Normally, election years are not very active years for tax legislation, or for other legislation for that matter. Every House member and one third of the Senate are usually focused on getting reelected, and the compromises that are often necessary to enact legislation become more difficult.
With President Trump having been able to enact a major piece of tax legislation in the first year of his second term, H.R. 1, the One Big Beautiful Bill Act, just as he did in the first year of his first term, 2017, with the Tax Cuts and Jobs Act, normally there would be much less focus on tax legislation in the current year.
However, there are signs this might not be a normal year. A largely bipartisan bill is already moving through Congress, the Taxpayer Assistance and Service bill. President Trump included a few tax proposals in his State of the Union Address, some longer-term and some that appeared focused on another current tax bill again utilizing the budget reconciliation process to get the legislation through Congress this year with only Republican support before the Republican majorities might be wholly or partially lost in the 2026 mid-term elections.
(Read more: "
While President Trump suggested a perhaps longer-term goal of substantially replacing the income tax with tariff revenue, the Supreme Court ruling on the illegality of many of those tariffs may have shifted the focus to a shorter-term goal of finding the money to refund those tariffs. It is also being suggested that there may be a need for governmental supplemental funding to replace stockpiles of military weapons being depleted in Iran.
The TAS bill
The proposed Taxpayer Assistance and Service bill includes:
- Expanding the digitization of tax returns;
- Creating a dashboard with information on call volume;
- Expanding online accounts;
- Expanding tax preparer penalties and more regulations for obtaining a preparer Taxpayer Identification Number;
- Extending the mailbox rule to electronic filings;
- Extending the tax deadline for hostages and individuals wrongfully detained abroad;
- Removing the IRS's ability to revoke an organization's tax-exempt status if it is purported to be supporting terrorists;
- Allowing the U.S. Tax Court to hear refund cases; and,
- Increasing the independence of the office of the National Taxpayer Advocate Service and the IRS Independent Office of Appeals.
At least portions of this legislation might be able to pass in 2026 without the need to use budget reconciliation.
Saver's Match
From the SECURE 2.0 Act of 2022, starting in 2027, a new Saver's Match is scheduled to replace the current Saver's Credit. Deposits into 401(k)s, 403(b)s, 457(b)s, or non-Roth IRAs would qualify for a government match of 50% for contributions up to $2,000, or a match of up to $1,000. Starting this year, under the OBBBA, Trump accounts can also qualify for a $1,000 government contribution for children born between 2025 and 2028.
In the State of the Union Address, Trump proposed government-backed retirement accounts for workers without 401(k)s, modeled on the federal Thrift Savings Plans, that would include a government match of up to $1,000 per year.
President Trump has also mentioned $1,000 payments to farmers to help offset the adverse effect of tariffs on agricultural activities. This was mentioned prior to the State of the Union and prior to the Supreme Court decision of tariffs. Therefore, this idea may have been overtaken by subsequent developments.
Additional tax cuts
President Trump in the State of the Union also suggested asking Congress to enact additional personal and corporate tax cuts beyond those in the Tax Cuts and Jobs Act and the OBBBA. He suggested the use of budget reconciliation to try to enact these tax cuts, which probably means trying to enact them in 2026 before the new Congress commences after the fall elections, in case the Republicans lose their majority in one or both of the House and Senate.
Tariffs to replace the income tax
President Trump also mentioned in the State of the Union that tariffs might substantially replace the income tax, and this was included in the address even after the Supreme Court decision on tariffs.
Even as a long-term goal, most analysts conclude that it would be difficult to ever make tariffs a substantial replacement of the income tax. In fiscal year 2025, the federal government collected around $195 billion in tariffs and related import duties, a substantial increase from prior years. However, the federal income tax for fiscal year 2025 raised over $2.6 trillion.
Analysts predict that it would be impossible to raise sufficient tariffs to significantly replace the income tax. Tariffs at those levels would be likely to produce retaliation from trading partners, raise consumer prices, depress gross national product, and reduce import volume, which would in turn reduce tariff revenue.
Supplemental spending bill
A couple of developments may pressure Congress to consider a supplemental spending bill, which might raise issues as to how to offset the cost of the additional spending. As tariff refund claims start to be submitted to the U.S. Court of International Trade and the court finds that those claims may be submitted, the federal government must come up with potentially as much as $200 billion in revenue to pay those refund claims. Also, concern is being raised that supplemental spending may be needed to replace the ordnance and drone and missile defense systems being utilized with respect to Iran.
President Trump appears to be hoping to revive his tariffs by utilizing a couple of separate laws from the one that the Supreme Court found illegal. Those other statutes, however, have greater limitations which might make it much more difficult for the president to raise as much tariff revenue as was raised in 2025.
OBBBA provisions effective in 2026
Although not requiring additional legislation, a few of the provisions of the OBBBA also come into effect in 2026. The new charitable deduction for nonitemizers and the new adjusted gross income floors on charitable deductions for itemizers and corporations are effective starting in 2026. The overall limitation on itemized deductions eliminating the benefit of the 37% tax bracket is also effective starting in 2026. Some of the phase-outs of clean-energy tax breaks from the Inflation Reduction Act also are effective starting in 2026.
The expansion of qualified K-12 expenses for 529 plans from $10,000 to $20,000 is effective starting in 2026. The estate and gift tax exclusion is set at a revised level of $15 million per person and $30 million for a married couple starting in 2026.
Summary
With the potential impact of all of these factors, there may be more new tax provisions to look at for 2026 federal income taxes than is usually the case in election years.
