Tax Planning
Maximizing the New Inflation Adjustments for 2026: Smart Tax Planning Strategies
With the IRS’s Inflation Adjustments for Tax Year 2026 now released under the One, Big, Beautiful Bill (OBBB), savvy taxpayers can apply forward-looking planning to lower their tax burden.
By NomadicTax Research Team • 5-8 min read • November 16, 2025
## Understanding the 2026 Inflation Adjustments
In Revenue Procedure 2025-32, the IRS laid out inflation-adjusted dollar amounts for more than 60 tax provisions under the One, Big, Beautiful Bill. These take effect for tax year **2026**, affecting returns filed in **2027**. Key changes include:
| Provision | 2025 Amount | 2026 Adjusted Amount |
|-----------|--------------|-----------------------|
| Standard Deduction — Married Filing Jointly | $31,500 | $32,200 ([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)) |
| Standard Deduction — Single | $15,750 | $16,100 ([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 ([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 (Three+ Children) | $8,046 max | $8,231 max ([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)) |
These adjustments impact marginal tax rates, exemptions, credits, and deductions — a wide set of levers for tax planning.
## Tax Planning Strategies to Consider Now
Here are actionable strategies to make the most of these changes:
1. **Timing Income and Deductions**
* If you expect income in 2025 to push you into a higher bracket under old thresholds, consider deferring income until 2026 when the thresholds are higher. For example, avoid realizing large capital gains in late 2025 if possible.
* Similarly, accelerate deductions (charitable gifts, medical expenses) if you anticipate being in a lower bracket next year.
2. **Foreign Earned Income Exclusion & Expat Planning**
* The increase to **$132,900** means more room for Americans abroad to exclude income. Consider sourcing more income from foreign operations if possible.
* If planning a move or long trip, ensure you satisfy bona fide residence or physical presence tests to claim the exclusion.
3. **Maximize Credits and Phase-outs**
* With thresholds for credits like EITC increasing modestly, families with 3+ children can benefit. Reassess eligibility based on 2026 thresholds.
* But beware phase-outs: higher thresholds may mean more taxation on phases of credits or greater exposure to AMT or other limits.
4. **Adjust Withholding and Estimated Payments**
* Because standard deductions and other credits increase, if you typically withhold too much, you can reduce your withholding or adjust estimated tax payments to improve cash flow. Use the IRS’s Withholding Estimator in the latter part of 2025.
* Employers should prepare for changes to W-2 boxes for tips, overtime, and passenger vehicle loan interest in 2026. Planning payroll systems ahead can avoid misreporting or surprise liabilities. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-provide-penalty-relief-for-tax-year-2025-for-information-reporting-on-tips-and-overtime-under-the-one-big-beautiful-bill?utm_source=openai))
## Examples
- A married couple filing jointly earning $310,000 in 2026: the 2026 35% bracket for joint filers now begins above **$512,450**, giving more breathing room before reaching 37%. Under 2025 rules they were closer to that margin.
- An expat earning $130,000 in 2025 (just under the old exclusion): in 2026, they can now exclude up to $132,900, allowing them potentially to owe no U.S. tax on the foreign-sourced salary portion given deductions and credits.
## Implementation Tips
- Review your 2025 tax return draft with these adjusted thresholds in mind to project your 2026 liability.
- Use tax software or consult a tax professional early to simulate impacts.
- For small business owners: monitor ending inventory, depreciation, or bonus depreciation rules, as inflation may affect cost basis and reporting.
**Bottom Line:** These inflation adjustments under OBBB offer meaningful advantages. Early planning leveraging rising thresholds for deductions, credits, and exclusions can produce significant tax savings for individuals and businesses.