IRS reveals new tax brackets for 2026
In this DML Report…
The IRS has released its inflation-adjusted federal income tax brackets for tax year 2026, applicable to returns filed in 2027, with thresholds increased by 2.2 to 2.5 percent across all rates to counter bracket creep from wage inflation. Marginal tax rates remain unchanged at 10%, 12%, 22%, 24%, 32%, 35%, and 37%. For single filers, the brackets are: 10 percent on income from $0 to $12,400; 12 percent from $12,401 to $50,400; 22 percent from $50,401 to $105,700; 24 percent from $105,701 to $201,775; 32 percent from $201,776 to $256,225; 35 percent from $256,226 to $640,600; and 37 percent above $640,601. Married couples filing jointly face: 10 percent on $0 to $24,800; 12 percent on $24,801 to $100,800; 22 percent on $100,801 to $211,100; 24 percent on $211,401 to $403,550; 32 percent on $403,551 to $512,450; 35 percent on $512,451 to $768,700; and 37 percent above $768,701. Compared to 2025, the top 37 percent threshold rises from $626,351 to $640,601 for singles and from $751,601 to $768,701 for joint filers. Standard deductions increase to $16,100 for singles (from $15,750), $32,200 for joint filers (from $31,500), and $24,150 for heads of household (from $23,850).
Additional inflation-tied adjustments for 2026 include upward shifts in long-term capital gains limits, the estate and gift tax exemption, and earned income tax credit eligibility thresholds, though exact figures were not specified in the announcement. A temporary deduction of up to $6,000 applies to individuals aged 65 and older under the One Big Beautiful Bill Act. These changes aim to let workers retain slightly more from paychecks by delaying entry into higher brackets, but experts note the benefits are modest and could be eroded by persistent inflation and rising costs for essentials, particularly for lower- and middle-income households. Higher earners gain little, as the expansions only postpone higher taxes amid income growth.
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The IRS announcement came Thursday amid operational disruptions from a government shutdown furloughing nearly half its staff—about 40,000 employees—potentially delaying refunds and taxpayer services, though 40,000 remain on duty for essential functions. Taxpayers with an October 15 filing extension should proceed as planned. Leadership shifts include Treasury Secretary Scott Bessent serving as acting IRS commissioner since August, following President Trump's removal of Billy Long, who was nominated as U.S. ambassador to Iceland; a new top deputy and CEO, Frank Bisignano—the current Social Security commissioner—is set to be announced.