IRS Announces New Tax Brackets under OBBBA
The IRS has released its official 2026 inflation adjustments, outlining new tax brackets, standard deduction increases, and several important updates that will affect both individuals and businesses.
These changes apply to tax returns filed in 2027.
Below, we break down the most important 2026 tax changes announced under the One, Big, Beautiful Bill Act (OBBBA) and what they could mean for your tax planning strategy.
2026 Standard Deduction Increases
The standard deduction for 2026 continues to rise to account for inflation:
| Filing Status | Tax Year 2025 (Under OBBB) | Tax Year 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 |
This increase provides modest relief for taxpayers across all filing statuses, helping to offset rising costs and inflation.
2026 Federal Income Tax Brackets
The top tax rate remains 37% for 2026. Here’s how the new federal income tax brackets break down:
| Tax Rate | Single Filers | Married Filing Jointly |
|---|---|---|
| 37% | Over $640,600 | Over $768,700 |
| 35% | Over $256,225 | Over $512,450 |
| 32% | Over $201,775 | Over $403,550 |
| 24% | Over $105,700 | Over $211,400 |
| 22% | Over $50,400 | Over $100,800 |
| 12% | Over $12,400 | Over $24,800 |
| 10% | Up to $12,400 | Up to $24,800 |
These updated brackets will apply to income earned in 2026 and may influence decisions around withholding, estimated payments, and year-end tax strategies.
Other Key IRS 2026 Adjustments
Alternative Minimum Tax (AMT):
- Exemption: $90,100 (single), $140,200 (joint)
- Phaseout begins at $500,000 (single) and $1,000,000 (joint)
Estate and Gift Tax Changes:
- Estate tax exemption: $15 million (up from $13.99 million in 2025)
- Annual gift exclusion: $19,000 (unchanged)
- Non-citizen spouse gift exclusion: $194,000 (up $4,000)
Adoption Credit:
- Maximum credit: $17,670 (up from $17,280)
- Refundable portion: $5,120
Employer-Provided Childcare Credit:
- Maximum credit increases from $150,000 to $500,000 ($600,000 for eligible small businesses)
Additional Inflation-Adjusted Tax Items
- Earned Income Tax Credit (EITC): Maximum credit rises to $8,231 for families with three or more children.
- Transportation & Parking Benefits: Monthly limit increases to $340.
- Health Flexible Spending Accounts (FSA): Employee contribution limit increases to $3,400, with a $680 carryover limit.
- Medical Savings Accounts (MSA):
- Self-only deductible range: $2,900–$4,400
- Family deductible range: $5,850–$8,750
- Family out-of-pocket max: $10,700
- Foreign Earned Income Exclusion: Increases to $132,900.
Items Not Affected by Inflation
A few items remain unchanged under the One, Big, Beautiful Bill:
- Personal exemptions remain at $0 (elimination made permanent).
- Itemized deduction limits remain removed but capped for top earners in the 37% bracket.
- Lifetime Learning Credit phaseouts stay at $80,000–$90,000 (single) and $160,000–$180,000 (joint).
How the 2026 IRS Inflation Adjustments May Affect You
The 2026 IRS updates reflect continued efforts to align the tax code with inflation—but they also create new opportunities for strategic tax planning. With higher standard deductions, updated tax brackets, and expanded credits, it’s a good time to review your 2026 tax strategy early.
Contact your Haefele Flanagan tax professional to:
- Evaluate how these changes impact your 2026 return
- Identify new savings opportunities
- Develop a proactive plan to minimize taxes next year
Source: IRS.gov