TL;DR: Recent tax laws continue to reshape the financial landscape, creating both opportunities and urgency for taxpayers to plan ahead before expected changes in 2026. This blog explains how to strategically navigate today’s lower tax environment and prepare for future IRS adjustments.
Main points:
- How recent tax laws (TCJA) impact tax brackets, deductions, and exemptions
- Why understanding progressive tax brackets can help you avoid costly mistakes
- Strategies to maximize your current tax bracket through accounts like 401(k)s, IRAs, and HSAs
- Benefits of Roth conversions now to secure long-term tax-free growth
- Key updates on digital income reporting, including new IRS Form 1099-DA requirements
We are operating under one of the largest tax code overhaul tied to recent tax laws in decades. The Tax Cuts and Jobs Act (TCJA) became law on December 22, 2017. It continues to shape today’s tax environment, including lower individual tax rates, a higher change in standard deduction, and the removal of personal exemptions. However, we need updated guidance under new IRS rules is already beginning to take shape.
With policymakers signaling potential adjustments ahead, many taxpayers are asking, how does the new tax law affect me as we approach these changes? The answer depends on income, timing, and how well you prepare for the expected 2026 IRS tax bracket changes.
How can you take advantage of the current tax environment before these changes take effect? There are four steps I help clients take.
Understand How Tax Brackets Work
Tax brackets are like a liquid measuring cup. The money that flows into the measuring cup first will be taxed at a lower rate. As you fill the measuring cup by earning more money, you will pass different income thresholds, and that money will be taxed at a higher rate.
When you cross certain income thresholds, only the income that has surpassed each benchmark will be subject to that higher tax rate. The income earned prior to the benchmark will be taxed at a lower rate. This is known as progressive tax, and traditionally what makes filing taxes by yourself challenging.
Embrace Your Current Tax Bracket
Take advantage of the full bracket you are in. As you earn more money, you are more likely to enter new tax brackets. Know where you are in your tax bracket and how much your taxes will increase if you jump to the next bracket.
For example, moving from a 10% to a 12% rate doesn’t change much. But the jump from 12% to 22% is more meaningful. That’s where planning starts to matter more.
There are a few common ways people manage this:
- Contributing to tax-deferred accounts like a 401(k) or traditional IRA
- Using an HSA if they qualify
- Adjusting the timing of income or deductions
Pay Some Taxes Now
Consider making some money moves now that will benefit your financial future when taxes group in 2026. We have four years to move money over to a tax-efficient account through Roth conversions. Roth conversions transfer money from pre-tax qualified accounts like Traditional IRAs and 401(k)s into a Roth IRA.
You pay taxes on the money you transfer at the time of the conversion, but your money grows and is taken out tax-free in retirement. So, it may be advantageous to consider this strategy while we are in historically low tax brackets. Depending on your age, making this money move now will give you another 20 or 30 years of tax-free growth before you need the money in retirement.
Consider Your Timing
Instead of waiting to make changes to your tax situation, start making them now. Let's say you are converting a significant amount of money to a Roth IRA and will owe $175,000 for that conversion. You may not be able to pay the entire bill, but you could break it down into partial conversions of $75,000 this year and $100,000 next year, decreasing the amount of taxes owed at the time of the conversion. You also need to consider how close you are to retirement. Be mindful that making large tax moves this close to retirement may cause those 65and older to incur penalties. The same goes for those on Medicare.
Plan for IRS New Tax Rule Digital Income
Another area that continues to evolve under new IRS rules is the IRS new tax rule digital income. Income from digital platforms is now more visible, and reporting requirements have become more consistent.
It’s important to separate this from the IRS definition of “digital assets.” The IRS uses that term to refer specifically to items like cryptocurrency, NFTs, and stablecoins, which are treated as property for tax purposes.
Starting with transactions on or after January 1, 2025, brokers are required to report digital asset transactions on a new Form 1099-DA. This includes sales, exchanges, or using digital assets as payment for services. This change, introduced under recent legislation, is designed to improve reporting and compliance as digital activity continues to grow.
If you are buying, selling, or exchanging digital assets, you may also need to report any gains or losses on your tax return, typically on Form 8949. That’s a separate requirement from platform-based income, but just as important under current recent tax laws.
How Long Will This Last?
Will this tax law get extended? Normally, I would believe so. But the United States spent more than $5 trillion throughout the pandemic, and because of that, it is unlikely. Our economy isn’t where it needs to be yet, and we will eventually need to pay back the government. Now is the time to take advantage of this discounted window to set yourself up for financial success in the future. At Asset Tax & Retirement Preservation Services, we help our clients find the right plan for them.
Frequently Asked Questions
What are the recent changes in tax law?
Recent tax laws are still largely shaped by the Tax Cuts and Jobs Act (TCJA), which lowered tax rates, increased the standard deduction, and removed personal exemptions. However, many of these provisions are set to expire after 2025. Additionally, new IRS rules are increasing reporting requirements, especially for digital income and assets, making tax compliance more important than ever.
What is the latest income tax rule?
The latest income tax updates focus on enhanced reporting and transparency. For example, beginning in 2025, brokers must report digital asset transactions using Form 1099-DA. There is also continued emphasis on properly reporting income from online platforms, along with ongoing adjustments to tax brackets and thresholds due to inflation.
How will the Big Beautiful Bill affect my taxes?
The “Big Beautiful Bill” refers to potential future tax legislation that could extend or modify current tax cuts. If changes are not extended, tax rates may increase in 2026. This means taxpayers may face higher brackets, making proactive planning, like Roth conversions or timing income, especially important now.
How does the new $6000 tax deduction work?
The proposed $6,000 tax deduction provide additional relief to taxpayers, potentially targeting middle-income households or specific groups like seniors. While details may vary depending on final legislation, it generally works by reducing taxable income, which can lower your overall tax bill. Eligibility and phase-outs will depend on income levels and filing status.
Stewart Willis is the founder and president of Asset Preservation Wealth & Tax, a financial planning firm in Phoenix, Arizona. Investment advisory services offered through Foundations Investment Advisors, LLC, an SEC registered investment adviser.
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