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The IRS has announced the inflation adjustments for tax year 2026

1. Standard Deduction Increases

The standard deduction—the amount you can subtract from your income before taxes are applied—has been raised across all filing statuses.

Filing Status 2025 (OBBB) 2026 (New)
Married Filing Jointly $31,500 $32,200
Head of Household $23,625 $24,150
Single / Married Filing Separately $15,750 $16,100

2. 2026 Marginal Tax Brackets

For 2026, the tax rates remain the same, but the income thresholds have shifted upward to account for inflation.

  • 37%: Incomes over $640,600 (Single) / $768,700 (Joint)
  • 35%: Incomes over $256,225 (Single) / $512,450 (Joint)
  • 32%: Incomes over $201,775 (Single) / $403,550 (Joint)
  • 24%: Incomes over $105,700 (Single) / $211,400 (Joint)
  • 22%: Incomes over $50,400 (Single) / $100,800 (Joint)
  • 12%: Incomes over $12,400 (Single) / $24,800 (Joint)
  • 10%: Incomes $12,400 or less (Single) / $24,800 or less (Joint)

3. Key Credits & Exemptions

The OBBB has introduced or enhanced several major tax benefits for families and employers.

Family & Individual Credits

  • Adoption Credit: The maximum credit rises to $17,670, with a refundable portion of $5,120.
  • Earned Income Tax Credit (EITC): The maximum amount for taxpayers with 3+ children is now $8,231.
  • Estate Tax Exclusion: The basic exclusion amount for 2026 deaths is $15,000,000 (up from $13.99M).
  • Gift Exclusion: Remains at $19,000 per recipient, though the exclusion for non-citizen spouses jumps to $194,000.

Employer & Employee Benefits

  • Childcare Tax Credit: Employers can now claim up to $500,000 ($600,000 for small businesses) for providing childcare.
  • Health FSA: The salary reduction limit is now $3,400, with a $680 carryover limit.
  • Transportation Fringe: Monthly limits for transit and parking increase to $340.

4. What Isn't Changing?

  • Personal Exemptions: These remain at 0.
  • Itemized Deduction Limit: The "Pease" limitation remains permanently eliminated by the OBBB, though the tax benefit is capped for those in the 37% bracket.
  • Lifetime Learning Credit: The phase-out range remains fixed at $80,000–$90,000 (Single) and $160,000–$180,000 (Joint).

Note on AMT: The Alternative Minimum Tax exemption for 2026 is $90,100 for individuals (phasing out at $500k) and $140,200 for married couples (phasing out at $1M).