For high-income earners and entrepreneurs, taxes are one of the most important topics. And I get why, no one likes paying tax. This is why tax planning is so important!
To do the best planning, you need to stay in front of tax law changes…and big changes are coming in 2026 as tax provisions sunset.
In this post, we’ll explore both the good and the bad of these changes to help you prepare for the future.
This is a huge change since the vast majority of people take the standard deduction. It will go back down to $12,700 for couples. This means more taxes paid for most people if they are not able to itemize as much.
AMT stands for alternative minimum tax. It places a floor on the percentage of taxes that a filer must pay to the government, no matter what. It will now apply to way more people due to a much lower exemption and phase out amount.
For those that do not know, QBI stands for Qualified Business Income Deduction. It is a tax deduction that allows eligible self-employed and small-business owners to deduct up to 20% of their qualified business income on their taxes. This is going away and will hurt many business owners.
If you were unhappy with the change this year, you will be more happy later It will go down to $1,000 per child and start to phaseout at $75k individual or $110k married.
This is one of the biggest changes coming. The lifetime exclusion amount will go from $12.92 million to about half of that at the end of 2025. THIS IS huge for my high income earners out there. You need planning around this and you need it now. You can fill up your exemptions early if you think you will go over it.
Right now marginal rates are 10%, 12%, 22%, 24%, 32%, 35% and 37%. But they will be moving back to 10%, 15%, 25%, 28%, 33%, 35% and 39.6%. Meaning they will be somewhat higher for everyone.
Corporate taxes went down with the TCJA and luckily those are set to stay down and not sunset back in 2026. This is at least something to be happy about for corporations out there.
SALT means State and local tax deduction. Right now it is capped at $10k but that cap will go away if these changes occur. But… deductions will phaseout at higher income levels due to the Pease limitation (phaseout begins at $261,500 for individuals, $313,800 for couples).
Right now you are limited to interest on $750,000 of qualified debt, but soon that will go up to $1 million. It will also cover $100k of home equity interest. This is really important as standard deductions go down and more will use these deductions!
This could be for deduction on certain investment expenses, job search expenses, uniforms, unreimbursed work-related expenses, etc. This becomes applicable once deductions exceed > 2% of AGI.
Taxpayers will be allowed to deduct a personal exemption for themselves, their spouse, and each of their dependents from their adjusted gross income. Currently, you are unable to do that.
It’s safe to say that there seems to be more bad than good coming. Higher taxes for most people is the reality we are facing if no changes occur. Make sure you are planning and preparing as best as you can here so you can pay the least amount of taxes over your lifetime!
If you want help planning around your taxes, feel free to reach out! We are here to help.
Financial Advisor