By John Q. Hosedrinker 
The IRS recently released updated federal income tax brackets and standard deductions for 2026, applicable for returns filed in 2027. The agency increased income thresholds for each bracket, along with adjustments to long-term capital gains brackets, estate and gift tax exemptions, and earned income tax credit eligibility. For the 2026 tax year, the top tax rate of 37% will apply to individuals with taxable income exceeding $640,600 and married couples filing jointly with income above $768,700.
Read the original article here
IRS announcements concerning federal income tax changes always spark interest, and the recent unveiling of the 2026 brackets and adjustments is no different. Let’s dive into the specifics and see what the IRS has in store for us come tax season.
The cornerstone of many taxpayers’ experience, the standard deduction, is seeing a bump in 2026. Married couples filing jointly will be able to deduct $32,200, a noticeable increase from the 2025 figure of $31,500. For single filers, the standard deduction will also rise to $16,100, up from $15,750. This is a welcome change, and it simplifies things for many taxpayers, making the process a bit more straightforward.
Shifting to the meat of the matter, the tax brackets themselves have been updated. The top rate, thankfully, remains at 37%. However, the income thresholds for each bracket have been adjusted. For single filers, the 10% bracket applies to income up to $12,400. The 12% bracket covers income exceeding $12,400, then 22% kicks in over $50,400, climbing to 24% beyond $105,700, 32% over $201,775, 35% over $256,225, and the top rate of 37% applies to income above $640,600. While the top rate stays the same, these adjustments can influence how much tax you actually pay. For married couples filing jointly, the income thresholds roughly double those for single filers.
Beyond the standard deduction and tax brackets, other key areas are being adjusted. The Alternative Minimum Tax (AMT) exemption is also seeing some changes, with single filers getting an exemption of $90,100 and those married filing jointly getting $140,200. The phaseouts for these exemptions begin at $500,000 for single filers and $1,000,000 for those married filing jointly. Estate tax basics exclusion amount has been bumped up to $15,000,000, from $13,990,000 in 2025.
Furthermore, other provisions are undergoing adjustments that taxpayers should be aware of. For instance, the adoption credit is rising to a maximum of $17,670. Employer-provided childcare credits see a jump to a maximum of $500,000, or $600,000 for eligible small businesses. There are changes for the Earned Income Tax Credit (EITC), with a maximum of $8,231 available for those with three or more qualifying children. Transit and parking fringe benefits see a monthly cap of $340.
Health Flexible Spending Account (FSA) parameters are also evolving. The salary reduction cap is set at $3,400, with a carryover maximum of $680. Medical Savings Account (MSA) parameters also get updates, like self-only deductible adjustments between $2,900 and $4,400, with an out-of-pocket maximum of $5,850. For families, the deductible range is $5,850 to $8,750, and the out-of-pocket maximum is $10,700. And the foreign earned income exclusion will be $132,900 in 2026. The annual gift exclusion remains at $19,000, but gifts to non-citizen spouses can reach $194,000.
It’s important to remember that while the standard deduction increase and adjustments to the tax brackets are generally positive, some may feel that these changes don’t entirely offset other economic factors, like inflation and rising costs of living. While a $350 increase might seem small, it’s still a positive step. It’s worth noting that the changes in tax brackets and deductions are often adjusted annually. Tax credits are often more advantageous to higher income taxpayers as the wealthy are able to maximize deductions.
The IRS’s announcement is a lot to digest, but hopefully, this breakdown provides a clear picture of what to expect for the 2026 tax year. It’s always wise to stay informed and consult a tax professional for personalized advice tailored to your unique financial situation.