Tag: Tax Cuts and Jobs Act (TCJA)

IRS Announces NEW 2026 Tax Brackets

2026 Tax Brackets

On a yearly basis, the Internal Revenue Service (IRS) adjusts more than 60 tax provisions for inflation to prevent what is called “bracket creep.” Bracket creep occurs when inflation, rather than real increases in income, pushes people into higher income tax brackets or reduces the value they receive from credits and deductions.

The IRS previously used the Consumer Price Index (CPI) as a measure of inflation prior to 2018. However, with the Tax Cuts and Jobs Act of 2017 (TCJA), the IRS now uses the Chained Consumer Price Index (C-CPI) to adjust income thresholds, deduction amounts, and credit values accordingly.

The One Big Beautiful Bill Act (OBBBA), passed in July 2025, made permanent most of the TCJA individual tax provisions scheduled for expiration at the end of 2025 and made other changes to individual taxes that will impact tax parameters for the 2026 tax year.

The new inflation adjustments are for tax year 2026, for which taxpayers will file tax returns in early 2027. On average, tax parameters that are adjusted for inflation will increase by about 2.7 percent.

2026 Federal Income Tax Brackets and Rates

In 2026, the income limits for all tax brackets and all filers will be adjusted for inflation and can be found in Table 1. The federal income tax has seven tax rates in 2026: 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent, and 37 percent. The top marginal income tax rate of 37 percent will hit taxpayers with taxable income above $640,600 for single filers and above $768,600 for married couples filing jointly.

The OBBBA made permanent the TCJA ordinary income tax structure and made an additional inflation adjustment for income subject to the bottom two brackets (10 percent and 12 percent), providing a 4 percent inflation adjustment for the bottom two brackets and a 2.3 percent increase for the higher brackets.

Table 1. 2026 Federal Income Tax Brackets and Rates for Single Filers, Married Couples Filing Jointly, and Heads of Households

Tax RateFor Single FilersFor Married Individuals Filing Joint ReturnsFor Heads of Households
10%$0 to $12,400$0 to $24,800$0 to $17,700
12%$12,401 to $50,400$24,801 to $100,800$17,701 to $67,450
22%$50,401 to $105,700$100,801 to $211,400$67,451 to $105,700
24%$105,701 to $201,775$211,401 to $403,550$105,701 to $201,775
32%$201,776 to $256,225$403,551 to $512,450$201,776 to $256,200
35%$256,226 to $640,600$512,451 to $768,700$256,201 to $640,600
37%$640,601 or more$768,701 or more$640,601 or more

2026 Standard Deduction and Personal Exemption

The standard deduction will increase by $350 for single filers and by $700 for joint filers compared to the 2025 tax year (Table 2). The OBBBA boosted the standard deduction in 2025 by $750 for single filers and $1,500 for joint filers compared to prior law on top of the 2026 inflation adjustment.

Seniors over age 65 may claim an additional standard deduction of $2,050 for single filers and $1,650 for joint filers. On top of this, taxpayers aged 65 and older both itemizing and claiming the standard deduction may claim a new $6,000 deduction per qualifying taxpayer, phasing out at a six percent rate for those earning over $75,000 (single) and $150,000 (joint) as part of the separate senior deduction under the OBBBA.

The personal exemption for 2025 remains at $0 (eliminating the personal exemption was part of the TCJA, and the $0 amount was made permanent as part of the OBBBA).

Table 2. 2026 Standard Deduction

Filing StatusDeduction Amount
Single$16,100
Married Filing Jointly$32,200
Head of Household$24,150

Source: Internal Revenue Service, “Revenue Procedure 2025-32.

2026 Alternative Minimum Tax

The alternative minimum tax (AMT) was created in the 1960s to prevent high-income taxpayers from avoiding the individual income tax. This parallel income tax system requires high-income taxpayers to calculate their tax bill twice: once under the ordinary income tax system and again under the AMT. The taxpayer then needs to pay the higher of the two.

The AMT uses an alternative definition of taxable income called alternative minimum taxable income (AMTI). To prevent low- and middle-income taxpayers from being subject to the AMT, taxpayers are allowed to exempt a significant amount of their income from AMTI. However, the exemption phases out for high-income taxpayers. The AMT is levied at two rates: 26 percent and 28 percent.

The AMT exemption amount for 2026 is $90,100 for singles and $140,200 for married couples filing jointly (Table 3), a continuation of the TCJA design adjusted for inflation after the structure was made permanent in the OBBBA.

