Millions of Americans are poised to experience significant changes in their tax deductions, savings, and claims as the IRS unveils its inflation-adjusted tax thresholds for the 2026 tax year. This update impacts more than 60 tax provisions, with implications for nearly all returns that will be filed in 2027.
A notable adjustment is in the standard deduction amounts. Married couples filing jointly will see their standard deduction rise to $32,200. For single filers and married individuals filing separately, the deduction will be $16,100, while heads of household will be able to deduct $24,150. These changes come on the heels of previous adjustments under the One Big Beautiful Bill Act, which had set the standard deduction for 2025 at $31,500 for joint filers, $15,750 for single filers, and $23,625 for heads of household.
Furthermore, while the top marginal tax rate of 37 percent remains unchanged, the income thresholds have been adjusted. In 2026, this top rate will apply to single taxpayers earning over $640,600 and to married couples filing jointly earning above $768,700. The tax rates for other income brackets have also shifted, with the following structure in place: a 35 percent rate for incomes over $256,225 ($512,450 for joint filers); 32 percent for earnings surpassing $201,775 ($403,550 for married couples); 24 percent for those making over $105,700 ($211,400 for joint filers); 22 percent for incomes above $50,400 ($100,800 for married couples); and a 12 percent rate for incomes over $12,400 ($24,800 for married couples). The lowest tax rate remains at 10 percent for single individuals earning $12,400 or less, as well as for married couples within the respective income limit.
In terms of estate planning, the federal estate tax exclusion is set to reach $15 million for those passing away in 2026, an increase from the $13,990,000 threshold in the previous year. Additionally, families adopting children will benefit from a claim of up to $17,670 for qualified adoption expenses, with a portion being refundable.
For employers, impactful changes are also on the horizon. The employer-provided child care tax credit will see a significant increase, jumping from a cap of $150,000 to $500,000, and $600,000 for qualifying small businesses. This adjustment is highlighted as a prominent enhancement from the One Big Beautiful Bill Act.
Tax relief for low- and moderate-income workers will also rise, with the Earned Income Tax Credit for families with three or more qualifying children increasing to a maximum of $8,231. Transportation benefits are set to receive an uptick as well, as the monthly cap for qualified transit and parking benefits will increase to $340.
Healthcare-related tax advantages will see more modest increases; the maximum contribution to health flexible spending accounts will rise to $3,400, with the allowed carryover moving to $680. Medical savings accounts will also benefit from increased deductible and out-of-pocket limits for both individual and family coverage. The foreign earned income exclusion for Americans working overseas will increase to $132,900, while the annual gift tax exclusion remains at $19,000, with a raised limit for gifts to noncitizen spouses, now set at $194,000.
However, not all aspects of the tax landscape are changing with inflation. Personal exemptions will remain at zero, a status solidified under the One Big Beautiful Bill Act. The suspension of itemized deduction limitations continues, although high earners in the top bracket still face a cap. Additionally, the phaseout range for the Lifetime Learning Credit remains unchanged at a modified adjusted gross income of $80,000 to $90,000 for single filers and $160,000 to $180,000 for joint filers.
