The IRS has announced key tax law updates for the 2026 tax year, reflecting the adjustments made under the One Big Beautiful Bill (OBBBA). These changes will affect returns filed in 2027 and include updates to standard deductions, tax brackets, credits, and various inflation-adjusted limits.
Here's a breakdown of the most notable updates that taxpayers and preparers should know.
1. Higher Standard Deduction Amounts
For tax year 2026, the standard deduction increases again, giving most taxpayers a slightly larger tax break:
| Filing Status | 2025 Standard Deduction | 2026 Standard Deduction |
|---|---|---|
| Single or Married Filing Separately | $15,750 | $16,100 |
| Married Filing Jointly or Surviving Spouse | $31,500 | $32,200 |
| Head of Household | $23,625 | $24,150 |
These adjustments reflect the annual inflation indexing built into the new tax law.
2. Marginal Tax Rates Remain the Same
The top marginal tax rate stays at 37%, applying to incomes above:
- $640,600 for single filers
- $768,700 for married couples filing jointly
Other brackets for 2026 are as follows:
- 35%: over $256,225 ($512,450 for joint filers)
- 32%: over $201,775 ($403,550 for joint filers)
- 24%: over $105,700 ($211,400 for joint filers)
- 22%: over $50,400 ($100,800 for joint filers)
- 12%: over $12,400 ($24,800 for joint filers)
- 10%: up to $12,400 ($24,800 for joint filers)
While the rates themselves haven't changed, income thresholds have been indexed upward to reflect inflation.
3. Alternative Minimum Tax (AMT) Adjustments
The Alternative Minimum Tax exemption increases to:
- $90,100 for single taxpayers (phasing out at $500,000)
- $140,200 for married couples filing jointly (phasing out at $1,000,000)
These updates help more taxpayers avoid being caught by the AMT as incomes rise.
4. Estate and Gift Tax Updates
The estate tax exclusion increases to $15 million (up from $13.99 million in 2025).
The annual gift exclusion remains $19,000, while gifts to a non-U.S. citizen spouse rise to $194,000.
These adjustments reflect the IRS's ongoing inflation indexing for estate and gift tax thresholds.
5. Adoption and Childcare Credits
The maximum adoption credit for 2026 rises to $17,670, with up to $5,120 eligible as refundable.
The employer-provided childcare tax credit sees a major boost, the maximum credit climbs from $150,000 to $500,000 (or $600,000 for qualifying small businesses).
These changes aim to increase support for families and working parents.
6. Earned Income Tax Credit (EITC)
For 2026, the maximum EITC for taxpayers with three or more qualifying children increases to $8,231 (up from $8,046 in 2025).
Revenue Procedure 2025-32 outlines the complete set of thresholds and phase-outs for other filing categories.
7. Transportation and Health Plan Adjustments
Qualified transportation and parking benefits rise to $340 per month.
Health Flexible Spending Arrangements (FSAs) now allow $3,400 in contributions, with a carryover limit of $680.
These modest increases help employees manage commuting and healthcare expenses more effectively.
8. Medical Savings Account (MSA) Limits
For 2026:
- Self-only coverage: deductible between $2,900 and $4,400, with a maximum out-of-pocket limit of $5,850.
- Family coverage: deductible between $5,850 and $8,750, and an out-of-pocket maximum of $10,700.
9. Foreign Earned Income Exclusion
For taxpayers living abroad, the foreign earned income exclusion increases to $132,900, up from $130,000 in 2025.
10. Items Not Adjusted for Inflation
Some tax provisions remain unchanged under the new law:
- Personal Exemptions: remain at $0, as this provision was permanently eliminated under the Tax Cuts and Jobs Act and reaffirmed by OBBB.
- Itemized Deductions: the previous cap on itemized deductions remains repealed, but taxpayers in the 37% bracket now face a new limitation on the total tax benefit from itemized deductions.
- Lifetime Learning Credit: still phases out for taxpayers with modified AGI between $80,000 and $90,000 ($160,000 to $180,000 for joint filers), with no inflation adjustment since 2020.