What’s New for 2026?
The IRS published Revenue Procedure 2025-32 on October 9, 2025, detailing inflation adjustments for tax year 2026.(irs.gov) These changes affect more than 60 tax provisions, including standard deductions, tax brackets, estate tax, foreign earned income exclusion, and various credits like the Earned Income Tax Credit.(irs.gov)
Here are some big shifts:
| Provision | 2025 Amount | 2026 Amount | Change |
|---|---|---|---|
| Standard Deduction (Married Filing Jointly) | $31,500 | $32,200 | +$700 |
| Standard Deduction (Single) | $15,750 | $16,100 | +$350 |
| Foreign Earned Income Exclusion | $130,000 | $132,900 | +$2,900 |
| EITC (3+ children) – maximum credit | $8,046 | $8,231 | +$185 |
| Childcare benefit limit (employer provided) | — | Increases to higher limits ($500,000 and $600,000) under OBBB | Big boost for eligible small businesses |
Why These Matter for Tax Planning
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Withholding adjustments: If your income will rise, or your filing status changes, you may need to update your W-4 to avoid under- or over-withholding. Rising thresholds mean you're less likely to jump into a higher bracket due to inflation alone.
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Charitable giving & gifts: The gift exclusion remains at $19,000, but gift amounts to non-citizen spouses increase to $194,000. If you plan large gifts or estate giving, update your strategy accordingly.(irs.gov)
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Foreign incomes & employer-provided benefits: As foreign earned income exclusion increases, and employer childcare credits expand, individuals and employers should re-evaluate benefit structuring and international compensation.
Practical Examples
Example 1 – Individual with Side Income
Sarah, a single taxpayer with freelance income of $130,000 in 2026, can now exclude up to $132,900 of foreign income, which helps reduce overall taxable income if she qualifies under bona fide residence or physical presence tests.
Example 2 – Employer Provided Childcare Credit
Your company is considering offering a childcare credit incentive. For 2026, under the OBBB Act, small businesses may attain a maximum employer provided childcare credit of $600,000, easing the financial burden of employee benefits.(irs.gov)
Actionable Insights
- Review your paystub and tax bracket to verify whether you're in a new threshold.
- Re-run withholding estimators based on the 2026 standards.
- Plan charitable gifts before year-end to align with 2025 limits.
- Employers: explore childcare benefits and prepare for compliance with expanded credit eligibility.
What’s Not Changing
Some items remain static: personal exemptions remain eliminated (zero), and certain phaseouts (like those for Lifetime Learning Credits) still don’t adjust for inflation.(irs.gov)