This year the major federal tax rules in effect reflect extensions and modifications of policies originally enacted under President Trump, along with legislation passed afterward to prevent many provisions from expiring at the end of 2025.
For individuals, lower income tax brackets that were scheduled to sunset remain. The top marginal rate is 37 percent, rather than increasing to 39.6 percent. The compressed bracket structure continues. The nearly doubled standard deduction applies, while personal exemptions continue to be eliminated. The Child Tax Credit remains higher than its pre-2018 level and is indexed for inflation, keeping the per-child benefit above $2,000. The cap on state and local tax (SALT) deduction increases to $40,000 for several years before a scheduled reversion later in the decade. The lifetime estate and gift tax exemption is increased to roughly $15 million per individual (about $30 million for married couples), indexed for inflation. In addition, temporary deductions allow eligible workers to deduct up to $25,000 in tip income and up to $12,500 in overtime pay and taxpayers may deduct up to $10,000 per year in interest on loans for certain new U.S.-assembled vehicles.
For businesses, the 21 percent corporate income tax rate remains permanent. Owners of pass-through entities—such as S corporations, partnerships, and sole proprietorships—continue to benefit from a 20 percent Qualified Business Income deduction, which was also preserved beyond its original expiration date. Businesses are again permitted to claim 100 percent bonus depreciation on qualified property placed in service after 2025, allowing immediate expensing rather than multi-year depreciation. Section 179 expensing limits remain elevated, enabling small and mid-sized businesses to deduct substantial equipment and property purchases upfront. At the same time, tighter limits apply to the deductibility of certain executive compensation at large public companies.
Overall, the 2026 tax landscape maintains lower individual and business tax rates, higher estate exemptions, and accelerated write-offs for investment, with several targeted deductions scheduled to phase out later in the decade.
Jaye Subramanian, Consult Vera
703 Hebron Ave., Suite 2A
Phone: 860-994-2791
Email: Office@consultvera.com
Online: Consultvera.com