What you need to know to plan ahead.
The IRS has released its annual inflation adjustments for more than 60 tax provisions for the 2026 tax year, many of which reflect changes introduced by the One Big Beautiful Bill Act (OBBBA). These updates will affect tax returns filed in 2027 and reach nearly every corner of the tax code—from standard deductions and income brackets to estate planning and employer credits.
Here’s a breakdown of the most important changes and what they mean for taxpayers, families, and businesses.
The standard deduction continues to rise, offering modest relief to taxpayers:
| Filing Status | 2025 Deduction | 2026 Deduction |
| Single / Married Filing Separately | $15,750 | $16,100 |
| Married Filing Jointly / Surviving Spouse | $31,500 | $32,200 |
| Head of Household | $23,625 | $24,150 |
This increase helps reduce taxable income for those who don’t itemize deductions.
The top marginal tax rate remains at 37%, but income thresholds have shifted upward:
These adjustments reflect inflation and help prevent “bracket creep,” where rising incomes push taxpayers into higher tax brackets even if their purchasing power hasn’t increased.
Long-term capital gains brackets have also been adjusted, benefiting investors and retirees. Meanwhile, the estate tax exemption climbs to $15 million, and the annual gift exclusion remains at $19,000. Gifts to non-citizen spouses can now reach $194,000.
Families adopting children can claim up to $17,670 in qualified expenses through the adoption tax credit, which includes a refundable portion of $5,120. This means eligible families may receive part of the credit as a refund even if they owe no federal income tax.
The Earned Income Tax Credit (EITC) for families with three or more children increases to $8,231. Child Tax Credit eligibility thresholds have also shifted, though phase-out details are still emerging.
The OBBB significantly expands the employer-provided childcare tax credit, raising the cap from $150,000 to $500,000—or $600,000 for qualifying small businesses. This change encourages family-friendly workplace benefits and supports working parents.
Several workplace and healthcare-related benefits are also getting a boost in 2026, helping employees manage everyday costs more effectively.
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The foreign earned income exclusion increases to $132,900, helping U.S. citizens working abroad reduce their taxable income.
Some provisions remain unchanged:
The 2026 tax updates reflect both inflationary adjustments and broader legislative priorities introduced under the OBBBA and have wide-ranging effects.
Understanding these updates early allows individuals and businesses to make informed decisions, optimize financial strategies, and potentially avoid surprises when filing in 2027. With thresholds shifting and new opportunities emerging, this may be an ideal time to revisit tax planning and ensure long-term goals remain on track.
Proactive planning today can help maintain clarity, confidence, and control tomorrow. Staying ahead of these changes is key to maximizing benefits and minimizing risk in an evolving financial landscape. Please reach out to your tax professional or advisor if you have any questions or concerns.
Sources:
https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill
https://www.cnbc.com/2025/10/09/2026-federal-tax-brackets.html
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