The IRS has released its annual inflation adjustments for tax year 2026, covering more than 60 tax provisions—including updates to the standard deduction, tax brackets, and key credits and exclusions. These changes, part of the One Big Beautiful Bill (OBBB), take effect for tax returns filed in 2027.
Here’s a summary of the most important updates for individuals, families, and small businesses.
Standard Deduction
For tax year 2026, the standard deduction rises again—meaning more income will be shielded from taxation before itemizing.
| Filing Status | 2025 Deduction | 2026 Deduction |
|---|---|---|
| Married Filing Jointly / Surviving Spouse | $31,500 | $32,200 |
| Single / Married Filing Separately | $15,750 | $16,100 |
| Head of Household | $23,625 | $24,150 |
Federal Income Tax Brackets for 2026
The top federal tax rate remains 37% for single filers earning more than $640,600 and for joint filers earning more than $768,700.
- 35% for incomes over $256,225 ($512,450 for married filing jointly)
- 32% for incomes over $201,775 ($403,550 for married filing jointly)
- 24% for incomes over $105,700 ($211,400 for married filing jointly)
- 22% for incomes over $50,400 ($100,800 for married filing jointly)
- 12% for incomes over $12,400 ($24,800 for married filing jointly)
- 10% for incomes at or below $12,400 ($24,800 for married filing jointly)
Other Key Tax Updates for 2026
- Alternative Minimum Tax (AMT): Exemption rises to $90,100 for single filers and $140,200 for joint filers.
- Estate Tax Exclusion: Increases to $15,000,000 (from $13,990,000 in 2025).
- Adoption Credit: Maximum credit increases to $17,670, with up to $5,120 refundable.
- Employer-Provided Childcare Credit: Enhanced to $500,000 for large employers and $600,000 for small businesses.
- Earned Income Tax Credit (EITC): Maximum benefit rises to $8,231 for families with three or more children.
- Transportation and Parking Benefits: Monthly limit increases to $340.
- Health FSAs: Contribution limit increases to $3,400, with a $680 carryover limit.
- Medical Savings Accounts (MSAs): Deductible and out-of-pocket limits increase slightly.
- Foreign Earned Income Exclusion: Increases to $132,900.
- Annual Gift Exclusion: Remains at $19,000 per recipient; $194,000 for gifts to non-citizen spouses.
Items Unaffected by Inflation Indexing
- Personal Exemptions: Continue to be set at zero under the OBBB.
- Itemized Deductions: Limitation remains eliminated, but high earners face a cap on total benefits.
- Lifetime Learning Credit: Phase-out range unchanged at $80,000–$90,000 (single) and $160,000–$180,000 (joint).
What This Means for You
These updates will impact your 2026 tax planning and 2027 filing. Adjustments to deductions, credits, and bracket thresholds can affect your tax liability, withholdings, and retirement strategy. Reviewing your financial plan early helps you take advantage of these changes.
At Grants Pass Tax Service, we help individuals and small businesses understand how new IRS rules affect them. Contact us today to prepare for the 2026 tax year with confidence.
