What changed for tax year 2027
The IRS announced inflation adjustments for nearly 70 federal tax provisions for tax year 2027. These amounts generally affect income earned during calendar year 2027 and returns filed in 2028; they do not retroactively change a taxpayer’s 2026 liability.
The 2027 standard deduction increases to $33,200 for married couples filing jointly, $16,600 for single taxpayers and married individuals filing separately, and $24,925 for heads of household. The maximum Child Tax Credit rises to $2,300, with up to $1,800 potentially refundable. The Foreign Earned Income Exclusion increases to $137,300.
Practical planning examples
A married couple living and working abroad during 2027 may benefit from both the higher standard deduction and the increased foreign earned income exclusion, provided they satisfy the applicable foreign-residence or physical-presence requirements. The exclusion does not automatically eliminate U.S. filing obligations: a qualifying taxpayer generally still files a federal return and reports worldwide income before claiming the exclusion.
A household with children should review expected 2027 earned income, filing status, and eligibility for the Child Tax Credit. A larger credit does not necessarily mean a larger refund if withholding or estimated payments are adjusted downward during the year.
Business owners should also review the 2027 Section 179 limit, which rises to $2,640,000, subject to the statutory phaseout rules and the property requirements.
Action checklist
- Update 2027 payroll withholding or estimated-tax projections after accounting for the new brackets and deductions.
- If working overseas, maintain travel records, housing documentation, employment contracts, and foreign tax records supporting an FEIE position.
- Compare the FEIE with the foreign tax credit; claiming the exclusion can affect the ability to claim credits for taxes attributable to excluded income.
- Revisit retirement, charitable-giving, and business-equipment timing before year-end 2027.
- Do not use the 2027 figures to amend a 2026 return unless separate IRS guidance specifically applies.
The IRS’s announcement and Revenue Procedure 2026-35 provide the controlling figures and detailed limitations.