What’s Driving Change in Tax Policy
As the U.S. moves into the second half of the decade, several interwoven factors are setting the stage for a reimagining of tax policy. These changes aren’t happening in a vacuum they reflect broader political, economic, and societal shifts.
Post 2024 Political Realignment
The outcome of the 2024 elections is likely to shape tax policy significantly. Changes in congressional leadership or the White House could alter legislative priorities:
A shift toward more progressive tax policy if control changes parties
Renewed attention to tax equity and income distribution
Possibility of gridlock that delays or dilutes reforms
Mounting Federal Deficit
The national debt continues to rise, reaching levels that worry fiscal policy experts. With growing pressure to fund infrastructure, healthcare, and defense spending, revenue generation is back in focus:
Expect more bipartisan debate on how to close the gap between spending and revenue
Greater emphasis on sustainable tax base expansion
Potential revival of proposals that had previously stalled
Wealth and Corporate Transparency in the Spotlight
Regulators are intensifying their focus on the top 1% and major multinational corporations. Key drivers include public demand for fairness and newly empowered enforcement bodies:
Enhanced data sharing between agencies and foreign governments
Sophisticated tracking of offshore accounts and pass through entities
A shift from only taxing realized income to considering unrealized gains among high net worth individuals
In combination, these forces are accelerating momentum for policy change. Stakeholders especially affluent individuals and corporate tax planners should closely monitor legislative developments to adapt strategies in real time.
Anticipated Federal Changes Through 2030
The 2017 Tax Cuts and Jobs Act (TCJA) wasn’t built to last forever and many of its key provisions are set to expire in 2025 unless Congress acts. This includes lower individual tax rates, a higher standard deduction, and the reduced corporate tax rate. If nothing changes, tax brackets will shift back to pre 2017 levels, potentially raising liabilities for both individuals and businesses. Lawmakers are debating whether to extend, rewrite, or sunset parts of the law, with political control post 2024 elections being the deciding factor.
Meanwhile, the idea of a federal wealth tax is moving from political talking point to policy drafting table. Proposals have gained traction that would tax unrealized capital gains profits from assets that haven’t been sold yet. If implemented, it could reshape how high net worth individuals handle long term investments, real estate, and business assets. The constitutionality and logistics are still under debate, but don’t dismiss this as noise momentum is growing.
Enhanced IRS funding, ushered in through recent legislation, is also beginning to show results. The agency is hiring thousands of new enforcement agents and upgrading its tech stack. Translation: more audits, fewer loopholes, and stronger focus on income under reporting across wealth tiers. For those who’ve been operating in gray zones, the window is closing.
Lastly, inflation adjustments to income brackets and the standard deduction are back in the spotlight. These updates are meant to keep taxpayers from getting hit harder just because wages are catching up with inflation. Still, depending on how the math is worked, subtle changes here can meaningfully affect your take home and annual tax bill.
The takeaway? Whether you’re an investor, small business owner, or salaried employee these changes aren’t theoretical. They’re imminent. Stay sharp, plan early, adapt fast.
State Level Trends to Watch
As federal tax policy dominates headlines, states are quietly redefining their own tax strategies often in response to emerging industries, shifting demographics, and the lasting effects of widespread remote work. Here are key state level trends tax professionals and businesses should watch:
Digital Services Taxes Are on the Rise
Several states are moving beyond traditional sales tax models by targeting digital business models. These new tax frameworks aim to capture revenue from:
Subscription based services (e.g., software, streaming platforms)
Online advertising and data collection
Cloud based computing and storage solutions
States like Maryland and New York are leading the charge, but more are expected to follow, creating a patchwork of digital taxation rules that businesses must navigate carefully.
Remote Work Is Reshaping Tax Residency Rules
The rise of remote and hybrid work arrangements is forcing states to redefine how they determine tax residency. This has implications for both individuals and employers:
Expect more aggressive enforcement from states seeking to claim taxable income from remote out of state residents.
Double taxation risks are growing for workers who live in one state but work remotely for an employer in another.
Some states are revising residency tests based on the number of days spent in state or use of local services.
Deduction Limits Tightening in High Tax States
In response to revenue pressures, high tax states are tightening the rules around income deductions and tax benefits for individuals who claim residency elsewhere:
Increased audits aimed at verifying true out of state residency claims
Reduced deductions or credits for nonresidents with significant in state earnings
Stricter documentation requirements to prove where income was generated
These changes signal a growing need for taxpayers especially remote workers and frequent movers to maintain precise records and consult local tax professionals to stay compliant.
Staying ahead of these evolving state level policies requires not only awareness but active tax planning. As geographic flexibility increases, so too does the complexity of staying compliant across jurisdictions.
How Technology Is Reshaping Compliance
The IRS is getting smarter and faster. Artificial intelligence is now powering audits and taxpayer matching systems, allowing for tighter cross checking of information across filings, bank reports, third party disclosures, and beyond. If you thought rounding up last year’s receipts was enough, think again. AI doesn’t forget, and it doesn’t skip lunch.
One prime target: crypto. Blockchain based reporting is no longer theoretical. The IRS is fully leaning into real time access to transactional data from major exchanges. Whether you’re casually swapping tokens or running a six figure DeFi setup, visibility is approaching total. Lapses in reporting aren’t just risky they’re traceable.
On the positive side, e filing tools are evolving fast. More forms than ever are digital first or digitally required. That means faster submissions, quicker refunds, and fewer excuses to put off filing. But this convenience brings its own demand: get it right the first time. Automation and AI are raising the bar, not lowering it.
Technology is cutting the fat out of compliance but it’s also turning up the heat.
Preparing for What’s Ahead
April might be the deadline, but real tax strategy is built month by month. High earners and small business owners can’t afford to treat tax prep like a once a year scramble. The landscape ahead is shifting fast those who plan early stay ahead of enforcement, penalties, and missed opportunities.
Documentation is tightening across the board. Deductions aren’t a casual claim anymore. The IRS is increasingly asking for receipts, logs, and supporting paperwork, especially for credits tied to education, energy, and business expenses. That means clean books, tagged expenses, and less room for guesswork.
On the money side, timing will be everything. Smart filers are being tactical about when they recognize income, when they sell investments, and how they align that with expected tax changes in coming years. Think deferring income into lower tax years or harvesting losses to offset gains. These aren’t advanced tricks they’re just things you can’t leave to the last minute.
Want to see how seasoned pros tackle this level of planning? Check out CPA Tips: How Experts Approach Tax Season Preparation for practical advice straight from the field.
Bottom Line for 2026 and Beyond
Tax pros aren’t sugarcoating it 2026 is shaping up to be a moving target, and waiting to react won’t cut it. With the possible end of several 2017 tax provisions and new state level measures creeping in, strategizing early isn’t a luxury it’s survival. Those sticking to a set it and forget it mindset are asking for a surprise bill down the line.
The smartest move? Build flexibility into your financial planning. That could mean rethinking how income is structured, diversifying where assets are held, or simply running updated projections quarterly, not annually. Because when policy shifts, numbers move fast.
Staying informed is no longer optional, especially for high earners and businesses facing tighter scrutiny. Active monitoring of policy proposals, IRS enforcement updates, and state level tax code tweaks will separate the proactive from the blindsided. Keeping a pulse on change and being ready to shift when it comes is the bottom line.
