Understanding the 2026 Inflation Adjustments
The IRS recently announced its tax year 2026 inflation adjustments, part of Revenue Procedure 2025-32, which includes changes to more than 60 tax provisions under the One, Big, Beautiful Bill (OBBB). Key changes set to apply to returns filed in 2027 include: (irs.gov)
| Item | 2025 Amount | 2026 Amount |
|---|---|---|
| Standard Deduction (single/MFS) | $15,750 | $16,100 † |
| MJ Joint Standard Deduction | $31,500 | $32,200 |
| Head of Household | $23,625 | $24,150 |
| Top Tax Rate Threshold (Single) | — | $640,600 |
| AMT Exemption (Unmarried) | — | $90,100 |
| Adoption Credit Max | $17,280 | $17,670 |
| Foreign Earned Income Exclusion | $130,000 | $132,900 |
† Applies only with OBBB restrictions. (irs.gov)
Practical Tax-Planning Strategies
Here are actionable ways to use these changes:
- Adjust withholding now. With higher thresholds, you may be over-withholding. Use the IRS Tax Withholding Estimator to avoid surprises. (eitc.irs.gov)
- Bunch itemized deductions if applicable. Even though OBBB made many deductions less restrictive, large deductible expenses like medical, charitable, or mortgage may become more beneficial when thresholds shift. Use deductions in one year to exceed standard deduction.
- Time adoption expenses. If you're expecting adoption expenses in 2026, take advantage of the increased adoption credit and refundable portion. Plan timing of payments or finalizing qualifying expenses. (irs.gov)
- Review AMT exposure. The increased AMT exemption reduces exposure for many; check if you can shift income or accelerate deductions to stay under AMT thresholds.
- Optimize foreign work exclusions. Digital nomads and expats will benefit from a higher foreign earned income exclusion, letting more foreign income go tax-free.
Example Scenario: Single Taxpayer Earning $150,000
- Filing single, your standard deduction rises from $15,750 to $16,100.
- Before: taxable income = $150,000 ‒ $15,750 = $134,250.
- After: taxable income = $150,000 ‒ $16,100 = $133,900. Savings of about $67.50–$80 depending on marginal rate. Adds up when combined with other changes.
Important Caveats
- These adjustments apply to taxable year 2026, generally meaning returns filed in 2027. (irs.gov)
- Some items remain unchanged—personal exemptions stay at zero; certain credit phase-out thresholds are not indexed. OBBB specifies which items. (irs.gov)
Use these inflation adjustments proactively—check your full tax profile, make small moves now, and consult a tax advisor to take best advantage.