This Election seems a Clear Choice on Tax Policy

If the Tax Cuts and Jobs Act (TCJA) sunsets as scheduled at the end of 2025, several significant income tax changes will occur starting in 2026.  VP Kamala Harris has been clear as to not wanting to extend those tax cuts and has proposed new tax increases, specifically related to capital gains.  Former President Trump put the TCJA in place and wants the tax cuts extended.

Here’s the impact of the TCJA sunsetting:

1. Tax brackets will revert to pre-TCJA levels, with the top rate increasing from 37% to 39.6%.
2. Many taxpayers will face higher marginal tax rates, with increases of 1-4% depending on the bracket.
3. The standard deduction will decrease substantially, roughly halving from current levels.
4. Personal exemptions will return, set at $2,000 per taxpayer and qualified dependent (adjusted for inflation).
5. The state and local tax (SALT) deduction cap of $10,000 will be eliminated.
6. Mortgage interest deduction limits will revert to pre-2018 levels.
7. The child tax credit will decrease from $2,000 to $1,000 per qualifying child.
8. Alternative Minimum Tax (AMT) exemption amounts and phaseout thresholds will decrease, potentially affecting more taxpayers.

As always, there is political disagreement related to tax policy.  We will be watching closely as a change or affirmation in tax policy will inform what strategies we recommend to our clients.

This content is provided for information purposes only. We do not offer tax advice, consult your tax advisor for tax advice.

Source for items C-H above:  https://taxfoundation.org/taxedu/glossary/tax-cuts-and-jobs-act/

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