First Glimpse at Tax Brackets in 2026 (And How Much More You’ll Have to Pay)
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- Опубліковано 28 вер 2024
- Tax rates will revert back in 2026 to what they were in 2017. What will your tax brackets look like at that point and what planning should you be doing now to protect yourself?
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How is a $6K+ tax increase equal a "minor" tax increase? I'm all ears... That's a 17% increase.
What happens to the standard deduction? Does it revert back too? If so, that will dramatically impact taxes.
It reverts back to what it was in 2017, they will index it for 8 years of inflation and then they’ll bring back the personal exemptions. So it should end up being about the same.
Good video as always. Prior to the 2017 changes I itemized, due to high state income and property tax and I was in AMT. Now, with the higher standard deduction, SALT cap, I do not itemize and not in AMT. If no compromise is agreed upon and it just reverts back, do you know what happens to these items? I know high tax states pushed back on the SALT limit at the time.
Everything reverts back to what it was in 2017 and is indexed for inflation.
i think the medicare surcharge is increasing from 3.8%. Terrible
Great info!
Thanks!
It's not just the tax brackets will get smaller and the percentages for the brackets will go up that concerns me, it's that the standard deduction will go down. From my understanding the 2026 standard deduction will be $7000. It's now $14,600 for the 2024 tax year. That is why I'm trying to have all my IRA money converted to Roth Ira before 2026.
They’ll adjust the standard deduction for inflation over where it was in 2017 AND bring back the personal exemption. So should be pretty close to the same.
What Source are you using for this information?
Investopedia has an article that says tax brackets will be indexed for inflation and the inflation rates were simply taken from what the IRS used over the last 6 years.
I adjusted for inflation since 2017 and came to the very same conclusions as David. The BLS has the CPI numbers , the summation of the CPI for the purposes to indexing goes from September of one year to August of the next year - you have the prior years and the current years and divide them , gives you the indexing for inflation the next year. Follow the rounding instructions in the Tax Code to come up with the bracket income thresholds for each bracket - and then do this again for 2018, 2019, and so on to 2024. You could also use the "base year" concept also from when the Bush code turned to Obama and that first year of Obama becomes the "base" year - either method gives you the same answer to get the indexing number. There are about 10 tax code items that all are indexed for inflation - do that same thing for each (standard deduction, over 65 extra deductions, exemption, etc) to rebuild the Obama 2017 to the Obama 2024 (actual numbers) then use an indexing number of your choice for what you think inflation will be in 2025 and 2026 (Dave assumed 3.5 inflation) to build his 2025 and 2026 Obama numbers.
If you are charitable, reverting back to the old standard deduction makes having a Donor Advised Fund very useful for itemizing.
For tax year 2017, the top of the 35% bracket was $470,700. This video estimates that for tax year 2026, the same figure will be $620,570. That is an increase of 31.84%. Where does that inflator factor come from? How would someone seeking to replicate this work come up with that figure?
These were the inflation rates the IRS applied to tax brackets over that time period: 2.1%, 1.80%,1.80%, 0.70%,3.20%,7%, 5.40%. I used 3% and 3% for 2024 and 2025. The math checks out.
@@davidmcknight8201 Thanks for the reply. Those are the factors that have been applied from 2018-2024, but they are based (somehow) on the Chained CPI. When the 2017 tax law expires, don't we revert back to CPI-U as the inflation series?
I haven’t seen anything on that so far.
When will this tax bracket be determined?
November of 2025.
@@DavidMcKnight Nov 2025 is wishful thinking - it could take to get the deal done to Jan 1 , 2026 - RECALL THE FOLLOWING: The American Taxpayer Relief Act of 2012 was also passed by a bipartisan majority in the House of Representatives on January 1, 2013.
@@nicholasrunowich371 There may be a last-minute legislative change, but the IRS will have to update its publications in November based on whatever the law is at the time. Theoretically Congress could push a retroactive adjustment for the 2026 tax year through in January of 2027.
@@vamoscruceros Thank you for pointing this out -- yes, I want it to be known in Nov 2025...
Paycheck slaves pay the burden....rich always use some loops or capital gains rates...Richest 400 american families paid 8% tax on their income in the last decade...anybody paying 8% on income? US army is protecting wealth of americans, why not 400 wealthiest families chip in too?
Don’t these numbers tell us that the population that got the biggest benefits are those making above 300-400k?
Indeed.
Yep not the mediocre 82,000 a year like me