Summerlin Benefits Consulting Q&AAnswer
Nov 07, 2024 - 06:54 AM
Because there are major tax law changes set to happen in 2026, this is likely to change.Currently there is a sunset provision that will cause The Tax Cuts and Jobs Act of 2017 (TCJA) to expire at midnight on January 1, 2026 unless Congress acts to extend the act.
Currently the tax rates in force today are 10%, 12%, 22%, 24%, 32%, 35%, and 37%. On January 1, 2026, the rates return to their pre-TCJA amounts of 10%, 15%, 25%, 28%, 33%, 35%, and 39.6%. The income brackets to which those rates apply will also be different and will continue to be adjusted for inflation each year going forward. Some people who have used estate and gift tax exemptions in the past can also expect those exemptions to be cut almost in half in 2026.
And, unfortunately, even without these changes, many retirees are finding their taxes increasing. Part of this is because those in retirement are likely to experience a loss in deductions due to less or no contributions to retirement accounts, no work or childcare expenses, and often no mortgage payments. Additionally, if the bulk of your retirement is in pre-tax investments (such as IRAs and 401Ks), you will be paying taxes on these withdrawals.
