2026 Tax Bracket Income Thresholds, Standard Deduction, and Personal Exemption

[Donk66]

I need to update my ER planning to include the changes coming in 2026 when the current tax law sunsets. I am assuming that the 2017 tax bracket income thresholds, standard deduction, and personal exemptions will be adjusted to account for CPI inflation between 2017 and 2026. Can anyone confirm that my assumption is correct? I have searched this site and the internet and have found lots of conflicting information in regards to this subject. Thanks.

[pb4uski]

I read an article the other day that was skeptical that the rates will sunset as scheduled. It was saying that despite the GOPs complaints about deficits and the debt limit that they will be loath to be seen as allowing tax reductions to expire so they will introduce legislation to make the lower rates permanent. Meanwhile, the Dems will vote to make the lower rates permanent to be consistent with Biden s campaign promise that nobody with income under $400k would see a tax increase.

But I think that the adjustment of brackets for inflation will continue.

What I would like to see is that the lower rate be preserved for those with $400k or lower income and revert for those with over $400k of income.

[jebmke]

I would not base my planning on an assumption that tax law will change.

When I use to try to project numbers I always did it in real dollars so I didn't have to bother trying to predict inflation.

[aaronc879]

Quote:

Originally Posted by pb4uski What I would like to see is that the lower rate be preserved for those with $400k or lower income and revert for those with over $400k of income.

I think that would be a reasonable compromise.

[pb4uski]

^^^which unfortunately means that it is unlikely to see the light of day!

[VanWinkle]

Quote:

Originally Posted by pb4uski ^^^which unfortunately means that it is unlikely to see the light of day!

Which is a good thing for some people, those pesky successful people that keep making all of that income.

[FLSUnFIRE]

I have no idea what the S&P 500 will be in 2026 but I bet I can predict it far more accurately than what the pols will do over the tax code over next three years. In general, I don't expect big/rapid moves especially raising rates due to fear of a backlash.



I keep an eye on things but until action occurs I make no adjustments. For now, tax planning is a current year exercise for me as I draw from my taxable account. Once I need to tap my tax advantaged accounts before 59.5 it will get a bit more challenging as I'll be making decisions that lock me into an income stream for multiple years. The only thing I could possibly do is conversions now but that would cost me ACA subsidy in addition to paying income tax so I'll take the bird in hand now and keep my withdrawals lower since I don't have to cover taxes or HI premiums which will help my taxable last longer -hopefully till another bull takes off and I can really stretch it!

[target2019]

Quote:

Originally Posted by Donk66 I need to update my ER planning to include the changes coming in 2026 when the current tax law sunsets. I am assuming that the 2017 tax bracket income thresholds, standard deduction, and personal exemptions will be adjusted to account for CPI inflation between 2017 and 2026. Can anyone confirm that my assumption is correct? I have searched this site and the internet and have found lots of conflicting information in regards to this subject. Thanks.

In my 10-year plan I changed 22% to 25% in the 2026 column. That's as far as I go.

[TheWizard]

Quote:

Originally Posted by target2019 In my 10-year plan I changed 22% to 25% in the 2026 column. That's as far as I go.

Wait!
What about the Personal Exemption and unlimited SALT Deductions?

[jebmke]

Quote:

Originally Posted by TheWizard Wait! What about the Personal Exemption and unlimited SALT Deductions?

I think the SALT cap is permanent. Not sure.

[audreyh1]

Quote:

Originally Posted by jebmke I think the SALT cap is permanent. Not sure.

I don’t think so. I think it reverts just like the standard deduction, personal exemption, tax brackets and AMT. One reason they put in the SALT cap was because they raised the standard deduction so much higher.

It’s temporary also according to Forbes:

Quote:

As with many other elements of the 2017 tax law, the SALT cap is temporary: It applies only to tax returns filed for 2018 through 2025.

https://www.forbes.com/advisor/taxes...tax-deduction/

[jebmke]

Quote:

Originally Posted by audreyh1 I don’t think so. I think it reverts just like the standard deduction, personal exemption, tax brackets and AMT. One reason they put in the SALT cap was because they raised the standard deduction so much higher. It’s temporary also according to Forbes: https://www.forbes.com/advisor/taxes...tax-deduction/

Thanks; makes sense - I'll check the code too although there is ~ zero chance the expirations go through as scheduled so I'm not particularly motivated.

[TheWizard]

Quote:

Originally Posted by jebmke Thanks; makes sense - I'll check the code too although there is ~ zero chance the expirations go through as scheduled so I'm not particularly motivated.

It would take new legislation to prevent or modify the reversion already set in law, right?
That can certainly happen and will depend to a degree what happens in the election in November next year...

[target2019]

Quote:

Originally Posted by target2019 In my 10-year plan I changed 22% to 25% in the 2026 column. That's as far as I go.

Quote:

Originally Posted by TheWizard Wait! What about the Personal Exemption and unlimited SALT Deductions?

TBH, I will probably be gone by then, and don't need to project another uncertain financial variable.


If I project 25%, and get additional deduction(s) from that, it just means that my projection was too conservative, and I'll pay a lower tax bill than predicted.