Tax Planning
How Inflation Adjustments for Tax Year 2026 Affect Everyday Tax Planning
Annual inflation adjustments just released by the IRS under the One, Big, Beautiful Bill deliver big changes — raising deductions, credits and bracket thresholds for 2026. Here's how to plan now.
By NomadicTax Research Team • 5-8 min read • November 18, 2025
## Overview of Tax Year 2026 Inflation Adjustments
The IRS has announced the **2026 annual inflation adjustments** under the One, Big, Beautiful Bill (OBBB), affecting more than 60 tax provisions. Major items include: standard deductions, income tax brackets, the alternative minimum tax exemption, the estate tax credit, and several credits. ([irs.gov](https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill?utm_source=openai))
## Key Changes That Matter for Taxpayers
| Tax-Item | 2025 Amount | 2026 Amount | What’s Different |
|---|---|---|---|
| Standard Deduction (Married Filing Jointly) | $31,500 | **$32,200** | Increase of $700, which reduces taxable income for many households ([irs.gov](https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill?utm_source=openai)) |
| Foreign Earned Income Exclusion | $130,000 | **$132,900** | Higher exclusion helps Americans abroad reduce taxable income ([irs.gov](https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill?utm_source=openai)) |
| Estate Tax Basic Exclusion | ~$13,990,000 | **$15,000,000** | Greater room to transfer wealth without estate tax ([irs.gov](https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill?utm_source=openai)) |
| EITC Max (3+ Children) | $8,046 | **$8,231** | Boosts credits for low-income families ([irs.gov](https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill?utm_source=openai)) |
## Strategies to Act On Now
- **Review withholding**: With raised standard deductions and wider bracket thresholds, your current withholding may lead to over-or underpayment. Adjust Form W-4 this year to reflect 2026 changes ahead of filing season.
- **Use credits wisely**: If you're eligible for refundable or partially refundable credits (like EITC or adoption credit), increased limits may make you better off. Social workers and financial planners should proactively incorporate these into guidance.
- **Plan charitable giving**: If you itemize, the raised thresholds may tip you away from itemizing. Charities might see shifts in giving behavior—consider bunching deductions or gifting in earlier years.
- **Estate and gift planning**: The estate tax exclusion increase gives breathing room to planners. Consider inter vivos transfers or trusts to take advantage before possible future legislative changes.
## Examples to Highlight the Differences
- A married couple filing jointly with taxable income just above $32,000 will pay lower tax in 2026 than in 2025, because their reduction in taxable income from standard deduction increase avoids a steeper bracket.
- An overseas worker earning $130,000 excluding housing costs will get to exclude about $2,900 more under the foreign earned income exclusion.
- A low-income family with three kids may get $185 more in the EITC maximum—useful when budgeting essentials.
## Risks & Watch Points
- These changes are **mandatory** and apply to tax returns filed in 2027 for 2026 income. They’re not optional.
- Some phase-outs and income thresholds are more complex—credit eligibility and deductions may not change for every taxpayer.
- Legislation could shift again—stay tuned for mid-2026 regulatory or legislative changes.
## Takeaway: Tax Planning Moves Before Year End
- Revisit your tax estimate or year-end tax planning calendar.
- Harvest losses or accelerate income/expenses where possible to align with the updated thresholds.
- If you expect changes in filing status or dependents, see how brackets and deduction amounts will affect you.
By understanding these adjustments early, and acting before the year turns, taxpayers can minimize surprises and maximize benefits under the One, Big, Beautiful Bill.