Tax Planning
Turbocharge 2026 Tax Planning with the Inflation Adjustments & Standard Deductions
With major inflation adjustments for 2026 now released — including higher standard deductions, bracket shifts, and foreign earned income exclusion increases — taxpayers and advisors have new levers to optimize savings.
By NomadicTax Research Team • 5-8 min read • November 22, 2025
## What changed for Tax Year 2026?
On October 9, 2025, the IRS published **Revenue Procedure 2025-32**, detailing inflation adjustments for more than **60 tax provisions** under the One, Big, Beautiful Bill (OBBBA). These changes will apply to returns filed in **2027**, reflecting the 2026 tax year. ([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)) Key shifts include:
| Provision | 2025 Value | 2026 Value |
|---|---|---|
| Standard Deduction (Single / MFJ / HoH) | $15,750 / $31,500 / $23,625 | $16,100 / $32,200 / $24,150 ([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 (FEIE) | $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)) |
| AMT Exemption (Unmarried / MFJ) | Noted earlier in OBBBA | $90,100 / begins phasing out at $500,000; married tax rates $140,200 / phase-out at $1,000,000 ([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)) |
| Gift Tax Annual Exclusion | $19,000 (general), $190,000 (non-citizen spouse) | Increase in non-citizen spouse limit to $194,000; general remains $19,000 ([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)) |
| Marginal Tax Bracket Thresholds | Widely lower in 2025 | Raises income thresholds across all brackets; top rate remains 37% over $640,600 (single) and $768,700 (MFJ) ([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)) |
## Strategic Planning Opportunities
### 1. Accelerate Income vs. Deductions
With higher standard deductions, many taxpayers will still benefit from itemizing if their deductions (mortgage interest, state/local taxes, large charitable gifts) exceed the new standard levels. Compare both paths before year-end.
### 2. Foreign Earned Income Savvy
Nomads using the FEIE can now exclude an additional $2,900 of foreign earned income. While incremental, it can reduce U.S. taxable income, especially for those with significant overseas earnings.
### 3. Gift Planning Adjustments
For 2026, donors planning large gifts to non-citizen spouses have an expanded exclusion ($194,000). Those with gifting strategies should revisit their plans accordingly.
### 4. Be Alert to Bracket Creeps
If your income hovers near a bracket threshold (e.g., single filers at ~$50,400 or MFJ at $100,800), inflation adjustments may ease unexpected tax jumps. Adjust withholding or estimated payments now.
## Practical Examples
- **Married Couple Filing Jointly**: In 2025, standard deduction is $31,500; in 2026 it becomes $32,200. If itemized deductions are $32,000, you might switch to standard in 2026.
- **Contractor Abroad with FEIE**: Earning $130,000 overseas, you exclude $130,000 in 2025; in 2026 you exclude $132,900. Combined with other deductions, this may push more income out of taxable range.
- **Potential Phase-Out Effects**: If Single with MAGI of $200,000, the phase-out for no-tax on tips starts cutting in. Expect reduction of deductions if exceeding limits. See digital nomad article for context.
## Actionable Checklist Before 2026
- Review your projected income and estimated tax payments for year end.
- If you’re itemizing, gather your deductions and assess whether they’ll exceed increased standard deduction.
- For tipped occupations or with tips income: Monitor proposed list of eligible occupations and prepare to track tips accordingly.
- Estate or gift planning: Set up transfers (especially to non-citizen spouses or friends) in 2025 to take advantage of current limits before adjustments or phase outs.
- Update payroll withholding or estimated tax filings based on shifting bracket thresholds.
## Risks and Considerations
- Inflation indices may shift again; last-minute adjustments are possible.
- Legislative changes could alter provisions before final implementation.
- Phase-outs may catch taxpayers off guard; always model both with and without new rules.
## Conclusion
The inflation adjustments for 2026 offer both relief and opportunity. For many taxpayers, knowing how the standard deduction, FEIE, gift exclusions, and tax brackets will move helps in planning income, deductions, withholding, and timing. Be proactive now — and stay tuned as regulations finalize.