What to Expect with the 2026 Sunset Tax Law

Planning for taxes can feel overwhelming, especially when the rules and regulations are constantly evolving. The approaching changes in the tax code, slated to take effect by the end of 2025, are causing understandable concern among individuals and businesses. A recent New York Times article sheds light on these upcoming adjustments and the potential impact on taxpayers as key provisions of the 2017 federal tax law are set to expire.

As we approach December 31, 2025, critical components of the tax code, including tax rates, standard deductions, treatment of business income, and exemption limits on inheritances and gifts, are likely to revert to their pre-2017 levels. Such changes could create significant shifts in tax liabilities for individuals, potentially resulting in trillions of additional dollars in taxes paid by taxpayers and corresponding revenue for the federal government.

The complexity of the situation arises from the uncertainty surrounding Congress’s response to these changes post-2025. If left unaddressed, the tax code in 2026 would essentially revert to its pre-2017 state, potentially resulting in trillions of dollars in additional costs for taxpayers. Striking the right balance between maintaining the current tax code, which could be financially burdensome, and allowing the scheduled changes to occur in 2026 poses a considerable challenge.

Key aspects of the tax law expected to change in 2026

Let’s take a closer look at key aspects of the tax law expected to change in 2026, as highlighted in the Congressional Research Service report:

1. Marginal tax rates: The highest tax rate is expected to increase to 39.6% from the current 37%, potentially impacting millions of taxpayers.

2. Standard deduction: The standard deduction is likely to decrease from the levels established by the 2017 law, affecting the amount of income that is exempt from taxation.

3. Child tax credit: It’s possible that the credit amount for eligible taxpayers may face a decrease in 2026.

4. Business pass-through deduction: Self-employed individuals might lose the advantage of deducting a portion of their business income, potentially impacting their tax planning strategies.

5. Alternative minimum tax and estate and gift taxes: Exemptions and thresholds for these taxes could see significant changes, particularly affecting high-income households.

The importance of proactive tax planning

The uncertainty surrounding the tax code post-2025 underscores the importance of proactive tax planning. As trusted financial advisors, our team at Keel Financial understands the challenges these changes present and is here to guide you through the shifting tax landscape effectively.

To best navigate these upcoming changes, it is vital for both financial advisors and taxpayers to consider potential strategies to optimize their tax positions. By staying informed, seeking professional advice when necessary, and proactively planning ahead, you can adapt to the evolving tax environment and make informed decisions that benefit your financial situation.

Support for tax law changes

We understand the challenges these changes present, and we are here to support you through the upcoming tax law changes. Our team of financial advisors can provide personalized guidance and clarity, helping you make informed decisions that seek to benefit your financial situation. At Keel Financial, we understand that taxes can be complex, but our commitment is to help navigate the process for you. Whether you’re an individual or a business owner, we’re here to help you make the most of your tax planning opportunities and ensure your financial future remains secure. Reach out to Keel today.