What’s Changed in 2026
The IRS released Revenue Procedure 2025-32, that implements inflation adjustments for 60+ provisions, many amended by the One, Big, Beautiful Bill (OBBB). Adjustments include higher standard deductions, updated phase-out thresholds, raise to estate tax exclusions, and more. (irs.gov)
| Adjustment | 2025 Amount | 2026 New Amount | Who’s Celebrated Most |
|---|---|---|---|
| Standard Deduction (MFJ) | $31,500 | $32,200 | Married couples filing jointly |
| Standard Deduction (Single) | $15,750 | $16,100 | All single filers |
| Foreign Earned Income Exclusion | $130,000 | $132,900 | Digital nomads, expats |
| Estate Tax Basic Exclusion | ~$13.99 million | $15.00 million | Estates, high net worth individuals |
Planning Moves You Can Make Now
- Check withholding and estimated tax payments: With higher standard deductions and threshold changes, taxpayers may need to re-run withholding calculators to avoid surprises. Use the IRS Withholding Estimator. (irs.gov)
- Leverage employer-provided benefits: Child care credits for employers are enhanced and maximum credits jump to $500,000 (or $600,000 for eligible small businesses). Small and mid-sized employers should assess whether offering or expanding childcare benefits now yields more tax advantage under OBBB. (irs.gov)
- Foreign income strategies: Nomads and expats should note the foreign earned income exclusion rise. Coupled with standard deduction increases, those working abroad have more room before taxable income kicks in.
Example Scenario: Jane the Digital Nomad
Jane is single, age 35, working remotely from Southeast Asia. In 2026 she earns $130,000 from clients. She stays under the foreign earned income exclusion (now $132,900) and deducts the standard deduction ($16,100). Her taxable income drops to $113,900. Without paying attention to the new figures, she might have misestimated her tax liability in 2025 when the exclusion was $130,000 and the standard deduction lower.
What About Business Owners?
- Businesses anticipating profits in early 2026 should assess their payouts and bonuses so employees can benefit from higher standard deductions and brackets.
- Those planning gifts should remember the annual gift exclusion increases (noted in Revenue Procedure 2025-32) for trustee plans or family wealth transfers.
Key Takeaways
- Inflation adjustments take effect January 1, 2026, meaning you can’t retroactively apply them in 2025. (irs.gov)
- Many phase-outs (AMT, EITC, itemized deductions) simply move upward, easing tax burdens.
- Combine tactical timing (income shifting, benefit contributions) with above thresholds to maximize net after-tax results.
By aligning your tax planning around these new inflation adjustments, you maximize benefits and avoid unpleasant surprises when filing in 2027.