What Is the OBBB Inflation Adjustment?
The One, Big, Beautiful Bill (Public Law 119-21) was signed on July 4, 2025. It includes significant inflation adjustments that take effect for tax year 2026—these changes generally impact returns filed in 2027. The IRS released all of this in IR-2025-103. (irs.gov)
Key Changes You Should Know
| Item | 2025 Amount | 2026 Amount | Who’s Most Impacted |
|---|---|---|---|
| Standard Deduction (Married Filing Jointly) | $31,500 | $32,200 | Most joint filers, especially married couples |
| Single / Married Filing Separately | $15,750 → $16,100 | All single or separate filers | |
| Heads of Household | $23,625 → $24,150 | Single caregivers and other heads | |
| Top Marginal Tax Rate Thresholds | Varies | Higher income brackets thresholds increase | Those near rate push-ups |
| AMT Exemption | – | $90,100 for singles; higher for couples | High incomes likely subject to AMT |
| Estate Tax Basic Exclusion | ~$13.99 million | $15 million | Estates preparing to plan large transfers |
| Adoption Credit (Max & Refundable Limit) | $17,280 max / $5,000 refundable | $17,670 max / $5,120 refundable | Families expecting or using adoption credit |
| Foreign Earned Income Exclusion | $130,000 | $132,900 | Those living/working abroad |
Strategic Moves to Make Now
- Adjust withholding or estimated tax payments: Rising thresholds may push you into lower brackets, meaning you may need to lower withholding or make fewer estimated payments.
- Plan large deductions or income timing: If you can bunch deductions or delay income into 2026, these adjustments give extra breathing room.
- Estate and gifting planning: With the basic exclusion at $15M, consider using lifetime gifting strategies now, before potential future changes.
- Adoption expenses: If adopting, maximize eligible expenses to meet the new, slightly higher limits.
- Foreign income / work abroad: Use the increased Foreign Earned Income Exclusion if overseas or considering digital nomad status.
Example Scenarios
Example 1 – Married couple with two incomes: Jane and John, married filing jointly, previously took the standard deduction of $31,500 in 2025. In 2026 this bumps to $32,200. If their taxable income is ~$200,000, staying under higher bracket thresholds due to inflation indexing could save them hundreds of dollars in taxes.
Example 2 – High earners subject to AMT: Lisa, a high earner single filer, sees her AMT exemption jump. That increases the income level before AMT phase-out kicks in, again reducing exposure to extra tax.
Final Thoughts
These inflation adjustments aren’t just automatic—they affect strategic decisions all year long. For taxpayers who live around bracket cut-offs, this means more after-tax income. For families, estate planning, and those abroad, the changes yield genuine opportunity. Always combine these updates with your full tax-planning picture to make the best decisions now.
source: IRS News Release IR-2025-103 (Oct 9, 2025) (irs.gov)