Each fall, the IRS releases the inflation-adjusted tax figures for the upcoming year. The 2026 adjustments carry particular significance because they reflect the state of the tax code after the scheduled sunset of many Tax Cuts and Jobs Act provisions. Whether Congress extended the TCJA, allowed it to expire, or enacted something entirely different, the 2026 numbers define the playing field for tax planning in the year ahead.
Individual Income Tax Rates and Brackets
The income tax rate structure for 2026 depends entirely on the legislative outcome. If the TCJA individual provisions were extended, the seven-bracket structure with a top rate of 37% continues, with brackets adjusted for inflation. If the TCJA expired, the pre-2018 seven-bracket structure returns with a top rate of 39.6%, and the bracket thresholds revert to the pre-TCJA levels adjusted for cumulative inflation since 2017. Business owners need to understand which rate structure applies to calibrate their estimated tax payments and income timing strategies.[1]
Standard Deduction and Personal Exemptions
The TCJA nearly doubled the standard deduction while eliminating personal exemptions. If extended, the inflation-adjusted standard deduction for 2026 continues at the elevated level. If the TCJA expired, the standard deduction reverts to approximately half its current level, but personal exemptions return—each worth approximately $5,300 per person adjusted for inflation. For large families, the return of personal exemptions could partially offset the reduced standard deduction, though the overall effect is a tax increase for most filers.[2]
Estate and Gift Tax Exemption
The estate and gift tax exemption is perhaps the most consequential number for high-net-worth individuals. Under the TCJA, the exemption was roughly doubled—reaching $13.99 million per person in 2025. If the TCJA expired, the 2026 exemption reverts to approximately $7 million per person (the pre-TCJA level adjusted for inflation). This reduction would expose many more estates to the federal estate tax and dramatically alter estate planning strategies.[3]
The IRS confirmed in proposed regulations that individuals who used the enhanced exemption before the sunset would not face a "clawback"—meaning gifts made using the higher exemption amount during the TCJA period would not be retroactively taxed after the exemption decreases. This provides some planning certainty, but the window for using the higher exemption has now closed if the TCJA was not extended.
Section 199A Qualified Business Income Deduction
The Section 199A deduction—which allows eligible pass-through business owners to deduct up to 20% of their qualified business income—was a TCJA provision scheduled to expire after 2025. If not extended, the deduction disappears entirely in 2026, effectively increasing the tax rate on pass-through business income by up to 7.4 percentage points for taxpayers in the top bracket. This has significant implications for entity selection and business structure planning.[4]
Other Key Numbers
Additional 2026 figures that business owners should track include retirement plan contribution limits (which continue to be adjusted for inflation regardless of the TCJA status), the Social Security wage base, the alternative minimum tax exemption amounts, and the annual gift tax exclusion amount. These figures are released in Revenue Procedures and IRS Notices throughout the fall and are essential inputs for year-end and new-year tax planning with a qualified tax advisor.[5]