Table 3. 2026 Alternative Minimum Tax (AMT) Exemptions

Filing StatusExemption Amount
Unmarried Individuals$90,100
Married Filing Jointly$140,200

Source: Internal Revenue Service, “Revenue Procedure 2025-32.

In 2026, the 28 percent AMT rate applies to excess AMTI of $244,500 for all taxpayers ($122,250 for married couples filing separate returns).

AMT exemptions phase out at 50 cents per dollar earned once AMTI reaches $500,000 for single filers and $1,000,000 for married taxpayers filing jointly (Table 4). The OBBBA’s changes to the AMT return the phaseout thresholds to 2018 levels and accelerate the phaseout rate from 25 percent previously.

In 2025, the exemption phaseout thresholds began at $625,350 for single filers and $1,252,700 for married taxpayers filing jointly, making the 2026 changes a slight tax increase for some taxpayers.

Table 4. 2026 Alternative Minimum Tax (AMT) Exemption Phaseout Thresholds

Filing StatusThreshold
Unmarried Individuals$500,000
Married Filing Jointly$1,000,000

Source: Internal Revenue Service, “Revenue Procedure 2025-32.

2026 Earned Income Tax Credit

The maximum earned income tax credit (EITC) in 2026 for single and joint filers is $664 if the filer has no children (Table 5). The maximum credit is $4,427 for one child, $7,316 for two children, and $8,231 for three or more children.

Table 5. 2026 Earned Income Tax Credit (EITC) Parameters

Filing StatusNo ChildrenOne ChildTwo ChildrenThree or More Children
Single or Head of HouseholdIncome at Max Credit$8,680$13,020$18,290$18,290
Maximum Credit$664$4,427$7,316$8,231
Phaseout Begins$10,860$23,890$23,890$23,890
Phaseout Ends (Credit Equals Zero)$19,540$51,593$58,629$62,974
Married Filing JointlyIncome at Max Credit$8,680$13,020$18,290$18,290
Maximum Credit$664$4,427$7,316$8,231
Phaseout Begins$18,140$31,160$31,160$31,160
Phaseout Ends (Credit Equals Zero)$26,820$58,863$65,899$70,224

Source: Internal Revenue Service, “Revenue Procedure 2025-32.”

2026 Child Tax Credit

The maximum child tax credit (CTC) in both 2025 and 2026 is $2,200 per qualifying child and will be adjusted for inflation moving forward. The OBBBA made the underlying expanded CTC from the TCJA permanent, increased the maximum CTC up from $2,000, and introduced the inflation adjustment.

The refundable portion of the child tax credit is adjusted for inflation and will remain at $1,700 for 2026.

2026 Capital Gains Tax Rates and Brackets (Long-Term Capital Gains)

Long-term capital gains face different brackets and rates than ordinary income (Table 6).

Table 6. 2026 Capital Gains Tax Brackets

For Unmarried Individuals, Taxable Income OverFor Married Individuals Filing Joint Returns, Taxable Income OverFor Heads of Households, Taxable Income Over
0%$0$0$0
15%$49,450$98,900$66,200
20%$545,500$613,700$579,600

Source: Internal Revenue Service, “Revenue Procedure 2025-32.”

2026 Qualified Business Income Deduction (Sec. 199A)

The TCJA included a 20 percent deduction for pass-through businesses, and the OBBBA made this deduction permanent.

Limits on the deduction begin phasing in for taxpayers with income above $201,775 (or $403,500 for joint filers) in 2026 (Table 7). The OBBBA slowed the range of income the deduction limits phase in from $50,000 to $75,000 for single filers and from $100,000 to $150,000 for taxpayers married filing jointly.

Table 7. 2026 Qualified Business Income Deduction Thresholds

Filing StatusThreshold AmountIncome Where Deduction Limits Completely Phase in
Unmarried Individuals$201,775$276,775
Married Filing Jointly$403,500$553,500

Source: Internal Revenue Service, “Revenue Procedure 2025-32.”

2026 Annual Exclusion for Gifts

In 2026, the first $19,000 of gifts to any person is excluded from tax, remaining the same as in 2025. The exclusion is increased to $194,000 from $190,000 for gifts to spouses who are not citizens of the United States.

The OBBBA made the TCJA-era estate tax exemption permanent and raised it to $15 million per person beginning in 2026, adjusted for inflation moving forward.

Note: the Tax Foundation is a 501(c)(3) educational nonprofit and cannot answer specific questions about your tax situation or assist in the tax filing process.

