Last Updated: April 2026
The Tax Cuts and Jobs Act (TCJA) of 2017 lowered income tax rates across all brackets — most visibly reducing the top rate from 39.6% to 37% and restructuring the bracket thresholds. All individual income tax rate changes under TCJA expire after December 31, 2026, reverting to pre-TCJA law. For high-income taxpayers, the 2026 planning window — the last year at current rates — is one of the most significant tax planning opportunities in a decade. This guide explains what happens to each bracket, how the changes affect different income levels, and what actions to consider before the window closes.
With the December 31, 2026 deadline approaching, here are the key actions to consider in priority order:
Roth conversion: convert traditional IRA/401(k) funds to Roth, filling up the current 24% bracket (or 32%/35% if the math works). The tax-free growth benefit compounds for decades. Calculate the break-even — typically 5–10 years for moderate conversions. Harvest long-term capital gains: if you have unrealised long-term gains and are in the 0% or 15% LTCG bracket, consider realising gains before year-end 2026 — post-sunset, the threshold at which 0% applies may be similar but the 15%→20% crossover point shifts down. ISO exercise timing: if you have ISOs with large unrealised spreads, exercise in 2026 to benefit from the higher AMT exemption.
Business income acceleration: if you run a pass-through business, accelerate billing and collections to 2026 — defer deductible expenses into 2027 when deductions are worth more (higher rates). S-corp salary planning: in an S-corp, the ratio of salary to distributions affects SE tax but not income tax. In 2026 at lower rates, slightly higher salary (within reasonable bounds) may make more sense than aggressively minimising it. Estate planning: the estate tax exemption also expires in 2026 — see the separate estate tax guide. Complete large gifts before December 31, 2026.
If Congress passes TCJA extension before your planned transactions: many of the above strategies become less urgent. Monitor Congressional developments through late 2026. The most likely scenario is at least partial extension — which provisions survive will determine the optimal strategy. Keep flexibility where possible.
CountryTaxCalc.com is reader-supported. When you use our partner links, we may earn a commission at no cost to you. Learn more about our affiliate partnerships
★ 4.8 verified reviews · 3,758 reviews
The 2026 planning window — Roth conversions, income acceleration, gain harvesting — requires customised analysis of your specific income, assets, and retirement timeline. TaxHub connects you with CPAs who specialise in TCJA sunset planning.
⚠ Not for simple single-state returns. Free filing is fine for straightforward W-2 situations.
Get 2026 Tax Rate Planning Help →The top rate change directly affects income above the top bracket threshold (~$500,000+ post-sunset estimates for single filers). However, the other bracket changes affect most income levels: the 12% bracket becomes 15% (a 3-point increase on income between roughly $12,000 and $47,000); the 22% bracket becomes 25% (on income between roughly $48,000–$100,000); the 24% bracket becomes 28% (on income between roughly $100,000–$150,000). A household with $120,000 in taxable income is affected primarily by the 22%→25% and 24%→28% changes — meaningful but moderate. The largest per-dollar increase is at the top (37%→39.6%) but virtually everyone with income above $48,000 faces some rate increase.
Converting at 37% (2026) vs 39.6% (2027) saves 2.6 percentage points — $2,600 per $100,000 converted. Whether this makes sense depends on: how much time the converted funds have to grow tax-free; your expected income in retirement (if you'll be in a lower bracket, paying 37% now may be worse than paying lower rates later); your heirs' tax situation (inherited Roth IRAs are tax-free for 10 years). For very high earners with large IRAs expecting to stay in high brackets throughout retirement, the 2026 window is attractive. For those expecting significantly lower income post-retirement, the timing may be neutral or unfavourable. Model your specific numbers — a CPA or financial planner can run the break-even analysis.
The 0%, 15%, and 20% LTCG rates themselves are not part of the TCJA expiring provisions per se — they existed pre-TCJA. However, the income thresholds at which each rate applies were set by TCJA and will revert. The 20% rate threshold drops from approximately $583,750 (MFJ, 2026) to approximately $445,000 (estimated MFJ, 2027). The 3.8% NIIT (Net Investment Income Tax) on incomes above $200,000/$250,000 is not TCJA and does not change with sunset. For investors with income near the 15%→20% LTCG threshold: the lower 2027 threshold means more gains are taxed at 20% — consider harvesting gains in 2026 to lock in the current higher 15% threshold.