The 2026 Tax Cliff: What Happens When Trump’s Tax Cuts Expire (And How Much More You’ll Actually Pay)

If you thought 2025 felt expensive, just wait until you see your 2026 paycheck.
Come January 1, 2026, dozens of the most popular provisions from the 2017 Tax Cuts and Jobs Act are set to disappear unless Congress acts. For the majority of American households and business owners, one thing is sure: higher taxes.
According to projections by the Tax Foundation and Congressional Budget Office, over 62% of taxpayers will see a tax increase in 2026, with many middle- and upper-middle-class families paying $2,000-$15,000+ more per year.
Here’s precisely what is changing, who gets hit hardest, who might actually come out ahead, and-most importantly-what you can do about it before the clock runs out.

Why Is This Happening? The TCJA “Sunset” Explained

When Republicans passed the TCJA in late 2017, Senate budget rules forced most of the individual cuts to be temporary. Corporate tax cuts were made permanent, but the juicy parts for people — lower rates, bigger standard deductions, the enhanced Child Tax Credit and the 20% pass-through deduction — got an expiration date: December 31, 2025.
In other words, income earned in 2026, filed in April 2027, automatically reverts to the pre-2018 tax code, adjusted only for inflation.
As of November of 2025, Congress has not extended the cuts, though Republicans now control the White House, Senate, and House starting January 2025. Extension talks are expected, but nothing is law yet. Smart money plans for expiration and treats any extension as a bonus.

Side-by-Side: 2025 vs. 2026 Tax Rules (Inflation-Adjusted Estimates)

1. Income Tax Rates & Brackets – Higher Rates Kick In Sooner

2025 (Current TCJA)	2026 (After Expiration)
Top rate: 37%	Top rate: 39.6%
Brackets much wider	Brackets shrink dramatically
Example (Married Filing Jointly):
Taxable income $400,000 → 24% top bracket in 2025 → 33% top bracket in 2026
Taxable income $600,000 → 35% top bracket in 2025 → 39.6% in 2026

Result: A family making $250,000–$700,000 often sees the single biggest dollar jump.

2. Standard Deduction vs. Return of Personal Exemptions

Filing Status	2025 Standard Deduction	2026 (Est.) Standard Deduction + Personal Exemptions
Single	~$15,000	~$8,200 + $5,300 exemption = $13,500 effective
Married Filing Jointly	~$30,000	~$16,400 + $10,600 (you + spouse) + $5,300 per kid
Head of Household	~$22,500	~$12,000 + exemptions

Large families with 3+ kids may break even or slightly win. Everyone else loses ground and many will be pushed back into itemizing.

3. Itemized Deductions – Some Big Winners Here

Deduction	2025 Rule	2026 Rule	Who Wins Big?
State & Local Tax (SALT)	Capped at $10,000	Unlimited again	NY, CA, NJ, CT, IL residents
Mortgage Interest	$750k debt limit	$1M debt limit + home equity returns	Owners with jumbo loans
Charitable contributions	60% AGI limit (cash)	50% AGI limit	Minor downgrade
Miscellaneous 2% deductions	Gone	Back (unreimbursed employee, tax prep fees, etc.)	Some W-2 employees
Pease limitation	Suspended	Returns for high earners	High-income itemizers lose some benefit

Blue-state high earners could see the unlimited SALT deduction completely cancel out (or even reverse) their tax increase.

4. Child Tax Credit – A Gut Punch for Parents

2025	2026
$2,000 per child under 17 ($1,700 refundable)	$1,000 per child (much lower refundability)
Phase-out starts at $400k MFJ	Phase-out starts ~$110k–$150k MFJ
$500 credit for non-child dependents	Eliminated

A family with two kids earning $180k could easily lose $2,000–$3,000 in credits alone.

5. The 20% Pass-Through (QBI) Deduction Dies

If you own an S-corp, LLC, partnership, or are a sole proprietor, the Section 199A deduction that shaves up to 20% off your taxable business income vanishes. For a business owner clearing $300k in profit, that’s roughly an extra $18,000–$25,000 in federal tax.

6. Estate & Gift Tax Exemption Gets Sliced in Half

2025 (doubled by TCJA)	2026 (reverts)
~$27.9 million per couple	~$14–$15 million per couple (est.)

More multi-generational wealth will owe 40% federal estate tax.

Who Gets Hurt the Most in 2026?

• Upper-middle-class families ($150k–$500k) in low/mid-tax states (TX, FL, TN, NV, WA) → often $5k–$15k+ higher tax
• Small business owners & self-employed → QBI loss is brutal
• Families with multiple children → CTC cut is immediate and painful
• High earners who don’t itemize heavily → little to offset the rate jump

Surprise Winners

• Residents of high-tax states (NY, CA, NJ, CT, IL, MA) who itemize — unlimited SALT can more than offset everything else
• Homeowners with mortgages over $750k
• Anyone who was stuck paying AMT pre-2018 but escaped it under TCJA — welcome back (kidding, mostly)

Real-Life 2026 Tax Shock Examples

Family A – Married, 2 kids, $180k income, Texas (no state income tax) 2025 tax: ~$19,500 federal 2026 tax (projected): ~$26,000 → +$6,500 more

Family B – Same as above but in California, itemizes $45k SALT 2025 tax: ~$24,000 2026 tax: ~$23,500 → actually $500 lower thanks to uncapped SALT

Business Owner – Single, $400k pass-through profit, Florida 2025 tax: ~$95,000 (after 20% QBI) 2026 tax: ~$128,000 → +$33,000 extra

Will Congress Actually Let This Happen?

Probably not entirely. With unified Republican control in 2025, some form of extension or modification is widely expected — possibly in a big reconciliation bill in early-to-mid 2026.

But don’t count on it for planning. Lawmakers could:

• Extend everything (least likely — costs ~$4 trillion over 10 years)
• Extend rates + CTC but keep SALT capped (most likely)
• Phase in changes or add new workarounds

Bottom line: Prepare for the cliff, celebrate later if they soften the landing.

7 Things You Can Do Before December 31, 2025

1. Accelerate income into 2025 (ask for year-end bonus early, take capital gains, do Roth conversions).
2. Defer deductions into 2026 if you’ll itemize more (pre-pay 2026 property taxes in Dec 2025 if cash allows, bunch charitable gifts).
3. Max 2025 retirement contributions while brackets are friendlier.
4. Business owners: Accelerate equipment purchases for any remaining bonus depreciation and consider C-corp conversion analysis.
5. High-net-worth families: Use the $27.9M gift/estate exemption before it drops — irrevocable trusts, spousal lifetime access trusts (SLATs), etc.
6. Run parallel 2025 vs. 2026 projections with your CPA now.
7. If you’re in a high-SALT state, crunch the numbers — you might actually want expiration.

The Bottom Line

For most Americans, January 2026 will bring the largest single-year tax increase in more than a decade.
Some will barely notice. A few-mostly in high-tax blue states-might pay less. But the majority-especially growing families and entrepreneurs in low-tax states-are looking at a serious hit to take-home pay and business cash flow.
The good news? You still have all of 2025 to reposition income, deductions, retirement savings, and estate plans.
Get the conversation going with your tax advisor this month. A few smart moves now can save you thousands (or tens of thousands) when the TCJA sun sets for good.
Need a quick personalized estimate? Use the Tax Foundation’s 2025-vs-2026 calculator or drop your scenario in the comments — happy to help point you in the right direction.
Don’t get caught off guard. The 2026 tax cliff is approaching sooner than you might think.

Tax Foundation – TCJA Expiration Tax Calculator

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