IRS announces inflation adjustments and changes under the One, Big, Beautiful Bill
The IRS has released the annual inflation adjustments for tax year 2026, affecting more than 60 tax provisions. These changes, which include significant updates from the One, Big, Beautiful Bill (OBBB), will impact tax returns filed in 2027. Below are the key adjustments that will affect most taxpayers, including increased standard deductions, updated tax brackets, and enhanced credits for families and employers.
Standard Deduction Increases
Tax Year 2026:
- Married Filing Jointly: $32,200
- Single / Married Filing Separately: $16,100
- Head of Household: $24,150
Tax Year 2025 (Updated):
- Married Filing Jointly: $31,500
- Single / Married Filing Separately: $15,750
- Head of Household: $23,625
Tax Brackets for 2026
| Tax Rate | Single Filers | Married Filing Jointly |
| 10% | Up to $12,400 | Up to $24,800 |
| 12% | Over $12,400 | Over $24,800 |
| 22% | Over $50,400 | Over $100,800 |
| 24% | Over $105,700 | Over $211,400 |
| 32% | Over $201,775 | Over $403,550 |
| 35% | Over $256,225 | Over $512,450 |
| 37% | Over $640,600 | Over $768,700 |
Other Notable Changes
Estate Tax
- Basic exclusion amount: $15,000,000 (up from $13,990,000 in 2025)
Adoption Credit
- Maximum credit: $17,670 (up from $17,280)
- Refundable portion: $5,120
Employer Childcare Credit
- New maximum: $500,000 (previously $150,000)
- Small business maximum: $600,000
Earned Income Tax Credit
- Maximum (3+ children): $8,231 (up from $8,046)
Alternative Minimum Tax
- Single: $90,100 exemption (phases out at $500,000)
- Married: $140,200 exemption (phases out at $1,000,000)
Foreign Earned Income Exclusion
- $132,900 (up from $130,000)
Annual Gift Exclusion
- Remains at $19,000
- Gifts to non-citizen spouse: $194,000
What Stays the Same
- Personal exemptions remain at $0
- Lifetime Learning Credit phase-out unchanged ($80,000-$90,000 for single; $160,000-$180,000 for joint)
These adjustments apply to tax returns filed in 2027. For more detailed information, refer to IRS Revenue Procedure 2025-32.
Planning Ahead
These inflation adjustments mean higher standard deductions and adjusted tax brackets that could reduce your tax liability for 2026. The enhanced employer childcare credit and increased adoption credits also provide significant new opportunities for families and businesses.
Stay tuned for our Year-End Tax Planning Update next month, where we’ll provide a comprehensive analysis of these changes along with actionable strategies to help you maximize deductions, minimize tax liability, and make informed financial decisions before year-end. We’ll explore how these updates interact with your specific situation and provide personalized planning recommendations.
If you have questions about how these updates apply to you, please don’t hesitate to reach out.
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