IRS releases new tax brackets, increases tax deductions
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The Internal Revenue Service on Thursday announced the annual inflation adjustments for more than 60 tax provisions — including income tax brackets, standard deductions and credits — for the 2026 tax year.
Why it matters: The changes, which apply to 2026 tax returns filed in 2027, include several tweaks from the "big beautiful bill."
- The legislation signed earlier this year made key provisions from the 2017 tax overhaul permanent and added new increases to deductions and credits.
- New tax brackets and standard deductions will slightly boost paychecks and lower income tax for many Americans.
Income tax brackets 2026
The big picture: By adjusting the brackets each year, the IRS aims to prevent "bracket creep," which happens when inflation pushes taxpayers into higher tax brackets without real income gains. (See chart above.)
- The bill's permanent extensions mean these thresholds — first introduced in the 2017 tax law — won't expire after 2025.
Tax deduction updates for 2025 tax year
State of play: Because of the big bill, the IRS announced changes to the 2025 tax year standard deductions that were originally set last October. The revised standard deductions are:
- $31,500 for married couples filing jointly (originally set at $30,000)
- $15,750 for single filers (originally set at $15,000)
- $23,625 for heads of household (originally was $22,500)
Tax deductions for 2026 tax year
The IRS said Thursday that the standard deduction under the bill rises to:
- $32,200 for married couples filing jointly
- $16,100 for single filers
- $24,150 for heads of household
Between the lines: Normally, the IRS adjusts the standard deduction each fall to keep up with inflation, but the new law boosted the deductions early — and made those higher amounts permanent going forward.
- That means the 2026 increases look modest — about 2.2% — because they're building on the increased 2025 deductions.
IRS increases estate tax credits, other credits
Zoom in: The estate tax exclusion increases to $15 million in 2026, up from $13.99 million in 2025.
- Earned Income Tax Credit (EITC) increases to $8,231 for families with three or more children, up from $8,046 for tax year 2025.
- See more of the changes here.
Senior tax deduction and Social Security
Catch up fast: A new $6,000 federal tax deduction for Americans 65 and older goes into effect for the 2025 tax year and is a break for those who pay taxes on Social Security income.
- Couples where both spouses qualify can claim up to $12,000 total.
- The deduction phases out for taxpayers with modified adjusted gross income over $75,000 ($150,000 for joint filers), the IRS says.
No tax on tips
Tipped workers won't pay federal income tax on their tips under the bill starting with 2025 tax year.
- The change applies to both cash and electronic tips, covering millions of service industry employees and is for itemizing and non-itemizing taxpayers.
- The maximum annual deduction is $25,000, the IRS says.
- Workers must still report tips for Social Security and Medicare purposes, but the income itself is now tax-free.
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