The IRS revealed its annual adjustments for various tax provisions on Thursday, which also reflect changes made under the One Big Beautiful Bill Act (OBBBA). These adjustments will be effective for the tax year 2026.
For that year, the standard deduction is set to rise to $16,100 for single filers and $32,200 for couples filing jointly. Additionally, the OBBBA raised the standard deduction for 2025 to $15,750 for singles and $31,500 for married couples.
The IRS has also updated its marginal tax brackets, with changes that account for inflation across the entire income spectrum.
The top tax rate will stay at 37% for 2026, affecting individuals with incomes over $640,600 and joint filers exceeding $768,700. Here’s a breakdown of the other tax brackets:
- 35% for incomes above $256,225 for individuals and $512,450 for couples.
- 32% for incomes above $201,775 for individuals and $403,550 for couples.
- 24% for incomes above $105,700 for individuals and $211,400 for couples.
- 22% for incomes above $50,400 for individuals and $100,800 for couples.
- 12% for incomes above $12,400 for individuals and $24,800 for couples.
- 10% for individuals earning $12,400 or less and couples earning $24,800 or less.
One significant change stemming from OBBBA is the inheritance tax exclusion amount, which will rise to $15 million for those who pass away in 2026, up from $13.99 million in 2025.
The adoption credit will increase from $17,280 in 2025 to $17,670 in 2026, allowing for a refundable credit of $5,120. The alternative minimum tax exemption will be set at $90,100, phasing out for individuals starting at $500,000, and $140,200 for couples, phasing out at $1 million.
Under the OBBBA, the maximum allowable employer-provided child care tax credits increased significantly, from $150,000 to $500,000, and even $600,000 for qualifying small businesses.
Additionally, the Earned Income Tax Credit has been adjusted, with the maximum deduction for eligible taxpayers with three or more children rising to $8,231 from $8,046 from the previous year.
The contribution limit for health care flexible spending arrangements will go up to $3,400 for 2026, increasing by $100 from the previous year. If unused amounts can be carried over, the limit will be set at $680.
Taxpayers using medical savings accounts must have a deductible of at least $2,900, up by $50 from the year before, and not exceeding $4,400, which increases by $100. The out-of-pocket maximum for self-only coverage will also see a rise of $150 to $5,850.
For family coverage in health savings accounts, the annual deductible will range from $5,850 to $8,750, with a maximum out-of-pocket of $10,700 for 2026.
The monthly limit for transportation fringe benefits will rise by $15, reaching $340. Notably, the annual gift deduction remains unchanged at $19,000 for 2026.
Some prior adjustments for inflation have been discontinued, including those that pertain to income limits phasing out personal deductions, itemized deductions, and lifetime learning credits.
