Key Points
Option 1: Extend the TCJA except for the top rate, which would revert to its 2017 level. Ordinary income above $547K (single) / $615K (married filing jointly) would be taxed at 39.6% starting in 2026. This option reduces the cost of TCJA extension by $402 billion over 10 years.
Option 2: Extend the TCJA but introduce a new top rate that taxes ordinary income above $1 million at 39.6% for all filers. This option reduces the cost of TCJA extension by $222 billion over 10 years.
Option 3 (New, added May 8, 2025): Extend the TCJA but introduce a new top rate that taxes ordinary income above $2.5 million ($5 million for married filing jointly) at 39.6%. This option reduces the cost of TCJA extension by $22 billion over 10 years.
Raising Top Ordinary Rates: Options under TCJA Extension (Updated)
The Tax Cuts and Jobs Act (TCJA), in effect through the end of 2025, has a top marginal tax rate of 37% on ordinary income. If the TCJA expires, the top marginal tax rate on ordinary income will rise to 39.6%, along with other increases to marginal tax rates. Congress is interested in extending the TCJA, and in order to reduce the cost of this extension, some congressional lawmakers have expressed interest in adjusting the extension to increase the marginal rate on ordinary income. This would tax higher-income earners at a rate closer to what they will be taxed at under current law (i.e. absent an extension). This reduces the cost of TCJA extension by reducing tax cuts for the highest earners.
| Provision | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 | 2034 | 2035 | Total, 2026-2035 |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Allow top rate and bracket to revert to pre-TCJA design | 23.6 | 35 | 36.5 | 38.2 | 39.7 | 41.6 | 43.5 | 45.7 | 47.8 | 50 | 401.6 |
| Add additional top rate of 39.6% for ordinary income over $1M | 12.3 | 19.8 | 20.5 | 21.4 | 22.1 | 23.1 | 24.1 | 25.2 | 26.4 | 27.5 | 222.4 |
| Add additional top rate of 39.6% for ordinary income over $2.5M ($5M MFJ) | -0.2 | 2.3 | 2.3 | 2.3 | 2.3 | 2.4 | 2.5 | 2.6 | 2.7 | 2.9 | 22.3 |
Notes: Estimates are relative to a baseline in which all expiring provisions of the Tax Cuts and Jobs Act (TCJA) are made permanent after 2025.
Under this option, the TCJA would be extended in full except for the top marginal rate, which would remain at the current law level of 39.6%. This would apply to ordinary income above $550K/615K (Single/MFJ), less than the top ordinary income threshold of $640K/770K that would take effect with a full TCJA extension. We estimate that this option would reduce the cost of a TCJA extension by $402 billion over 10 years.
Under this option, the TCJA would be extended in full, and lawmakers would add an additional top rate of 39.6% on ordinary income above $1 million for all filers.1 This would leave the 37% rate on ordinary income above $640K/770K, meaning ordinary income taxation would not change for taxpayers who currently face the top rate but earn less than $1 million, relative to what they would face under a “clean” TCJA extension. We estimate that this option would reduce the cost of TCJA extension by $222B over 10 years.
This option would mirror option number 2, except with higher thresholds for the new higher top rate. Under this option, the TCJA would be extended in full, and lawmakers would add an additional top rate of 39.6% on ordinary income above $2.5 million, or $5 million for married taxpayers filing jointly.2 This would leave the 37% rate on ordinary income above $640K/770K, meaning ordinary income taxation would not change for taxpayers who currently face the top rate but earn less than $2.5 million ($5 million MFJ), relative to what they would face under a “clean” TCJA extension. We estimate that this option would reduce the cost of TCJA extension by $22B over 10 years.
Updated on May 8, 2025, to add option 3.
This analysis was produced by Brendan Novak. Mariko Paulson prepared the brief for the website.
-
Married taxpayers filing separately would face this rate for ordinary income greater than $500K. These thresholds are in 2025 dollars and would be adjusted annually for inflation, consistent with the other marginal rate thresholds. ↩
-
These thresholds are in 2025 dollars and would be adjusted annually for inflation, consistent with the other marginal rate thresholds. ↩
