Tax Planning
Making the Most of the New 2026 Inflation Adjustments under the One, Big, Beautiful Bill
With 2026 tax brackets, deductions, and credits updated under the One, Big, Beautiful Bill, taxpayers need to understand what changed and how to leverage these adjustments.
By NomadicTax Research Team • 5-8 min read • November 23, 2025
## Overview of the 2026 Inflation Adjustments
The IRS released Revenue Procedure 2025-32, highlighting inflation adjustments for more than **60 tax provisions** under the One, Big, Beautiful Bill (OBBB) for tax year 2026, filed in 2027. Key items include: the standard deduction, marginal rates, AMT exemptions, estate tax exclusion, adoption credits, and employer-provided childcare credit. ([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))
### Notable Changes:
- **Standard Deduction (2026)**: Single taxpayers and married filing separately: $16,100. Married filing jointly: $32,200. Heads of household: $24,150. ([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))
- **AMT Exemption (2026)**: Unmarried individuals—$90,100, phase-out threshold $500,000. For married couples jointly: exemption phases out starting at $1,000,000. ([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 (FEIE)**: $132,900 in 2026, up from $130,000 in 2025. ([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 Exclusion**: $15,000,000 in 2026, up from ~$13,990,000 in 2025. ([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))
- **Employer-Provided Childcare Credit Ceiling**: Increased to $500,000 (or $600,000 for eligible small businesses). ([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))
## Tax Planning: What You Can Do Now
1. **Optimize Tax Bracket Management**
- With brackets shifting slightly due to inflation indexing under OBBB, defer or accelerate income or deductions to avoid bumping into a higher bracket, especially for those close to top thresholds. For example, married couples approaching the 35% or 37% thresholds should analyze income timing in 2025 vs. 2026.
2. **Review Retirement Savings Strategy**
- The FEIE increase benefits expats sizing exclusion thresholds. Consider making sure foreign income and housing costs align optimally with this exclusion. Also, assess Roth vs. traditional IRA contributions, keeping in mind AGI phase-outs and deduction changes.
3. **Estate Planning and Gifting**
- With the estate tax exclusion now $15 million, those employing lifetime gifting strategies may find more room. Also evaluate whether issuing gifts could be advantageous now before exclusion shifts further.
4. **Childcare & Adoption Credits**
- Families planning adoptions or employing childcare programs should revisit eligibility and maximum benefit ceilings. The enhanced adoption credit and larger employer childcare credit ceilings offer new opportunities.
5. **Standard vs. Itemized Deduction Decision Tree**
- Since the standard deduction amounts rose, taxpayers who previously itemized should re‐calculate whether standard deduction yields a higher benefit. If itemized deductions are only marginally above old standards, the increase in standard deduction may tip the scale.
## Actionable Example
**Scenario:** Alice and Bob, married filing jointly, expect taxable income of about $700,000. In 2025, married joint standard deduction = $31,500. In 2026, it’s $32,200. They also expect a large medical expense deduction to itemize.
- If their itemized deductions (medical, state taxes, mortgage interest) are about $33,000, they would still itemize in 2026. But with inflation pushing standard deduction higher, if deductions drop slightly or medical costs are delayed, taking the standard deduction becomes more compelling. They should run the numbers for both years.
- If they foresee higher income or bonuses in early 2026, accelerating income or withholding deductions in 2025 may avoid higher bracket thresholds in 2026.
## Compliance & Practical Tips
- Ensure payroll and HR departments are aware of new ceilings, especially for qualified transportation fringe benefits, health FSA carryovers, and qualified parking limits.
- Keep documentation early for adoption expenses for credit claims. Be ready to claim the refundable portion.
- Non-profit or small business employers providing childcare should verify eligibility and documentation to claim up to $500,000/$600,000 credit.
With these changes in place, knowing where thresholds landed helps make more informed planning decisions now rather than scrambling during filing season.