2026 Tax Hikes Loom: Understand the Sunsetting Tax Cuts and Act Now

Jersey City, New Jersey Apr 27, 2025 – Millions of American individuals and businesses face a potential financial hurdle as key tax provisions from 2017 are slated to expire on December 31, 2025, unless Congress acts. This expiration could lead to a sharp rise in tax obligations in 2026. Therefore, understanding the reasons behind this potential increase and taking immediate action is essential.

, a tax and accounting advisory firm based in Jersey City, NJ, advises taxpayers to prepare now. The firm stresses that the time for strategic planning to reduce the impact of these approaching changes is running out.

“Many are unaware that the tax rules in place since 2018 will significantly change after next year,” says Gary Mehta, CPA, EA, the firm’s founder. “Time is running out to understand these expirations and implement strategies in 2025 – such as accelerating income, managing deductions, or revising estate plans – to lessen potentially large tax increases in 2026. Waiting until the changes take effect will be too late.”

Why Your Tax Bill Could Explode: The TCJA Sunset

The potential for a tax explosion arises from the scheduled expiration (“sunset”) of significant individual and business provisions of the Tax Cuts and Jobs Act (TCJA). Here’s a breakdown of the main reasons your taxes could substantially increase starting in 2026:

• Higher Income Tax Rates: Current individual tax brackets (including the top rate of 37%) will revert to higher rates that were in place before the TCJA (including a top rate of 39.6%). Consequently, a larger portion of your income could be taxed at a higher rate.
• Standard Deduction Slashed: The current, historically high standard deduction ($15,000 for single filers / $30,000 for joint filers in 2025) will be reduced by approximately half, compelling millions more taxpayers to itemize deductions to maintain the same tax benefits.
• QBI Deduction Disappears: The valuable 20% Qualified Business Income deduction (Section 199A) – a significant tax benefit for freelancers, sole proprietors, partnerships, and S-corps – will be eliminated. This will substantially increase the effective tax rate on many small business profits.
• Estate Tax Exemption Cut: The generous lifetime gift and estate tax exemption ($13.99 million per person in 2025) will return to pre-TCJA levels, anticipated to be around $7 million (adjusted for inflation). This will significantly affect estate planning for many families.
• Other Itemized Deduction Changes: While limitations on deductions like State and Local Taxes (SALT cap) will expire, the reinstatement of other limitations (like Pease limitations) and potentially broader exposure to the Alternative Minimum Tax (AMT) might offset this for some.

Defusing the Time Bomb: Proactive Planning is Non-Negotiable

“Ignoring these impending changes is like ignoring a ticking time bomb,” Mehta adds. “The positive aspect is that strategic planning in 2025 can help navigate this ‘tax cliff’.”

Leveraging the combined knowledge of a CPA and an EA, Gary Mehta’s firm specializes in proactive strategies designed for this specific challenge, including:

• TCJA Sunset Impact Analysis: Modeling the effects of the expiring provisions on your specific tax situation.
• Income Acceleration/Deferral Strategies: Optimizing the timing of income recognition before potential rate increases.
• Deduction Planning: Strategizing whether to “bunch” itemized deductions now or prepare for itemizing in 2026.
• Roth Conversion Analysis: Evaluating conversions while tax rates are known and potentially lower.
• Business Structure Review: Assessing the optimal entity structure after the QBI deduction expires.
• Estate & Gift Planning: Taking advantage of the current high exemption amounts before they potentially decrease.

Time is critical. To understand how these approaching tax changes could affect you and explore proactive strategies before the December 31, 2025, deadline, consult with your tax professional immediately.

Don’t let your 2026 tax bill rise unexpectedly. Time is running out – seek expert advice now to understand the situation and prepare effectively.