New Congressional Control Sets Stage for Federal Tax Battles

Democratic control of both the House and Senate following the November 2026 elections will reshape federal tax policy debates beginning in January 2027. The party will set legislative agendas, including proposals to modify individual tax rates, business taxation, energy incentives, and the estate tax. However, President Trump retains the power to veto legislation that reverses his administration's tax policy, and overriding such a veto requires a two-thirds vote in both chambers.

The central question for farmers, ranchers, and closely held businesses involves the One Big Beautiful Bill Act, enacted in July 2025. No Democrat voted in favor of the legislation, which made permanent the seven federal income tax brackets established in 2017. These rates are 10%, 12%, 22%, 24%, 32%, 35%, and 37%. The law also made the standard deduction permanent, set at $32,200 for married couples filing jointly and $16,100 for single taxpayers for the 2026 tax year.

Stability in these rates provides a foundation for investment and succession planning in an industry characterized by volatile commodity prices and weather conditions. While a future Congress could change these rates, the election results do not automatically restore the pre-2017 tax structure.

Certain provisions of the act are temporary and apply through December 31, 2028. These include deductions for qualified tips, qualified overtime compensation, qualifying automobile loan interest, and an additional deduction for taxpayers age 65 and older. Congress will decide whether to extend, modify, or allow these deductions to expire, making 2029 the key year for subsequent tax legislation.

The act restored 100% bonus depreciation for qualifying property placed in service after January 19, 2025. This provision is permanent under current law. It allows taxpayers to deduct the entire qualifying cost of assets such as tractors, combines, grain storage facilities, and irrigation equipment in the year they are placed in service. A separate special depreciation allowance under I.R.C. Section 168(n) applies to qualifying production property, requiring construction to begin before January 1, 2029, and the property to be in service before January 1, 2031.

The act also made the Section 199A qualified business income deduction permanent. This provision allows a deduction of up to 20% of qualified business income for pass-through entities like sole proprietorships, partnerships, LLCs, and S corporations. It includes a minimum $400 deduction for taxpayers with at least $1,000 of qualified business income. Unlike other provisions, this deduction is not scheduled to expire at the end of 2028.

Estate and gift tax relief is permanent beginning in 2026. The federal estate and gift tax basic exclusion amount increased to $15 million per person, indexed for inflation. A married couple receives a combined $30 million exclusion. This amount is not scheduled to revert to a lower level after 2028. Any proposed reduction would require new legislation and face a presidential veto through that date.

The act expanded the Child Tax Credit to $2,200 per qualifying child for 2026 and $2,300 for 2027. It also created Trump Accounts, which provide a one-time $1,000 federal contribution for children born between 2025 and 2028. These accounts allow additional contributions from parents and employers, subject to statutory limitations.