As the IRS rolls out new income tax brackets and adjustments for the 2026 fiscal year, U.S. taxpayers need to understand how these changes will impact their upcoming 2027 tax returns. These updates are designed to help maintain taxpayers’ purchasing power in the face of inflation, but they also reflect higher tax burdens for some individuals.
The changes include adjusted income tax brackets, an increase in standard deductions, and updated limits for capital gains taxes, estate taxes, and the Earned Income Tax Credit (EITC). In this guide, we’ll break down the new tax system, how it will affect you, and the key figures you need to know to plan for 2026 and beyond.
Table of Contents
Overview of 2026 Changes
The IRS’s changes for 2026 reflect inflation adjustments aimed at preserving the value of deductions, credits, and income brackets. Here are the key highlights:
| Category | Old Rate (2025) | New Rate (2026) | Increase |
|---|---|---|---|
| Standard Deduction (Single) | $15,750 | $16,100 | +$350 |
| Standard Deduction (Joint) | $31,500 | $32,200 | +$700 |
| Income Brackets (Single) | As of 2025 | Updated for 2026 | Adjusted for inflation |
| Income Brackets (Married) | As of 2025 | Updated for 2026 | Adjusted for inflation |
Key Changes in 2026 Taxation
Income Tax Brackets for 2026
The IRS has made inflation adjustments to the tax brackets for the 2026 fiscal year. This means that more of your income will be taxed at a lower rate. Here’s a breakdown of the updated tax brackets for both single filers and married couples filing jointly:
Single Filers
| Tax Rate | Income Range |
|---|---|
| 10% | $0 to $12,400 |
| 12% | $12,401 to $50,400 |
| 22% | $50,401 to $105,700 |
| 24% | $105,701 to $201,775 |
| 32% | $201,776 to $256,225 |
| 35% | $256,226 to $640,600 |
| 37% | $640,601 and over |
Married Couples Filing Jointly
| Tax Rate | Income Range |
|---|---|
| 10% | $0 to $24,800 |
| 12% | $24,801 to $100,800 |
| 22% | $100,801 to $211,400 |
| 24% | $211,401 to $403,550 |
| 32% | $403,551 to $512,450 |
| 35% | $512,451 to $768,700 |
| 37% | $768,701 and over |
These changes allow individuals to keep more of their income before higher taxes kick in, but for those at the top of the brackets, the rate increases are also substantial.
Increased Standard Deductions
To further account for inflation and rising living costs, the IRS has also increased the standard deductions for 2026:
| Filing Status | 2025 Standard Deduction | 2026 Standard Deduction | Change |
|---|---|---|---|
| Single | $15,750 | $16,100 | +$350 |
| Married (Joint) | $31,500 | $32,200 | +$700 |
This increase allows you to deduct more from your taxable income, which can potentially lower the amount of tax you owe, especially for those who do not itemize their deductions.
Capital Gains and Other Taxes
The IRS has also updated provisions related to capital gains and estate taxes, which could have a significant impact on taxpayers involved in asset sales, inheritances, or gifts.
Capital Gains Tax:
For individuals selling assets, the long-term capital gains tax rates will be adjusted to keep up with inflation. These tax rates, which apply to assets held for more than a year, include:
- 0% tax rate for long-term capital gains on income below $44,625 for single filers and $89,250 for married couples.
- 15% tax rate for income between the above thresholds and $492,300 (single) or $553,850 (married).
- 20% tax rate for income exceeding these thresholds.
Changes to the estate tax and gift tax limits will also impact those who are planning large donations or inheritances. These changes, which could affect estates exceeding $12 million, aim to simplify the tax code and ensure that the rich do not avoid taxes through complicated loopholes.
Why These Changes Matter?
These changes are part of a broader tax reform agenda that seeks to address the growing wealth gap, support middle-class families, and reduce the burden on lower-income households. However, for higher earners, these adjustments may mean paying more in taxes, particularly in the upper brackets.
Dr. Rebecca Thompson, a tax policy expert at the Brookings Institution, says:
“While the tax cuts for the lower and middle classes are a step forward, those at the highest income levels will face increased burdens, especially with the changes to capital gains taxes and the estate tax.”
Moreover, the increase in the standard deduction and adjustments to brackets ensure that taxpayers do not fall into higher tax brackets as inflation drives up wages.
Other Key Changes: EITC and Social Security Benefits
Another important adjustment involves the Earned Income Tax Credit (EITC). The IRS has raised the income thresholds and credit limits for 2026, which will benefit low-income workers. This increase, paired with the Social Security COLA increase (projected at 2.7%), could provide substantial relief for those in the workforce.
EITC for 2026:
| Filing Status | 2025 Maximum Credit | 2026 Maximum Credit |
|---|---|---|
| Single, no children | $540 | $560 |
| Married, 2 children | $6,660 | $6,880 |
| Married, 3+ children | $7,500 | $7,730 |
Conclusion
With the IRS’s updated tax brackets and adjustments for 2026, taxpayers should be aware of the new thresholds, standard deduction increases, and impacts on capital gains. These changes are intended to ensure that taxpayers’ purchasing power remains steady amidst inflation, though some individuals may face higher taxes, particularly those in higher income brackets. Understanding these updates will help you plan for a smoother filing process in 2027 and ensure that you take full advantage of available credits and deductions.
FAQs
Q1. How will the new tax brackets affect my tax filing in 2026?
Ans. The new tax brackets will ensure that individuals and married couples benefit from an inflation-adjusted income tax system. If you earn more, you may be subject to higher rates, but the thresholds are higher than before, providing some relief.
Q2. Will the capital gains tax change for long-term investments?
Ans. Yes, the long-term capital gains tax rates will be adjusted based on income. The most significant impact will be on high earners who will now pay higher taxes on their long-term capital gains.
Q3. What is the standard deduction increase for 2026?
Ans. The standard deduction for single filers will increase to $16,100, and for married couples filing jointly, it will increase to $32,200. This helps reduce taxable income for those who do not itemize deductions.
Q4. When will these changes take effect?
Ans. These changes apply to tax filings for the 2026 fiscal year, which will be filed in 2027.
Q5. How will these changes affect my Social Security benefits?
Ans. Social Security benefits will be adjusted based on inflation, and the COLA increase will ensure that seniors and beneficiaries receive a higher monthly amount to account for rising costs.