The Internal Revenue Service (IRS) has announced significant adjustments to tax provisions for the 2026 tax year, reflecting an average inflation increase of approximately 2.7%. These modifications come in the wake of the One Big Beautiful Bill Act (OBBBA), which, passed in July 2025, permanently reinforced many provisions of the Tax Cuts and Jobs Act (TCJA) set to expire at the end of 2025, as well as introduced new tax parameters for individuals.
The 2026 federal income tax structure will maintain seven tax rates: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. The income thresholds for these brackets have been adjusted for inflation, with the highest rate of 37% affecting single filers earning over $640,600 and married couples filing jointly earning over $768,600. Notably, the lower two brackets (10% and 12%) received a more considerable inflation adjustment of 4%, while the higher brackets saw a 2.3% increase.
Moreover, the standard deduction will see increases of $350 for single filers and $700 for joint filers, building on a previous boost of $750 for single filers and $1,500 for joint filers in 2025. For seniors aged 65 and older, additional exemptions and deductions are applicable, with a specified amount of $2,050 for single filers and $1,650 for joint filers. Taxpayers in this age group may also benefit from a new $6,000 deduction, subject to income thresholds.
The alternative minimum tax (AMT) also retains significant changes. The exemption amounts for 2026 have been established at $90,100 for singles and $140,200 for married couples jointly filing. The AMT is designed to ensure high-income taxpayers do not avoid taxation through various deductions and credits. The 28% AMT rate will apply to excess alternative minimum taxable income (AMTI) over $244,500 for all taxpayers, with exemption phaseouts beginning at $500,000 for singles and $1,000,000 for joint filers.
Adjustments to the earned income tax credit (EITC) will set the maximum credit at $664 for those without children, with further increments based on the number of children. The child tax credit (CTC) remains at a maximum of $2,200 per qualifying child and has been made subject to future inflation adjustments.
In terms of capital gains, long-term capital gains tax rates will continue to differ from those of ordinary income, with brackets established to tax realized gains on assets. Furthermore, the Qualified Business Income Deduction under Section 199A has been made permanent, with phase-in limits starting at $201,775 for individuals and $403,500 for joint filers.
Lastly, the annual exclusion for gifts remains unchanged at $19,000, while the exclusion on gifts to non-citizen spouses has increased to $194,000. The estate tax exemption has been solidified at $15 million per individual, with future adjustments for inflation.
Taxpayers are encouraged to stay informed about these developments, as they could significantly impact their financial planning and tax filing strategies for the upcoming tax year.
