The Middle Class Tax Cut Act would significantly restructure federal income taxes starting in 2026 by increasing the standard deduction and replacing the current tax bracket system with a simpler, flatter rate structure. The bill raises the standard deduction from $4,400 to $75,000 for married couples filing jointly and from $3,000 to $50,000 for single filers, reducing the amount of income subject to taxation. The legislation replaces the existing seven-bracket tax system with a new four-bracket structure with rates of 25%, 30%, 40%, and 70% depending on income level, and eliminates preferential tax treatment for capital gains, meaning investment income would be taxed at the same rates as ordinary income. These changes would affect all individual taxpayers, estates, and trusts filing federal income taxes beginning with the 2026 tax year. The bill includes automatic annual adjustments to account for inflation starting in 2026.
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