If you’ve been planning your retirement or managing your income based on the current tax brackets, you’ve likely been keeping one eye on the calendar and one on Congress. That’s because the lower tax rates introduced under the 2017 Tax Cuts and Jobs Act (TCJA) were set to expire after 2025, which is something that has been on the front of our minds ever since it was enacted.
But with the passage of the “One Big Beautiful Bill” (OBBB), those brackets are now here to stay, at least for the foreseeable future.
Let’s break down what this change means for you and your long-term financial plan.
A Quick Refresher on the TCJA Tax Brackets
The TCJA lowered federal income tax rates and widened the income thresholds for each bracket. It also nearly doubled the standard deduction. Most families saw a reduction in their tax burden as a result. For example, the top rate dropped from 39.6% to 37%, and many middle-income households found themselves in the 12% or 22% brackets instead of higher ones.
But there was always a catch: these changes were temporary. The TCJA included a built-in expiration date at the end of 2025. That meant unless Congress acted, tax brackets would revert to their pre-2018 levels starting in 2026, raising taxes across the board.
This chart shows the magnitude of that change. The left side shows the current tax brackets as of 2025, and the right side shows what they would have reverted to (with an estimated inflation adjustment) in 2026 when the TCJA expired.
| TCJA – 2025 | TCJA sunset – 2026 | ||||
| Bracket | Income (Single) | Income (Married) | Bracket | Income (Single) | Income (Married) |
| 10% | $0 – 11,925 | $0 – $23,850 | 10% | $0–$11,600 | $0–$23,200 |
| 12% | $11,925 – $48,475 | $23,850 – $96,950 | 15% | $11,601–$47,300 | $23,201–$94,600 |
| 22% | $48,475 – $103,350 | $96,950 – $206,700 | 25% | $47,301–$114,700 | $94,601–$229,400 |
| 24% | $103,350 – $197,300 | $206,700 – $394,600 | 28% | $114,701–$218,900 | $229,401–$437,800 |
| 32% | $197,300 – $250,525 | $394,600 – $501,050 | 33% | $218,901–$494,300 | $437,801–$494,300 |
| 35% | $250,525 – $626,350 | $501,050 – $751,600 | 35% | $494,301–$547,200 | $494,301–$654,600 |
| 37% | Above $626,350 | Above $751,600 | 39.6% | Above $547,200 | Above $654,601 |
What the OBBB Just Did
The One Big Beautiful Bill, signed into law on July 4, 2025, makes those TCJA-era tax brackets permanent. In short, the tax rates we’ve grown accustomed to over the past several years are no longer on a countdown clock.
Even better, the bill included a one-time inflation adjustment to the lower two brackets—the 10% and 12% brackets—starting in 2026. This gives everyone a little more breathing room, especially retirees folks on the lower end of the income spectrum drawing from Social Security or modest retirement accounts.
Why This Matters for Your Retirement Plan
In simple terms, the tax rates that we have been expecting to go back up are staying where they are. This means taxes we have been projecting that you would pay in the future are now lower. Not lower than they currently are… but lower than we expected them to be in the future.
This also removes some of the uncertainty surrounding taxes, which helps plan more effectively. Knowing what your tax brackets will be five or ten years from now gives you more control over your financial decisions today. Here’s how this change may impact your strategy:
1. More Flexibility with Roth Conversions
If you’ve been considering converting traditional IRA dollars to a Roth, the certainty around tax brackets can help you decide when and how much to convert. The extended brackets give you more time to spread conversions out over multiple years—keeping your overall tax bill lower. You are no longer pressed up against a 2025 tax cliff.
2. Better Timing for Realizing Capital Gains
Because long-term capital gains are taxed based on your total income, the inflation bump to the 10% and 12% brackets means you may be able to harvest more gains at the 0% rate, especially if you’re early in retirement and not yet claiming Social Security.
3. Smarter Withdrawal Strategies
With the threat of bracket compression now off the table, you have more room to plan your withdrawals from taxable accounts, IRAs, and other income sources in a way that minimizes taxes over the long haul.
What’s Next?
OBBB did more than just lock in tax brackets. It also made some other important changes—like lifting the SALT deduction cap and preserving the 20% pass-through deduction for small business owners. It also added a additional standard deduction for people 65 and over. But for most retirees and near-retirees, the permanence of lower tax brackets is the biggest win.
If you were planning around a potential tax hike in 2026, you can now exhale a bit. That doesn’t mean tax planning is any less important, in fact in some ways the OBBB added some complexity, but you now have a clearer path ahead.
The Bottom Line
The extension of the TCJA tax brackets under the One Big Beautiful Bill permanently lowers federal income tax rates. For retirees, this offers a better foundation for income planning. For pre-retirees, it means the strategies you’ve been using like Roth conversions, capital gains harvesting, and bracket management, can continue without sudden changes to the rules.
If you’re not sure how this change fits into your personal retirement plan, we’d love to talk. We help East Texans build plans that reflect who they are, what they value, and where they’re going. And yes—tax planning is a big part of that.
To get help from a fee-only fiduciary and make sure that tax efficiency is a part of your retirement plan, email me at [email protected] or call 903-471-0624 and I’d be glad to help you.
