Earlier this month, the Internal Revenue Service (IRS) announced the annual inflation adjustments for 2026, including updated tax rate schedules, cost-of-living adjustments, and other key figures.
These updates were first released in Revenue Procedure 2025-32, which formally documents the inflation-adjusted amounts for 2026 as of October 9, 2025.
Now, in a rare twist, the IRS has issued an update to that update—correcting certain figures and adding an entirely new section. The revisions reflect the agency’s continued efforts to refine calculations and ensure accuracy across its inflation-adjusted provisions.
Updates to the Low-Income Housing Tax Credit (LIHTC)
One of the most important changes is the addition of Section 2.05, which has led to a renumbering of existing paragraphs within Section 2 of the Revenue Procedure.
This new section addresses updates to the Low-Income Housing Tax Credit (LIHTC), a cornerstone program that incentivizes the development of affordable rental housing.
The newly added provision clarifies that Section 70422(a) of the One Big Beautiful Bill Act (OBBBA) amends § 42(h)(3)(I) of the Internal Revenue Code to increase the state housing credit ceiling for calendar years beginning after December 31, 2025.
Additionally, the IRS revised Section 4.08 (Low-Income Housing Credit) to reflect updated calculation amounts. The credit allocation for each state is now based on the greater of:
- $3.416 multiplied by the state’s population, or
- $3,953,600 (a flat minimum allocation).
These changes mean states will have higher credit ceilings beginning in 2026, allowing them to fund more affordable housing projects.
The LIHTC program provides a dollar-for-dollar tax credit to developers who build or rehabilitate rental housing for low-income households. Credits are typically claimed over ten years, and developers often sell these credits to investors to raise upfront financing for construction.
The expansion under OBBBA ensures a permanent increase in credit availability—now indexed annually for inflation—boosting the nation’s affordable housing capacity.
According to the Congressional Research Service, this expansion will reduce federal revenues by $39 million in 2026, with revenue losses projected to rise to $4.0 billion by 2034 as the program scales.
Updates to the 2026 Tax Brackets
The updated Revenue Procedure also corrects previously published 2026 tax bracket thresholds.
For Heads of Household, the 24% tax bracket now applies to income over $105,700 but not over $201,750.
For Married Individuals Filing Separate Returns, the IRS corrected the 24% bracket description to read:
“$17,966 plus 24% of the excess over $105,700.”
These corrections align with earlier observations from tax analysts who identified discrepancies in the initial October release. The revised figures ensure consistency across filing statuses and clarify how taxpayers will calculate their 2026 federal income tax obligations.
Updates to the 2026 Earned Income Credit (EIC)
The Earned Income Credit (EIC) also sees upward adjustments for 2026 to reflect inflation.
The maximum EIC amount for qualifying taxpayers with three or more children will rise to $8,231, up from $8,046 in 2025. The IRS also amended the phaseout threshold for married couples filing jointly with three or more qualifying children to $70,244.
As with prior years, the credit phases out gradually as income increases. These new thresholds ensure that the EIC continues to provide meaningful support to low- and moderate-income families, even as living costs rise.
Timing and Effective Dates
These adjustments apply to the 2026 tax year, meaning they affect tax returns that individuals and businesses will file in 2027. Taxpayers should use these numbers for tax planning during 2026, not for preparing 2025 returns due in April 2026.
The IRS has confirmed that these corrections will be officially published in Internal Revenue Bulletin (IRB) 2025-45 on November 3, 2025.
It’s worth noting that these changes build upon the foundation laid by the original Revenue Procedure 2025-32, which also incorporated retroactive adjustments for the start of 2025 due to provisions in the One Big Beautiful Bill Act (OBBBA).
Those earlier updates included higher standard deduction amounts, expanded state and local tax (SALT) deduction caps, and a larger child tax credit—none of which are affected by this latest revision.
Broader Context: Inflation and Legislative Changes
The 2026 inflation adjustments reflect not only cost-of-living increases but also the long-term legislative effects of the Tax Cuts and Jobs Act (TCJA) and subsequent laws like the OBBBA.
Together, these statutes continue to reshape the structure of U.S. federal taxation by adjusting key thresholds annually to align with inflation metrics.
By maintaining annual updates, the IRS aims to prevent “bracket creep”—where inflation pushes taxpayers into higher tax brackets despite no real increase in purchasing power. The latest corrections ensure fairness and consistency as inflation remains a key factor in fiscal policy planning.
The IRS’s revised Revenue Procedure 2025-32 highlights how even minor technical corrections can have significant implications for tax planning and compliance.
From expanding access to affordable housing credits to refining bracket thresholds and adjusting the Earned Income Credit, the 2026 updates reflect the agency’s ongoing effort to balance precision, fairness, and fiscal responsibility.
Tax professionals, financial institutions, and individuals alike should review the new figures carefully to ensure accurate projections and informed planning for the 2026 tax year.
For the full details, the IRS will publish the final version of the update in IRB 2025-45 on November 3, 2025, ensuring taxpayers have the official, corrected numbers well in advance of 2026.
