Potential Tax Overhaul in 2026: What You Need to Know

Brew

| Jan 2025

WHAT’S NEXT FOR THE TCJA?

Many of the tax provisions from the Tax Cuts and Jobs Act (TCJA) of 2017 are set to expire on January 1, 2026. Absent congressional action, 62% of Americans will face higher tax bills and a more complex tax code starting in 2026. However, with a Republican President and Republicans controlling the House of Representatives and the Senate, it is reasonable to expect that certain TCJA tax provisions could be extended through a process known as “budget reconciliation.”

Earlier this month, several news outlets reported that the House Budget Committee Republicans have begun assembling policy options for a bill to be introduced later this year. While there is no certainty as to which options will make it into the final legislation, some of the policy considerations being discussed include:

Eliminating the home mortgage interest deduction
Eliminating the exclusion on municipal bond interest
Eliminating the Head of Household filing status
Eliminating the child and dependent care credit
Eliminating Health Savings Accounts (HSAs)
Eliminating the estate tax
Repealing the “Green Energy” tax credits for clean vehicles
Amending the state and local tax (SALT) deduction

These potential changes reflect the priorities of legislators who will be shaping future tax policy. While it’s too early to know which measures will ultimately be included in the final legislation, this list provides insight into the proposals being considered.

How Joint Filer Tax Brackets Will Adjust if the TCJA Expires

	Joint Filers Thresholds if TCJA Continues	Joint Filer Thresholds if TCJA Expires
First rate begins at	$0	$0
Second rate begins at	$24,500	$24,400
Third rate begins at	$99,550	$99,200
Fourth rate begins at	$212,200	$200,100
Fifth rate begins at	$405,050	$304,950
Sixth rate begins at	$514,400	$544,550
Seventh rate begins at	$771,550	$615,100

Source: Congressional Budget Office

What’s Next?
There is still a long way to go before any tax legislation is finalized. We will continue to closely monitor developments and assess their potential impact on markets and your personal financial situation. Proactive financial planning will be key to navigating these potential changes and ensuring your financial plan is positioned for success in the years ahead.

MARKET BACKDROP

ASSET CLASS SUMMARY
As of 01/30/2025

Asset Class	1 Month	3 Month	YTD	1 Year	3 Year	5 Year	10 Year
U.S. Stock	+3.29%	+5.28%	+3.68%	+24.83%	+12.34%	+14.31%	+13.27%
Global Ex U.S.	+4.35%	+0.55%	+4.33%	+12.13%	+4.49%	+5.97%	+5.77%
U.S. Bond	+0.57%	+0.03%	+0.69%	+2.69%	-1.48%	-0.54%	+1.21%
Global Bond	+0.66%	-1.12%	+0.74%	+1.06%	-3.63%	-2.01%	+0.24%
U.S. Real Estate	+3.11%	-3.96%	+2.22%	+11.78%	-0.19%	+2.90%	+5.29%

SECTOR SUMMARY
As of 01/30/2025

Cyclical	1 Month	3 Month	YTD	1 Year	3 Year	5 Year	10 Year
Consumer Cyclical	+3.29%	+18.85%	+4.31%	+38.11%	+11.84%	+15.13%	+14.45%
Financials	+7.30%	+10.46%	+7.21%	+34.19%	+12.30%	+13.41%	+13.02%
Materials	+6.78%	-4.95%	+6.37%	+9.25%	+4.56%	+10.95%	+8.75%
Real Estate¹	+2.93%	-4.53%	+2.06%	+11.97%	-0.45%	+4.40%	+6.19%

Sensitive	1 Month	3 Month	YTD	1 Year	3 Year	5 Year	10 Year
Comm. Services	+6.35%	+2.29%	+4.93%	+9.27%	+15.22%	+15.17%	+5.94%
Energy	+7.53%	+13.79%	+8.31%	+38.95%	+15.81%	+15.90%	+12.21%
Industrials	+5.66%	+3.50%	+5.78%	+23.94%	+13.77%	+12.87%	+11.78%
Technology	-3.16%	-0.10%	-2.14%	+25.88%	+18.66%	+22.38%	+22.57%

Defensive	1 Month	3 Month	YTD	1 Year	3 Year	5 Year	10 Year
Consumer Defensive	+2.94%	+2.16%	+2.78%	+15.49%	+6.31%	+8.83%	+8.85%
Health Care	+7.43%	-0.02%	+7.17%	+6.60%	+5.90%	+9.66%	+9.77%
Utilities	+3.43%	-0.09%	+3.56%	+31.46%	+8.31%	+5.89%	+8.56%

Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. Market segment (index representation) as follows: Consumer Cyclical (S&P 500 Consumer Discretionary (Sector) Total Return), Financials (S&P 500 Financials (Sector) Total Return), Materials (S&P 500 Materials (Sector) Total Return), Real Estate (S&P 500 Real Estate (Sector) Total Return¹), Comm. Services (S&P 500 Communication Services (Sector) Total Return), Energy (S&P 500 Energy (Sector) Total Return), Industrials (S&P 500 Industrials (Sector) Total Return), Technology (S&P 500 Information Technology (Sector) Total Return), Consumer Defensive (S&P 500 Consumer Staples (Sector) Total Return), Health Care (S&P 500 Health Care (Sector) Total Return), Utilities (S&P 500 Utilities (Sector) Total Return).

1) The index Launch Date is Sep 19, 2016. All information for an index prior to its Launch Date is hypothetical back-tested, not actual performance, based on the index methodology in effect on the Launch Date. Back-tested performance reflects application of an index methodology and selection of index constituents with the benefit of hindsight and knowledge of factors that may have positively affected its performance, cannot account for all financial risk that may affect results and may be considered to reflect survivor/look ahead bias. Actual returns may differ significantly from, and be lower than, back-tested returns. Past performance is not an indication or guarantee of future results. This back-tested data may have been created using a “Backward Data Assumption”. For more information on “Backward Data Assumption” and back-testing in general, please see the Performance Disclosure.

This article is for informational purposes only and is not intended as individual investment advice or as a recommendation of any particular security, strategy or investment product. Investing involves risk including the potential loss of principal. SEIA is not engaged in rendering legal, accounting, or tax services. We recommend that all investors seek out the services of competent professionals in any of the aforementioned areas. Past performance is not indicative of future results. Signature Investment Advisors, LLC (SIA) is an SEC-registered investment adviser; however, such registration does not imply a certain level of skill or training and no inference to the contrary should be made. Securities offered through Signature Estate Securities, LLC member FINRA/SIPC. Investment advisory services offered through SIA, LLC, 2121 Avenue of the Stars, Suite 1600, Los Angeles, CA 90067, (310) 712-2323. The information provided in this article is for general informational purposes only and does not constitute professional advice. Individual results may vary, and it is important to consult with a qualified professional before making any financial or legal decisions. For details on the professional designations displayed herein, including descriptions, minimum requirements, and ongoing education requirements, please visit seia.com/disclosures. SIA does not accept time-sensitive, action‐oriented messages or transaction orders, including orders to purchase or sell securities, via electronic mail.

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