WASHINGTON — The Internal Revenue Service (IRS) today announced the tax year 2026 inflation adjustments for more than 60 tax provisions, including tax rate schedules, deductions, credits, and exclusions.
These adjustments, detailed in Revenue Procedure 2025-32 PDF, reflect changes mandated under the One, Big, Beautiful Bill (OBBB) and generally apply to tax returns filed in 2027.
Standard Deduction Increases
For tax year 2026, the standard deduction continues to rise, offering relief to millions of taxpayers. Married couples filing jointly will see an increase to $32,200, while single taxpayers and married individuals filing separately will have a standard deduction of $16,100. For heads of households, the deduction rises to $24,150.
For comparison, under the OBBB for tax year 2025, the standard deduction amounts are $31,500 for joint filers, $15,750 for single and separate filers, and $23,625 for heads of household.
| Filing Status | TY 2025 Under OBBB | TY 2026 Under OBBB |
|---|---|---|
| Single / Married Filing Separately | $15,750 | $16,100 |
| Married Filing Jointly / Surviving Spouses | $31,500 | $32,200 |
| Head of Household | $23,625 | $24,150 |
2026 Marginal Tax Rates
For 2026, the top individual income tax rate remains 37% for single taxpayers earning over $640,600 and $768,700 for married couples filing jointly.
Other brackets are as follows:
- 35% for incomes above $256,225 ($512,450 for joint filers)
- 32% for incomes above $201,775 ($403,550 for joint filers)
- 24% for incomes above $105,700 ($211,400 for joint filers)
- 22% for incomes above $50,400 ($100,800 for joint filers)
- 12% for incomes above $12,400 ($24,800 for joint filers)
The lowest rate, 10%, applies to income up to $12,400 for singles and $24,800 for joint filers.
Alternative Minimum Tax (AMT)
The AMT exemption for 2026 increases to $90,100 for unmarried individuals, phasing out at $500,000. For married couples filing jointly, the exemption is $140,200, phasing out at $1 million.
Estate and Gift Tax Adjustments
The estate tax exclusion increases to $15 million in 2026, up from $13.99 million for 2025 decedents. The annual gift tax exclusion remains $19,000. However, for gifts to a noncitizen spouse, the exclusion rises to $194,000, up from $190,000 in 2025.
Adoption Credit Expansion
The maximum adoption credit rises to $17,670 for 2026, compared with $17,280 in 2025. Of this amount, up to $5,120 may be refundable. The credit covers qualified adoption expenses, helping families offset costs associated with adopting children.
Employer-Provided Childcare Credit Boost
A key provision under the OBBB is the expanded employer-provided childcare tax credit. For 2026, the maximum allowable credit increases significantly—from $150,000 to $500,000. For eligible small businesses, that limit rises to $600,000, further incentivizing employer investment in family-supportive benefits.
Earned Income Tax Credit (EITC)
For 2026, the maximum EITC increases to $8,231 for taxpayers with three or more qualifying children, up from $8,046 in 2025. Revenue Procedure 2025-32 provides detailed income thresholds and phase-out ranges for all EITC categories.
Transportation and Health Benefits
Several workplace benefit limits also rise with inflation:
- Qualified Transportation Fringe Benefit: $340 per month (up $15 from 2025).
- Qualified Parking Benefit: Also $340 per month.
- Health Flexible Spending Account (FSA): $3,400 annual contribution limit (up $100).
- FSA Carryover: Maximum of $680 (up $20).
These adjustments help employees manage healthcare and commuting expenses through pre-tax savings.
Medical Savings Account (MSA) Changes
For 2026, self-only MSA coverage must have a deductible between $2,900 and $4,400, with an out-of-pocket maximum of $5,850.
For family coverage, the deductible range increases to $5,850–$8,750, with an out-of-pocket cap of $10,700. These increases maintain the program’s balance between savings incentives and healthcare affordability.
Foreign Earned Income Exclusion
The foreign earned income exclusion for 2026 rises to $132,900, up from $130,000 in 2025, providing continued relief for Americans working abroad.
Items Unaffected by Indexing
Certain tax items remain unchanged by inflation adjustments:
- Personal Exemptions: Remain at $0, a change originally enacted by the 2017 Tax Cuts and Jobs Act and made permanent under the OBBB.
- Itemized Deductions: The prior limitation remains repealed, but taxpayers in the highest bracket (37%) are still subject to limits on total deduction benefits.
- Lifetime Learning Credit: The phase-out range remains fixed for incomes between $80,000–$90,000 for individuals and $160,000–$180,000 for joint filers.
Supporting Fair and Predictable Taxation
These inflation adjustments ensure that tax provisions remain consistent with the rising cost of living while providing stability for both individuals and businesses.
The IRS encourages taxpayers to review Revenue Procedure 2025-32 for full details, as these updates will affect tax planning and withholding for the 2026 tax year.
FAQs
What are the standard deduction amounts for tax year 2026?
For 2026, the standard deduction increases to $32,200 for married couples filing jointly, $16,100 for single taxpayers and married individuals filing separately, and $24,150 for heads of households.
What are the 2026 federal income tax brackets?
The top tax rate remains 37% for single filers earning over $640,600 ($768,700 for joint filers). Other rates are 35%, 32%, 24%, 22%, 12%, and 10%, depending on income thresholds.
How much is the Alternative Minimum Tax exemption for 2026?
The 2026 AMT exemption is $90,100 for unmarried individuals and $140,200 for married couples filing jointly. The phase-out begins at $500,000 and $1 million respectively.
What is the estate and gift tax exclusion for 2026?
The basic exclusion for estates increases to $15 million in 2026. The annual gift tax exclusion remains $19,000, while gifts to a non-citizen spouse rise to $194,000.
What are the new credit amounts for 2026?
The maximum adoption credit increases to $17,670, with up to $5,120 refundable. The maximum Earned Income Tax Credit (EITC) for families with three or more children rises to $8,231.
What are the new limits for FSAs, transportation, and childcare benefits?
For 2026, the health FSA limit is $3,400 with a $680 carryover. The monthly transportation and parking benefit limits are $340. The employer-provided childcare credit rises sharply to $500,000 ($600,000 for eligible small businesses).
Has the foreign earned income exclusion changed for 2026?
Yes. The foreign earned income exclusion increases to $132,900 for tax year 2026, up from $130,000 for 2025.
Which tax items remain unchanged by inflation indexing?
The personal exemption remains $0, and itemized deduction limits continue to be repealed under the OBBB. The Lifetime Learning Credit phase-out range also stays fixed between $80,000–$90,000 ($160,000–$180,000 for joint filers).
