IRS Announces 2026 Tax Inflation Adjustments

The IRS has released its inflation adjustments for tax year 2026, covering more than 60 provisions. These changes reflect updates from the One, Big, Beautiful Bill (OBBB) and will apply to returns filed in 2027. Here’s what stands out:

Standard Deduction Updates

For 2026, the standard deduction rises to:

• $32,200 for married couples filing jointly
• $16,100 for single filers and married individuals filing separately
• $24,150 for heads of household

By comparison, 2025 deductions under the OBBB are $31,500, $15,750, and $23,625 for those same groups.

Marginal Tax Rates

The top rate remains 37% for single filers earning over $640,600 and married couples filing jointly earning over $768,700. Other brackets:

• 35%: for incomes over $256,225 ($512,450 for married couples filing jointly)
• 32%: Over $201,775 ($403,550 joint)
• 24%: Over $105,700 ($211,400 joint)
• 22%: Over $50,400 ($100,800 joint)
• 12%: Over $12,400 ($24,800 joint)
• 10%: At or below $12,400 ($24,800 joint)

Alternative Minimum Tax (AMT)

• $90,100 exemption for single filers, phasing out at $500,000
• $140,200 exemption for joint filers, phasing out at $1,000,000

Estate and Adoption Updates

• Estate exclusion increases to $15,000,000 for 2026
• Adoption credit rises to $17,670, with $5,120 potentially refundable

Childcare Tax Credit for Employers

• Maximum credit increases to $500,000
• Up to $600,000 for qualifying small businesses

Additional Indexed Adjustments for 2026

• Earned Income Tax Credit (3+ kids): $8,231, up from $8,046 in 2025
• Transportation/Parking Fringe Benefit: $340 per month, up $15 from 2025
• Health Flexible Spending Cafeteria Plans: $3,400 cap (up $100) with a $680 carryover, up $20 from prior year
• Medical Savings Accounts: Self-only deductible: $2,900–$4,400; Family: $5,850–$8,750.
• Foreign Earned Income Exclusion: $132,900, up from $130,000 for tax year 2025
• Annual Gift Exclusion: Remains $19,000
• Non-citizen Spouse Gift Exclusion: $194,000, up $4,000 from 2025

Items That Stay the Same

• Personal Exemptions: Remain at $0 under OBBB. The elimination of the personal exemption was a provision in the Tax Cuts and Jobs Act of 2017 and was made permanent by OBBB.
• Itemized Deduction Limits: Permanently removed by OBBB, although it imposes a limitation on the tax benefit from itemized deductions for those taxpayers in the highest tax bracket (37%).
• Lifetime Learning Credit Phaseout: The modified adjusted gross income (MAGI) amount used to phase out the Lifetime Learning Credit has not been adjusted for inflation for tax years beginning after Dec. 31, 2020. The Lifetime Learning Credit is phased out for taxpayers with MAGI between $80,000 and $90,000 ($160,000 and $180,000 for joint returns).

If you have questions on how these updates affect your 2026 planning, we’re here to help.