The Internal Revenue Service (IRS) has announced significant updates to various line items on federal tax returns for the current and upcoming tax years, driven by inflation adjustments and new provisions from tax legislation enacted in July.
These changes primarily impact taxpayers based on the deductions they claim and their taxable income. Experts suggest that many will experience “modest relief” as deductions and thresholds rise, thereby mitigating the effects of inflation on overall tax burdens. Tom O’Saben, director of tax content at the National Association of Tax Professionals, noted that the upward adjustments will result in more income being pushed into the ‘zero bracket,’ meaning it will remain untaxed due to increased deductions.
One of the most notable updates is the higher standard deduction. Most taxpayers opt for this standard deduction because it exceeds the value of itemized deductions. For tax year 2025, due next April, the standard deduction for single filers has been raised to $15,750 from the planned $15,000. This adjustment also benefits married couples filing jointly, whose standard deduction will now be $31,500, an increase from the previous $30,000. Meanwhile, heads of households will see their standard deduction rise to $23,625, up from $22,500.
Looking ahead to 2026, the IRS will further adjust the standard deduction for inflation, a routine annual procedure. The updated figures will establish the standard deduction at $16,100 for single filers, $32,200 for joint filers, and $24,150 for heads of households.
In addition to the changes to standard deductions, the IRS has also modified the income ranges applicable to the seven federal income tax rates for 2026. It is crucial to understand that when income crosses into a higher tax bracket, the elevated rates only apply to the income exceeding the threshold for that bracket. The adjustments reveal varying increases in the income ranges, with some rising nearly 3.9% and others approximately 2.3%. O’Saben clarifies that these uneven increases are typical outcomes of the IRS’s inflation adjustment methodology and are not indicative of any policy biases.
The updated income tax rates for 2026 will be as follows:
- 10%: On the first $12,400 of taxable income ($24,800 for joint filers).
- 12%: On income over $12,400 ($24,800 for joint filers).
- 22%: On income over $50,400 ($100,800 for joint filers).
- 24%: On income over $105,700 ($211,400 for joint filers).
- 32%: On income over $201,775 ($403,550 for joint filers).
- 35%: On income over $256,225 ($512,450 for joint filers).
- 37%: On income greater than $640,600 ($768,700 for joint filers).
For low-income households, the Earned Income Tax Credit (EITC) remains a vital resource. This dollar-for-dollar tax credit can significantly reduce the amount owed, and since it is refundable, it can also enhance tax refunds for those with little or no tax liability. The IRS has announced an increase in the EITC value for the coming year; eligible tax filers with three or more children can now claim a maximum of $8,231, an increase from $8,046 in the previous year.
For additional information on these and other adjustments, taxpayers are encouraged to check the IRS website or consult tax professionals.
