The United States Internal Revenue Service (IRS) announced on Thursday, October 9, the federal income tax brackets for 2026 and standard deductions for the upcoming tax year. These adjustments will apply to the tax year 2026 when filing in 2027.
The IRS has increased the income thresholds for various tax brackets under the new system. Additionally, they have raised the values of other tax terms, including long-term capital gains tax brackets, estate and gift tax exemption amounts, and eligibility for the Earned Income Tax Credit (EITC) for low-income families.
In 2026, the highest tax rate will be 37%, affecting individuals with taxable income exceeding $640,600 and married couples filing jointly with income of $768,700 or higher.
Federal income tax brackets determine the amount of tax that taxpayers need to pay on their taxable income.
Taxable income is calculated by deducting the standard deduction or itemized deductions from the adjusted gross income, whichever is higher, before applying the tax rate.
The standard deduction will also increase in 2026. For married couples filing jointly, the deduction will rise from $31,500 in 2025 to $32,200 in 2026. Starting in 2026, single filers can claim a deduction of $16,100, up from the current $15,750.
For married couples filing jointly and single filers alike, these adjustments aim to provide clarity and potentially reduce the tax burden for many taxpayers.