The reason why you may have to pay MORE tax in 2026

Donald Trump-era tax breaks are set to expire next year meaning millions of Americans may have to start paying more in 2026.    

Trump made sweeping changes to the tax landscape through the Tax Cuts and Jobs Act (TCJA) in 2017. 

This included lowering individual income tax rates, almost doubling the standard deduction and raising the federal estate tax exemption. It also slashed corporate income tax to 21 percent - its lowest level since 1993.

However, these cuts are due to expire on January 1, 2026 - a date dubbed 'Sunset day' by financial experts.

Howard Gleckman, senior fellow at the Urban-Brookings Tax Policy Center, told CNBC the upcoming changes are 'enormous', he said: 'Pretty much the entire individual income tax code is on the table at the end of 2025'. 

Trump made sweeping changes to the tax landscape through the Tax Cuts and Jobs Act (TCJA) in 2017. However, these cuts are due to expire on January 1, 2026 - a date dubbed 'Sunset day' by financial experts

When the TCJA expires, income tax brackets could revert to pre-2017 levels - which were almost 3 percent higher. 

The rates could jump from 10%, 12%, 22%, 24%, 32%, 35%, 37%, this year to 10%, 15%, 25%, 28%, 33%, 35% and 39.6% in 2026. 

These cuts have saved the average US household $1,600 each, according to estimates by the Tax Policy Center. 

Both Biden and Trump have suggested they would extend middle-class TCJA provisions, but it's not clear exactly what this would look like, or if they would only keep certain measures. 

Fully extending the TCJA could add an estimated $4.6 trillion to the already looming national deficit over the next ten years. 

If the TCJA is not extended, the biggest impact will be to the lower rates and wider tax brackets. 

The TCJA expiring would affect 'virtually all aspects of the tax code and affects the vast majority of American taxpayers,' Erica York, senior economist and research manager with the Tax Foundation’s Center for Federal Tax Policy, told CNBC.

Trump has not confirmed whether or not he will extend the TCJA and experts are divided over whether he will. A research note by Capital Economics said there is little 'scope' for Trump to be so generous. 

It is also possible Biden will extend many of the cuts however he has made it clear he plans to raise the corporate income tax to 28 percent. 

Trump has not confirmed whether or not he will extend the TCJA and experts are divided over whether he will

The TCJA also doubled the lifetime estate tax deduction from the 2017 value of $5.49 million for individuals up to $11.18 million - and this has continued to increase in the years since.

Under current rules, an individual can transfer $12.92 million and a married couple can transfer $25.84 million to heirs before they are slapped with federal estate taxes. 

If the TCJA is axed, the exemption could be effectively halved, leaving an individual with a taxable estate worth more than approximately $7 million subject to federal estate taxes if they do not plan ahead. 

When the TCJA expires the standard deduction could fall back to 2017 levels, nearly half what it is now. 

This may mean more people need to itemize their deductions when filing their returns in 2026 to reduce their taxable income. 

Before 2018, only 70 percent of people claimed the standard deduction. In 2020, with the higher allowance, this jumped to 90 percent, according to the Tax Policy Center.