The Internal Revenue Service (IRS) has released the annual inflation adjustments for tax year 2026. The changes are made for over 60 tax provisions, including tax brackets, deductions, and credits. Most of these changes will apply when you file your 2026 tax return in 2027, according to irs.gov
Standard deduction increases
One of the most important changes is the increase in the standard deduction. In 2026, married couples filing jointly can claim a standard deduction of $32,200, which is an increase from $31,500 in 2025. Single tax filers and those married but filing separately can claim $16,100, again an increase from $15,750 last year. Heads of households will see deduction upto $24,150 compared to previous $23,625. Higher standard deductions reduce taxable income, which can help most taxpayers pay less in federal income taxes.
The IRS has also updated the income levels for each tax bracket, though the tax rates remain the same. According to the new rule, 37 percent will apply to single filers earning over $640,600 and married couples filing jointly earning over $768,700. Other brackets updates are 35 percent for incomes above $256,225 for singles and $512,450 for married couples. 32 percent is applied for incomes above $201,775 and $403,550, 24 percent for incomes above $105,700 and $211,400, 22 percent for incomes above $50,400 and $100,800 and so on. Full details available at: Irs official website
What it means for high earners
For top earners, the IRS’s 2026 tax updates could bring a relief. The tax rates haven’t changed, but the income ranges for each tax bracket have gone up because of inflation. For example, a married couple making about $1 million could end up paying around $2,000 less in taxes in 2026 than in 2025.
For those taxpayers who have to pay the Alternative Minimum Tax, the amount they can exempt from has slightly increased. Single people can now exempt $90,100 of their income, but this starts to decrease if they earn more than $500,000. Married couples filing together can exempt $140,200, which will further shrink for incomes over $1,000,000.
The estate tax exclusion rises to $15,000,000 compared to $13,990,000 in 2025. The maximum adoption credit will increase to $17,670, with up to $5,120 refundable for qualifying expenses. For employers who are offering childcare benefits, the maximum tax credit will increase from $150,000 to $500,000, and $600,000 for small businesses (only if they are eligible). The foreign earned income exclusion has also increased to $132,900 from $130,000. Meanwhile, annual gift exclusion remains at $19,000, with gifts to non-citizen spouses increasing to $194,000.
Policies unaffected
Some policies, however, are not affected by these changes. Personal exemptions remain at $0, a result of the Tax Cuts and Jobs Act of 2017, which was made permanent under the One Big Beautiful Bill. Limitations on itemised deductions for high earners remain intact, and the income phase-out for the Lifetime Learning Credit has not been adjusted.
