The Internal Revenue Service (IRS) has released the annual inflation adjustments for more than 60 tax provisions for the 2026 tax year, including new tax brackets, standard deduction amounts, and updates to key credits. These changes, outlined in Revenue Procedure 2025-32, will apply to tax returns filed in 2027.
Key Changes for 2026
Standard Deduction
- Married filing jointly: $32,200 (up from $31,500 in 2025)
- Single or married filing separately: $16,100 (up from $15,750)
- Head of household: $24,150 (up from $23,625)
Marginal Tax Rates
The top individual tax rate remains 37% for incomes above $640,600 (single) or $768,700 (married filing jointly). Other brackets include:
- 35% for incomes over $256,225 ($512,450 for joint filers)
- 32% for incomes over $201,775 ($403,550 for joint filers)
- 24% for incomes over $105,700 ($211,400 for joint filers)
- 22% for incomes over $50,400 ($100,800 for joint filers)
- 12% for incomes over $12,400 ($24,800 for joint filers)
- 10% for incomes up to $12,400 ($24,800 for joint filers)
Alternative Minimum Tax (AMT)
The exemption amount increases to $90,100 for single filers and $140,200 for married couples filing jointly.
Estate and Gift Taxes
The federal estate tax exemption rises to $15 million, up from $13.99 million in 2025. The annual gift tax exclusion remains $19,000 per recipient.
Adoption Credit
The maximum credit increases to $17,670, with up to $5,120 refundable.
Employer-Provided Childcare Credit
The credit expands significantly – employers can now claim up to $500,000 (or $600,000 for eligible small businesses).
Other Notable Inflation Adjustments
- Earned Income Tax Credit (EITC): Up to $8,231 for families with three or more qualifying children.
- Qualified Transportation & Parking Benefits: Limit increases to $340 per month.
- Health FSA Contributions: Cap rises to $3,400; carryover amount increases to $680.
- Medical Savings Accounts: Deductible and out-of-pocket limits increase modestly for both self-only and family coverage.
- Foreign Earned Income Exclusion: Rises to $132,900.
These updates reflect the IRS’s annual inflation adjustments and the ongoing implementation of provisions under the One Big Beautiful Bill Act.
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