBI, and bonus depreciation. Changes to credits such as the Child Tax Credit and SALT limitations may affect itemization and planning, particularly for homeowners and high-tax state residents. Staying informed and planning ahead allows individuals and businesses to optimize tax outcomes and position themselves for financial stability in 2026 and beyond.