Annual tax revisions: 2026 tax brackets and IRS updates

Each year, the IRS updates a wide range of provisions, including federal tax brackets, contribution limits, deductions and credits. For 2026, these routine inflation adjustments are joined by changes stemming from the One Big Beautiful Bill Act, or OBBBA, adding another layer of complexity—and opportunity.

While the 2027 tax deadline may seem far off, understanding key updates now—including 2026 tax brackets, IRS tax charts, phaseouts and OBBBA tax updates—can help you adjust your financial strategy and make tax-smart moves in the coming year.

2026 tax brackets

The IRS adjusts federal income tax brackets annually to account for inflation. These updates help ensure that you aren't pushed into a higher IRS tax bracket when you receive a cost-of-living salary increase.

2025 versus 2026 tax brackets

The IRS increased each tax bracket by approximately 2.7% compared with 2025. The adjustment matches the 2.7% rate of inflation for the 12 months ending November 2025, aligning with the increase in overall consumer prices.

Standard deductions

When you file your taxes, you can choose between taking the standard deduction and itemizing. Both will reduce your taxable income, but the standard deduction lowers it by a fixed dollar amount.

The standard deduction is based on your filing status and age. If you're younger than 65, the following standard deduction will apply when you file taxes in 2027.

• Single filers: $16,100
• Married, filing jointly: $32,200
• Head of household: $24,150

Filers ages 65 and older or who are legally blind may qualify for an additional standard deduction on top of the regular amount, further reducing taxable income. For 2026, eligible single filers can claim an extra $2,050, while married couples filing jointly can claim $1,650 for each qualifying spouse.

In addition, under the OBBBA, seniors may be eligible for a new temporary bonus deduction of up to $6,000 per qualifying filer for tax years 2025 through 2028. This bonus deduction begins to phase out for single filers with modified adjusted gross income, or MAGI, above $75,000 and for joint filers with MAGI above $150,000.

Alternative minimum tax exemptions

The alternative minimum tax, or AMT, is designed to ensure that higher-income individuals and corporations pay a minimum level of tax even if they qualify for sizable tax deductions and credits. The AMT kicks in if your taxable income exceeds a certain amount, based on your filing status. The IRS updates these thresholds annually to account for inflation.

While the OBBBA preserves the higher AMT exemption amounts introduced under the Tax Cuts and Jobs Act, or TCJA, it lowers the income thresholds at which these exemptions begin to phase out. As a result, more filers may again find themselves subject to AMT.

State and local tax deduction limits

The OBBBA temporarily increases the cap on the state and local tax, or SALT, deduction from $10,000 to $40,000 per household, with inflation adjustments through 2029 and a gradual phaseout beginning at $500,000 of income. In 2030, the cap is scheduled to revert to $10,000.

Capital gains tax

Long-term capital gains—or any gains realized after 1 year—remain taxed at more favorable rates of 0%, 15% or 20%, depending on your total income. For long-term capital gains realized in 2026, the following brackets apply.

Note that these tax rates apply to long-term capital gains only. Assets held less than 1 year are taxed as regular income. Learn more about how capital gains are calculated.

Family tax credits

The IRS offers several tax breaks for parents. These credits offer a dollar-for-dollar reduction in the amount of tax you owe.

For 2026, the Child Tax Credit has increased slightly to $2,220 per qualified child, while the refundable amount of the child credit is $1,700.

For prospective parents wondering how to afford adoption costs, the Adoption Credit may offer some relief because it can be claimed for qualified expenses paid to adopt an eligible child. For 2026, the IRS raised the maximum tax credit to $17,670, while the refundable amount of the Adoption Credit is $5,120.

Earned Income Tax Credit

The Earned Income Tax Credit, or EITC, helps low- to middle-income families reduce the amount of taxes they owe. The size of this tax credit depends on your filing status, income and the number of qualifying children in your household. Eligibility for the EITC begins to phase out at certain income levels.

Retirement contribution limits

Each year, the IRS updates contribution limits for a wide range of retirement savings plans. The annual contribution limit for 401(k) and 403(b) plans, governmental 457 plans and the federal government's Thrift Savings Plan has been increased to $24,500 for 2026.

Here are additional retirement plan contribution limits for 2026. Note that these 2026 contribution limits don't factor in catch-up contributions for those 50 and older.

• Roth and traditional IRAs: The contribution limit for Roth and traditional IRAs is up to $7,500 in 2026.
• SEP IRAs: The 2026 contribution limit for SEP IRAs is the lesser of $72,000 or 25% of an employee's compensation, with a compensation cap of $360,000.
• SIMPLE IRAs and SIMPLE 401(k)s: Individuals can contribute up to $17,000 to a SIMPLE IRA or SIMPLE 401(k) in 2026.
• Solo 401(k)s: In 2026, you can contribute up to $24,500 to a solo 401(k) as an employee, plus an additional 25% of compensation as an employer, for a total contribution cap of $72,000.

