On October 9, 2025, the Internal Revenue Service released Revenue Procedure 2025-32, its annual announcement of inflation-adjusted tax figures for tax year 2026. The adjustments affect more than 60 tax provisions and also incorporate changes made by the One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025. Tax year 2026 returns are generally filed in early 2027.
Key 2026 Figures at a Glance
| Provision | 2025 | 2026 |
|---|---|---|
| Standard deduction (single) | $15,000 | $16,100 |
| Standard deduction (married jointly) | $30,000 | $32,200 |
| Top bracket threshold (single) | $626,350 | $640,600 |
| Top bracket threshold (married jointly) | $751,600 | $768,700 |
| Max EITC (3+ children) | $8,046 | $8,231 |
| AMT exemption (single) | $88,100 | $90,100 |
| Estate tax exclusion | $13,990,000 | $15,000,000 |
| Annual gift exclusion | $18,000 | $19,000 |
| 401(k) contribution limit | $23,500 | $24,500 |
| IRA contribution limit | $7,000 | $7,500 |
| Health FSA limit | $3,300 | $3,400 |
| Foreign earned income exclusion | $130,000 | $132,900 |
Tax Brackets: Same Rates, Higher Thresholds
The seven federal income tax rates remain unchanged at 10%, 12%, 22%, 24%, 32%, 35%, and 37%. The OBBBA made these rates permanent — ending years of uncertainty about whether the lower TCJA rates would expire after 2025. The income thresholds that determine which rate applies have been adjusted upward by approximately 2.7% for inflation. For single filers, the 37% top rate now applies to income above $640,600. For married couples filing jointly, it kicks in above $768,700.
Standard Deduction Increases
The standard deduction rises for all filing statuses in 2026: $16,100 for single filers and married filing separately (up from $15,000), $32,200 for married filing jointly (up from $30,000), and $24,150 for head of household (up from $22,500). The OBBBA also added a new $6,000 senior deduction for taxpayers age 65 and older, which phases out at a 6% rate for incomes above $75,000 (single) and $150,000 (joint). This provision expires after the 2028 tax year.
New OBBBA Deductions (2025–2028)
Beyond the standard deduction increase, the OBBBA introduced several entirely new deductions available on the new Schedule 1-A:
- No Tax on Tips: Up to $25,000 in qualified tip income deductible from federal taxable income (phases out above $150,000 MAGI single / $300,000 married)
- No Tax on Overtime: Up to $12,500 in overtime pay deductible per year ($25,000 married jointly; same phase-out thresholds)
- Car Loan Interest: Up to $10,000 per year in interest on new vehicle loans originated after December 31, 2024 (phases out above $100,000 MAGI single / $200,000 married)
- Senior Deduction: $6,000 additional deduction for taxpayers 65+ (phases out above $75,000 single / $150,000 married)
These deductions are available whether you take the standard deduction or itemize, and they reduce your Adjusted Gross Income directly.
Earned Income Tax Credit (EITC)
The maximum EITC for 2026 increases to $8,231 for qualifying taxpayers with three or more qualifying children (up from $8,046 in 2025). The investment income limit for EITC eligibility rises to $11,950. Many eligible taxpayers miss this credit — check eligibility annually even if you didn't qualify in a prior year, as income thresholds shift each year.
Alternative Minimum Tax (AMT)
The AMT exemption increases to $90,100 for single filers and $140,200 for married filing jointly. The phase-out threshold starts at $635,900 for single filers and $1,271,900 for joint filers — both significantly higher than the old pre-TCJA levels that the OBBBA made permanent.
Retirement Contribution Limits
The 401(k) employee contribution limit rises to $24,500 (up from $23,500). The IRA contribution limit increases to $7,500 (up from $7,000), with the catch-up contribution for those 50+ rising to $1,100 — now indexed to inflation for the first time under SECURE 2.0. The Social Security wage base increases to $184,500.
Estate and Gift Tax
The federal estate tax exclusion jumps to $15,000,000 per person for 2026 (up from $13,990,000), or $30,000,000 for married couples using portability. The annual gift tax exclusion remains at $19,000 per recipient; the exclusion for gifts to non-citizen spouses rises to $194,000.
SALT Deduction Cap: $40,000 Through 2029
One of the most impactful OBBBA changes is the increase of the State and Local Tax (SALT) deduction cap from $10,000 to $40,000 for tax years 2025–2029 (phases out for MAGI above $500,000, returning to $10,000 floor at $600,000). This change significantly affects itemizing decisions for homeowners in high-tax states.
What This Means for Your 2026 Tax Planning
- Review W-4 withholding — higher brackets and standard deductions may mean you're over-withholding
- Max out 401(k) contributions at the new $24,500 limit to reduce taxable income
- Check EITC eligibility if your income is in the qualifying range
- If you're in a high-tax state, recalculate whether itemizing now beats the standard deduction given the higher SALT cap
- Workers who receive tips or overtime should be sure to claim the new Schedule 1-A deductions
Source
All figures sourced from IRS Revenue Procedure 2025-32 and IRS IR-2025-103. Use our income tax calculator to estimate your 2026 federal tax with the updated brackets and deductions.
How Inflation Adjustments Affect Your 2026 Tax Bill
Each year, the IRS adjusts dozens of tax parameters for inflation using the Chained Consumer Price Index (C-CPI-U). These adjustments are designed to prevent bracket creep — the phenomenon where inflation pushes taxpayers into higher brackets even though their real purchasing power hasn't changed. Understanding them helps you plan accurately for the year.
Why These Adjustments Matter
Without inflation adjustments, a worker who receives a 4% raise in a 4% inflation year hasn't gained any real income — but under a non-indexed tax system, some of that raise would be pushed into higher brackets, increasing their real tax burden. The annual adjustments prevent this by scaling bracket thresholds, the standard deduction, and contribution limits upward with inflation. If your income keeps pace with inflation, your inflation-adjusted tax burden stays roughly constant year over year.
2026 Bracket Thresholds vs. 2025
The 2026 brackets shifted upward from 2025. For a single filer, the 22% bracket threshold rose to $48,475. The 24% bracket threshold moved to $103,350. For married filers, the 22% bracket ceiling moved to $96,950. These adjustments mean the same real, inflation-adjusted income stays in the same bracket year over year — the tax system isn't inadvertently taking a larger share of your purchasing power just because prices rose.
Gift Tax Annual Exclusion
The annual gift tax exclusion increased to $19,000 per recipient for 2026 (from $18,000 in 2025). This means you can give up to $19,000 per person to as many individuals as you like without filing a gift tax return or using any of your lifetime exemption. Married couples can combine to give $38,000 per recipient per year without any filing requirement.
Alternative Minimum Tax (AMT) Exemptions
The AMT exemption adjusts annually to prevent the AMT from expanding into middle-income households. For 2026, the AMT exemption is $89,925 for single filers and $139,850 for married filing jointly. Most middle-income taxpayers are not subject to the AMT due to the higher exemptions established after 2017. High-income filers with large ISO (Incentive Stock Option) exercises or significant preference items should still run an AMT calculation each year.
Use our 2026 tax bracket guide for the complete adjusted bracket tables, and our income tax calculator to see how your estimated 2026 tax compares to last year.
See also our complete 2026 tax bracket guide for the full table of single, married, and head-of-household thresholds.