Major Inflation-Adjusted Provisions for Tax Year 2026
Every year, the government adjusts certain tax thresholds and deductions for inflation. These changes can have a significant impact on how individuals and businesses plan their finances. For the 2026 tax year, a host of new inflation-adjusted figures have been released, many of which also reflect updates under the One Big Beautiful Bill Act (OBBBA).
Standard Deduction Increases
For 2026, taxpayers will see modest increases in the standard deduction across all filing statuses. Married couples filing jointly can expect a new standard deduction of $32,200, up from $31,500 in 2025. Single taxpayers and married individuals filing separately will see an increase from $15,750 in 2025 to $16,100 in 2026, while heads of household will experience a jump from $23,625 in 2025 to $24,150 in 2026.
A discussion with your advisor on if you are taking the standard deduction or taking the itemized deduction may influence your decisions around timing or amounts for charitable deductions or the timing of when tax payments should be made for the most benefit as well.
Marginal Tax Rate Thresholds
The OBBBA retains the top tax rate of 37%, which continues to apply to single taxpayers with incomes exceeding $640,600 and married couples filing jointly with incomes over $768,700. Other bracket thresholds have also been nudged upward.
Tax Rate | For Single Filers | Married Individuals Filing Jointly |
| 10% | $0 to $12,400 | $0 to $24,800 |
| 12% | $12,401 to $50,400 | $24,801 to $100,800 |
| 22% | $50,401 to $105,700 | $100,801 to $211,400 |
| 24% | $105,701 to $201,775 | $211,401 to $403,550 |
| 32% | $201,776 to $256,225 | $403,551 to $512,450 |
| 35% | $256,226 to $640,600 | $512,451 to $768,700 |
| 37% | $640,601 or more | $768,701 or more |
While the percentage rates themselves remain unchanged, the upward shift in the bracket boundaries can mean that some portion of your annual income might now be subject to a lower tax rate. Planning strategies could include timing certain deductions or deferring income. For relatively high-income households approaching a bracket change, professional advice can help optimize your overall tax picture.
Alternative Minimum Tax (AMT) Exemptions
The AMT system ensures that certain income items are taxed at a minimum level. For 2026, the exemption amount is rising to $90,100 for individuals, phasing out at $500,000. Married couples filing jointly receive a higher exemption of $140,200, which begins phasing out at $1,000,000.
Estate Tax Exemption
For the 2026 tax year, the basic exclusion amount for estates increases to $15,000,000, up from $13,990,000 in 2025. This high Federal estate exemption allows many taxpayers to avoid taxation at the Federal level but multiple states, including Oregon and Washington, have estate taxes at the state level, with much lower exemptions. There will continue to be a long-term need for estate planning in these states.
Adoption Credits
Families planning to adopt can benefit from a higher maximum adoption credit in 2026. The allowable credit for qualified adoption expenses now goes up to $17,670, a slight increase from $17,280 the previous year. Notably, up to $5,120 of this credit can be refundable, which may provide extra relief for families who do not typically have a large tax liability to offset. Those going through the adoption process can consider coordinating finalization timelines so that they can maximize the use of this credit.
Employer-Provided Childcare Tax Credit
The OBBBA significantly expands the tax credit available to employers who offer childcare benefits to employees, increasing the cap from $150,000 to $500,000. For qualifying small businesses, the limit can go as high as $600,000.
Earned Income Tax Credit (EITC)
In 2026, the maximum value rises to $8,231 for individuals who have three or more qualifying children, compared to $8,046 in 2025. Because EITC amounts depend on both income level and number of qualifying children, it is essential to review the updated phase-out thresholds to see whether your household still meets the requirements or if you may receive a larger credit this year.
Qualified Transportation Fringe Benefit
The monthly limits for commuter benefits and qualified parking move up to $340, marking a $15 increase from 2025. This adjustment may help employees defray more of their commuting expenses on a pre-tax basis. It is also a good moment for employers offering these programs to confirm their plan documents reflect the updated limits.
Health Flexible Spending Arrangements (FSAs)
For 2026, individuals who leverage FSAs can set aside up to $3,400 in pre-tax funds, which is $100 more than in the prior year. Unused amounts carried over after the plan year can now be as high as $680. If you tend to spend consistently on healthcare costs, a higher annual limit can help shield more of your income from taxes, but be sure not to overfund the account if your projected medical expenses are uncertain.
Foreign Earned Income Exclusion (FEIE)
U.S. taxpayers living abroad will see the foreign earned income exclusion tick upward to $132,900, up from $130,000 in 2025. This may slightly reduce your taxable income if you qualify, though eligibility depends on factors such as residence or physical presence tests. Tracking your travels meticulously ensures you meet these tests, keeping you in compliance and free from unwanted tax surprises.
Annual Gift Exclusion
The standard gift exclusion remains at $19,000 for 2026. However, there is a new figure to note for spouses who are not U.S. citizens, with the exclusion for gifts to such spouses moving to $194,000. Since gifting strategies can be complex, especially for couples who maintain citizenships in different countries, it is best to map out a plan that optimizes these thresholds.