Catch-up contributions

If you're 50 or older, the IRS allows you to make an additional contribution—known as a catch-up contribution—to help boost your retirement savings. In 2026, contribution limits depend on your age. How these contributions are taxed also changes for higher earners.

• For ages 50 to 59 and 64 and older: In 2026, you can contribute an additional $8,000 to most employer-sponsored plans, including 401(k) and 403(b) plans. For Roth and traditional IRAs, you can contribute an additional $1,100 this year.
• For ages 60 to 63: Unchanged in 2026, 401(k) participants aged 60 through 63 can make catch-up contributions of up to $11,250 to most workplace plans. For Roth and traditional IRAs, the catch-up contribution limit is now $1,100.

New Roth requirement for higher earners

Beginning in 2026, the SECURE Act 2.0 requires that catch-up contributions be made on an after-tax basis for individuals who earned more than $145,000 in the prior year.

As a result:

• Higher earners will no longer be able to make pretax catch-up contributions to workplace plans.
• Catch-up dollars must go into a Roth account, increasing current-year taxable income but allowing future qualified withdrawals to be tax-free.
• Employer-sponsored plans must offer a Roth option to accept catch-up contributions from affected employees.

Estate taxes

The OBBBA makes TCJA exemption amounts permanent. The new tax laws also usher in significant changes to gift and estate tax limits, making it an important time for taxpayers to evaluate their options.

Estate tax exemptions

The federal estate tax exemption has been increased for 2026. As a result, any individual estate valued at $15 million or less in 2026 will be exempt from federal taxes. Likewise, the exemption for married couples has increased to $30 million.

Note that estate taxes only apply to the value of the estate that exceeds the exemption. In other words, beneficiaries who inherit an estate valued at $15.2 million would only pay taxes on $200,000 in 2026.

Gift tax exclusion

The gift tax exclusion remains the same in 2026—an individual can give up to $19,000 per recipient tax-free. A married couple can combine, or gift split, their individual exclusions and give up to $38,000 per recipient in 2026 without triggering the gift tax. To qualify, the gift must be a present-interest gift, meaning it can be used immediately.

As in previous years, married couples can transfer unlimited amounts to each other. However, if one spouse is a non-US citizen, the gift cap has increased to $194,000.

Tax breaks for homeowners

Within the OBBBA, there are several noteworthy changes to some of the most popular tax breaks for homeowners. The mortgage interest deduction, which was scheduled to expire at the end of 2025, has been made permanent at $750,000. In addition, private mortgage insurance is now treated as deductible mortgage interest, while interest on home equity loans remains excluded from the definition of qualified residence interest.

Significant changes have also been made to home energy tax credits. Any purchases made after December 31, 2025, are no longer eligible for these credits.

Charitable deductions

Two new rules will affect how charitable donations are deducted, depending on whether you take the standard deduction or itemize.

• If you take the standard deduction: Starting this year, you can deduct cash charitable donations of up to $1,000 if you file as a single taxpayer, or $2,000 if you're married and filing jointly.
• If you itemize deductions: The OBBBA has introduced new limits to charitable deductions. If you itemize, your charitable deductions must exceed 0.5% of your adjusted gross income to qualify. For higher earners, your total itemized deductions—including charitable gifts—will be capped at 35%.

Other 2026 tax changes

These additional updates also may impact your financial strategy.

• Qualified charitable distribution limits: The annual limit on qualified charitable distributions, or QCDs, has been increased to $111,000 for 2026, as long as these donations are made directly to a charity. The annual limit on QCDs used to fund a gift annuity or charitable remainder trust will increase to $55,000.
• Health savings plans: The annual contribution limit for health savings accounts associated with a high-deductible health plan with minimum deductibles has increased to $4,400 for individual coverage and $8,750 for family coverage. Those who are 55 and older can contribute an additional $1,000 in 2026.
• Foreign earned-income exclusion: The foreign earned-income exclusion has been raised to $132,900 in 2026.
• Qualified Business Income deduction: In 2026, the Qualified Business Income deduction has been made permanent, allowing eligible taxpayers to deduct up to 20% of qualified business income from 1099 earnings. The deduction begins to phase out for taxpayers with income above $201,775, or $403,500 for those married and filing jointly.
• Taxes on tips and overtime: Through 2028, hourly workers can deduct up to $12,500 in qualified overtime pay, or $25,000 if you're married and filing jointly. The deduction applies only to the overtime premium—the portion earned above your regular hourly rate. Eligible tipped workers can also deduct up to $25,000 in qualified tips from federal income tax through 2028, although tips remain subject to Social Security, Medicare and applicable state and local taxes. The tip deduction phases out at incomes over $150,000, or $300,000 if you're married and filing jointly.

The bottom line

As you make financial moves throughout the year—like refinancing a mortgage or funding your retirement account—be sure to revisit annual IRS updates to avoid surprises at filing time. Add this to your year-end financial checklist to identify potential tax-saving opportunities in the year ahead.

Also be sure to consult with a tax specialist. They can help you navigate the latest updates and pinpoint opportunities to reduce your tax burden.