U.S. Tax Policy in 2026: What Actually Changed, and What Didn't

The rates and brackets that are now permanent

For 2026, federal individual income tax rates remain at 10%, 12%, 22%, 24%, 32%, 35%, and 37%, the same seven-bracket structure first introduced by the 2017 Tax Cuts and Jobs Act (TCJA). That structure was originally scheduled to expire at the end of 2025, reverting to older, generally higher rates. Instead, the One Big Beautiful Bill Act (OBBBA), passed in July 2025, made these brackets permanent, along with several other TCJA provisions.

The standard deduction for 2026 rose to $16,100 for single filers and $32,200 for married couples filing jointly, adjusted for inflation. The top 37% rate applies only to income above $640,600 for single filers or $768,700 for married couples filing jointly, a common point of confusion, since the top rate applies only to income above that threshold, not to someone's entire income.

The corporate side tells a very different story than the individual side

While individual rates stayed within the same TCJA-era range, the corporate tax rate underwent a much larger, permanent structural change back in 2017: the federal corporate income tax dropped from a top marginal rate of 35% to a flat 21% rate for all corporations, regardless of size or profit level, and that flat 21% rate remains in place for 2026.

State-level corporate taxes add another layer on top of the federal rate and vary enormously: 44 states levy their own corporate income tax, with top rates ranging from 2% in North Carolina to 11.5% in New Jersey, and the average top state rate sitting around 6.57%. Three states, Nebraska, North Carolina, and Pennsylvania, cut their corporate rates again for 2026.

What actually changed with OBBBA beyond just making TCJA permanent

• The qualified business income (QBI) deduction for pass-through businesses (sole proprietorships, partnerships, and S-corps) increased to 23% and was made permanent
• 100% bonus depreciation, letting businesses immediately deduct the full cost of qualifying equipment purchases, was also made permanent
• A new temporary bonus deduction was added for taxpayers 65 and older, phasing out above $75,000 (single) or $150,000 (joint) modified adjusted gross income
• The alternative minimum tax (AMT) exemption for 2026 rose to $90,100 for single filers and $140,200 for married couples, continuing the higher TCJA-era exemption levels

The core disagreement, briefly

Supporters of the OBBBA's permanence generally argue that businesses and individuals need long-term tax certainty to plan investment and hiring decisions, and that letting TCJA rates expire would have amounted to a significant, sudden tax increase on most filers, not just high earners.

Critics generally argue the corporate rate cut in particular, from 35% to 21%, went further than necessary to remain internationally competitive, and that permanently locking in lower rates constrains future revenue at exactly the moment federal deficits are already historically high (see our companion piece on the national debt for the fuller fiscal picture). Both sides broadly agree the U.S. corporate rate needed to come down from its pre-2017 level to stay competitive with other wealthy nations; the disagreement is almost entirely about how far, and what should replace the lost revenue.