Tax Tips and Updates: Preparing for 2026 and the TCJA Sunset

As we approach the 2026 tax season, taxpayers are facing a unique landscape. Not only do we have new inflation-adjusted limits for the 2025 tax year (filed in 2026), but we are also staring down the barrel of a major tax law expiration: the “sunset” of the Tax Cuts and Jobs Act (TCJA) at the end of 2025.

Here is what you need to know to file your 2025 return and plan for the changes coming in 2026.

Key Numbers for Tax Year 2025 (Filing in 2026)

For the tax return you will file in early 2026, the IRS has released updated numbers, incorporating changes from the “One Big Beautiful Bill Act” (OBBBA):

1. Standard Deduction Increases

The OBBBA increased the standard deduction amounts for 2025:

• Single / Married Filing Separately: $15,750
• Married Filing Jointly: $31,500
• Head of Household: $23,625

2. New Senior “Bonus” Deduction

New for 2025, taxpayers aged 65 and older may be eligible for an additional $6,000 deduction (up to $12,000 for joint filers where both are 65+) if their Modified Adjusted Gross Income (MAGI) is below $75,000 (Single) or $150,000 (Joint). Notably, this can be claimed even if you itemize.

3. Retirement Contribution Limits

Now is the time to maximize your contributions before the April deadline.

• 401(k), 403(b), 457 plans: $23,500
• IRA (Traditional & Roth): $7,000
• Catch-up Contributions (Age 50+):
  • 401(k): $7,500 (Total $31,000)
  • IRA: $1,000 (Total $8,000)

4. Health Savings Account (HSA)

• Self-only coverage: $4,300
• Family coverage: $8,550
• Catch-up (Age 55+): $1,000

5. Gift Tax Exclusion

You can now gift up to $19,000 per person per year without filing a gift tax return.

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The Big Story: Planning for 2026 (The TCJA Sunset & OBBBA)

While the “One Big Beautiful Bill Act” (OBBBA) made the Standard Deduction increases permanent, other provisions of the Tax Cuts and Jobs Act (TCJA) are still scheduled to expire on December 31, 2025 unless Congress acts further.

What Could Change in 2026?

Key areas to watch include:

• Higher Tax Rates: The top marginal rate could return to 39.6% (up from 37%), and other brackets may shift.
• Charitable Deduction for Non-Itemizers: Starting in 2026, a new rule allows non-itemizers to deduct up to $1,000 (Single) or $2,000 (Joint) in charitable contributions.
• Return of the SALT Deduction: The $10,000 cap on State and Local Tax deductions would disappear if the TCJA provision expires, allowing unlimited deductions again.
• Expiration of QBI: The 20% Qualified Business Income deduction for pass-through business owners would expire.
• Child Tax Credit: Could drop from $2,000 to $1,000 per child.

Strategic Moves to Consider NOW

With the potential for higher taxes in 2026, 2025 might be a critical year for tax planning:

1. Roth Conversions: If tax rates go up in 2026, paying taxes on a Roth conversion now (at 2025 rates) might be cheaper than withdrawing money later at 2026 rates.
2. Accelerate Income: It might make sense to recognize income in 2025 while rates are historically low.
3. Maximize QBI: Business owners should ensure they are getting the full benefit of the 20% QBI deduction in 2025 before it potentially disappears.

Other Updates

Clean Vehicle Credits

For 2026, the rules for the Clean Vehicle Credit (up to $7,500) continue to tighten. Vehicles with battery components from “Foreign Entities of Concern” are ineligible. Always check the latest IRS list before purchasing.

Crypto Reporting

The IRS continues to focus on virtual currency. Ensure you have accurate records of all buy/sell transactions, as broker reporting rules are becoming more stringent.

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Additional Resources

Looking for more insights? Check out these related articles:

• Year-End Tax Saving Tips for Individuals and Families - 2025
• Tax Saving Tips for Business Owners

These resources provide actionable strategies to help you navigate the evolving tax landscape.

Disclaimer: Tax laws are subject to change. The “sunset” of the TCJA is a legislative event that may be altered by Congress. Always consult with a tax professional at Novicta Tax to discuss your specific situation.