US Tax Changes in 2025: Key Provisions to Watch

US Tax Changes in 2025: What You Need to Know

The year 2025 is poised to bring significant changes to the US tax landscape, with several key provisions of the 2017 Tax Cuts and Jobs Act (TCJA) set to expire. These expirations, coupled with annual inflation adjustments already released by the Internal Revenue Service (IRS), will impact individuals, families, and businesses. Here’s a breakdown of the changes to be aware of:

Expiration of Key TCJA Provisions

The most significant aspect of the 2025 tax year is the sunset of several individual income tax provisions from the TCJA. Unless Congress takes action, these changes will revert to pre-2018 levels, potentially leading to:

  • Higher Individual Income Tax Rates: The current seven federal income tax rates (10%, 12%, 22%, 24%, 32%, 35%, and 37%) are scheduled to revert to the pre-TCJA rates, which were generally higher.
  • Lower Standard Deduction: The TCJA significantly increased the standard deduction. In 2025, the standard deduction has already increased due to inflation to $15,000 for single filers and $30,000 for married couples filing jointly. However, without congressional action, these amounts will likely decrease substantially in 2026.
  • Return of Personal Exemptions: The TCJA eliminated personal exemptions. These are expected to return in 2026 if no new legislation is enacted.
  • Changes to Itemized Deductions: Limitations on certain itemized deductions introduced by the TCJA, such as the state and local tax (SALT) deduction cap, might expire or change.
  • Expiration of the Qualified Business Income (QBI) Deduction: The 20% deduction for certain QBI is also set to expire, impacting many small business owners and self-employed individuals.

Inflation Adjustments for 2025 (Already in Effect)

While the major TCJA changes are on the horizon, the IRS has already announced annual inflation adjustments for the 2025 tax year. These adjustments include:

  • Income Tax Brackets: The income thresholds for each of the seven tax brackets have shifted slightly higher for 2025. For example, the threshold for the 32% tax rate for single filers increases to $197,300, and for married couples filing jointly, it rises to $394,600.
  • Standard Deduction: As mentioned earlier, the standard deduction has increased to $15,000 for single filers, $22,500 for heads of households, and $30,000 for married couples filing jointly.
  • Alternative Minimum Tax (AMT) Exemption: The AMT exemption amount has increased to $88,100 for single filers and $137,300 for married couples filing jointly. The phase-out thresholds have also increased.
  • Earned Income Tax Credit (EITC): The maximum EITC amount has increased for various categories of taxpayers. For those with three or more qualifying children, the maximum credit is $8,046.
  • Qualified Transportation Fringe Benefit: The monthly limitation for qualified transportation fringe benefits and qualified parking has increased to $325.
  • Health Flexible Spending Arrangements (FSAs): The limit for employee salary reductions for contributions to health FSAs has increased to $3,300, with a maximum carryover of $660.
  • Health Savings Accounts (HSAs): The minimum annual deductible and maximum out-of-pocket expenses for HSA plans have increased.
  • Foreign Earned Income Exclusion: The exclusion has increased to $130,000 for 2025.
  • Estate Tax Exemption: The basic exclusion amount for estates of decedents dying in 2025 has increased to $13.99 million per individual.
  • Annual Gift Tax Exclusion: The annual exclusion for gifts has increased to $19,000 per recipient.
  • Adoption Credit: The maximum credit for the adoption of a child with special needs has increased to $17,280.
  • Retirement Plan Contribution Limits:
    • The limit for traditional and Roth IRA contributions remains at $7,000 (plus an additional $1,000 for those age 50 and over).
    • The annual contribution limit for 401(k), 403(b), and most 457 plans has increased to $23,500 (plus an additional $7,500 for those age 50 and over, with a higher catch-up limit of $11,250 for those aged 60 to 63).
    • Income thresholds for Roth IRA contributions have also increased.

Potential Future Changes

Given the looming expiration of the TCJA provisions, there is considerable uncertainty about the long-term tax landscape. Potential scenarios include:

  • Congressional Action: Congress could act to extend some or all of the expiring provisions, modify them, or enact entirely new tax legislation.
  • Different Political Proposals: Various political proposals exist, such as extending the current tax rates, making them permanent, or implementing different tax structures. Some proposals also suggest changes to corporate tax rates and capital gains taxes.

Importance of Staying Informed

Tax laws are complex and subject to change. It is crucial for individuals and businesses to stay informed about these developments and how they might impact their financial planning and tax liabilities. Consulting with a tax professional can provide personalized guidance based on your specific circumstances.

As 2025 progresses, further clarity on the future of US tax law is expected. Taxpayers should remain attentive to legislative updates and IRS guidance to ensure compliance and effective tax planning.