IRS announces inflation adjustments and tax brackets for 2026

The Internal Revenue Service has unveiled annual inflation adjustments for tax year 2026 for more than 60 tax provisions, including tax rate schedules and other tax changes, with Rev. Proc. 2025-32 providing all the details.

These adjustments generally apply to tax returns filed in 2027. 

For Tax Year 2026, the standard deduction increases to $32,200 for married filing jointly. For single taxpayers and married filing singly, the standard deduction rises to $16,100 and for heads of household it will be $24,150.

Additionally, for tax year 2025, the One Big Beautiful Bill Act raises the standard deduction to $31,500 for married couples filing jointly. For single taxpayers and married individuals filing separately, the standard deduction for 2025 is $15,750; for heads of households, the standard deduction is $23,625.

For TY26, the top marginal rate remains 37% for individual single taxpayers with incomes greater than $640,600 ($768,700 for married couples filing jointly). The other rates are:

• 35% for incomes exceeding $256,225 ($512,450 for MFJ);
• 32% for incomes exceeding $201,775 ($403,550 for MFJ);
• 24% for incomes exceeding $105,700 ($211,400 for MFJ);
• 22% for incomes exceeding $50,400 ($100,800 for MFJ); and,
• 12% for incomes exceeding $12,400 ($24,800 for MFJ).

The lowest rate is 10% for incomes of single individuals with incomes of $12,400 or less ($24,800 for MFJ).
Also for TY26:

• The AMT exemption amount for unmarried individuals is $90,100 and begins to phase out at $500,000 ($140,200 for married MFJ, for whom the exemption begins to phase out at $1,000,000).
• Estates of people who die during 2026 have a basic exclusion amount of $15 million, up from a total of $13,990,000 for estates of those who died in 2025.
• The maximum credit allowed for adoptions is the amount of qualified adoption expenses up to $17,670, up from $17,280 for 2025. The amount of credit that may be refundable is $5,120.
• For tax year 2026, the OBBBA significantly increases the maximum amount of employer-provided child care tax credit from $150,000 to $500,000 ($600,000 if the employer is an eligible small business).
• The tax year 2026 maximum Earned Income Tax Credit is $8,231 for qualifying taxpayers who have three or more qualifying children, up from $8,046 for TY25. (Rev. Proc. 2025-32 contains a table providing maximum EITC amounts for other categories, income thresholds and phase-outs.)
• The monthly limitation for the qualified transportation fringe benefit and the monthly limitation for qualified parking increases to $340, up $15 from 2025.
• For tax years beginning in 2026, the dollar limitation for voluntary employee salary reductions for contributions to health flexible spending arrangements increases to $3,400, up $100 from prior year. For cafeteria plans that permit the carryover of unused amounts, the maximum carryover amount is $680, an increase of $20 from tax years beginning in 2025.
• For participants who have self-only coverage in a medical savings account, the plan must have an annual deductible of not less than $2,900, up $50 from tax year 2025 — but not more than $4,400, an increase of $100 from tax year 2025. For self-only coverage, the maximum out-of-pocket expense amount is $5,850, up $150 from 2025. For family coverage, the annual deductible is not less than $5,850, up from $5,700 for 2025; the deductible cannot be more than $8,750, up $200 from the limit for TY25. For family coverage, the out-of-pocket expense limit is $10,700, an increase of $200 from tax year 2025.
• The foreign earned income exclusion is $132,900, up from $130,000 for tax year 2025.
• The annual exclusion for gifts remains at $19,000. But the annual exclusion for gifts to a spouse who is not a U.S. citizen increases to $194,000 for calendar year 2026, up $4,000 from calendar year 2025.)

Items that are unaffected by indexing include:

• Personal exemptions. These remain at 0. (Elimination of the personal exemption was a provision in the Tax Cuts and Jobs Act of 2017 and was made permanent by OBBBA.)
• Itemized deductions. The limitation on itemized deductions was previously eliminated for tax years 2018 to 2025. Elimination of the limitation was made permanent by the OBBBA, although it imposes a limitation on the tax benefit from itemized deductions for those taxpayers in the highest tax bracket (37%).
• Lifetime Learning Credits. The modified adjusted gross income amount used to phase out the Lifetime Learning Credit has not been adjusted for inflation for tax years beginning after Dec. 31, 2020. The credit is phased out for taxpayers with MAGI of $80,000 to $90,000 ($160,000 and $180,000 for MFJ returns).