Tax laws will undergo significant changes starting next year. So the upcoming year provides valuable insight into current tax rates, which makes it necessary to understand upcoming changes. Here are the key tax changes you should know about.

Changes to Tax Brackets

Next year's adjustments to the tax brackets will affect your tax rate in 2026. Here’s a quick look at the new rates:

The 12% bracket will rise to 15%.
The 22% bracket will go up to 25%.
The top bracket, which currently stands at 37%, will rise to 39.6%.

As a result of these changes, if you are in one of these tax brackets, you can expect to pay a little more in taxes when the new rates are implemented.

The Estate Tax Changes

Estate taxes stand in line for a substantial transformation. Today you can exempt up to $14 million in estate taxes per individual. But in 2026, that number will drop to $7 million. The current exemption for married couples stands at $28 million, but this will drop to $14 million next year. The government will tax your estate at roughly 40% if your estate exceeds these limits. The change is very important for people with large estates.

SALT Deduction: No More Limits

The State and Local Tax (SALT) deduction experiences its biggest change yet. The State and Local Tax (SALT) deduction provides itemizers with a limit of $10,000 for state and local tax deductions. Beginning in 2026, this restriction will no longer apply, and you can claim the full amount of state and local taxes paid. Those living in states with high taxes may see their overall tax bill decrease as a result of this change.

Alternative Minimum Tax (AMT) Modifications

Changes are coming to the Alternative Minimum Tax (AMT). In previous years, many higher-income individuals could stay out of the Alternative Minimum Tax (AMT) because of high exemption levels. But from 2026 forward, these exemptions are set to fall. As a result, additional people will be subject to the AMT since this tax becomes active at a lower income level.

Qualified Business Income (QBI) Deduction

Business owners will welcome this positive development. The Qualified Business Income (QBI) deduction continues to stand as a significant tax advantage. Certain business owners can deduct 20% of their total net business income under this provision.

A pass-through entity owner, like a partnership or S corporation, can see their tax liability drop substantially through this important tax exemption.

Final Thoughts

The tax modifications in 2026 will substantially influence your financial situation. From higher tax rates to lower estate tax exemptions, it’s important to plan ahead.

To understand how these new changes will impact you, it is essential to assess your current tax situation with the help of a professional. Despite ongoing uncertainty, people who stay informed will avoid important tax surprises while optimizing their tax savings through programs like the QBI deduction and relaxed SALT deduction rules.

*The content in this blog is for general informational purposes only and does not constitute personalized financial, investment, tax, or legal advice. Falcon Wealth Planning, Inc., a fee-only, true fiduciary, registered investment advisor, provides this information to give a broad understanding of financial concepts and strategies.

What You Need to Know: 2026 Tax Changes Ahead