Wondering how much you’ll pay in taxes next year? The Internal Revenue Service has released the 2026 tax brackets, providing American taxpayers with insight into inflation adjustments and income thresholds as well as how the tax brackets will affect taxpayers across all income levels.
Tax brackets, income levels and inflation adjustments explained
On Thursday, the IRS announced that taxpayers will need to earn more income to reach each tax bracket following a 4% inflation adjustment for lower brackets and a 2.3% increase for higher brackets. The annual adjustments are based on formulas tied to inflation, and these figures pertain to returns filed in early 2027, according to The Wall Street Journal.
This year’s 2.7% tax adjustment fell slightly below the current inflation rate, as average hourly earnings rose from the previous year to 3.7% in August, according to the Labor Department.
The updated tax brackets and higher standard deduction mean many taxpayers will owe slightly less next year, likely around a few hundred dollars. Additionally, changes to the estate tax exclusion could save wealthier filers hundreds of thousands of dollars, according to The Wall Street Journal.
Here’s everything taxpayers should know about changes in the income tax brackets and how they could affect single and married couples, along with the deductions and tax rates largely based on the new tax law.
How do tax brackets and other tax entities affect individuals and married couples?
Tax Brackets
The top federal income-tax bracket will increase by $17,000 for married couples in 2026, applying the 37% rate to income above $768,700. For individuals, the top bracket applies to income over $640,600.
The effective rate or average rate will be lower than the top rate, which is the highest rate that applies to a taxpayer. It aligns with the highest bracket they will fall into when they pay the last portion of their income.
A married couple filing jointly could have $100,800 in taxable income — almost $4,000 more than this year — and still remain in the 12% bracket. While the child tax credit remains at $2,200, the cap on local and state deduction, known as SALT, rises 1% to $40,400.
New temporary deductions for seniors as well as for car loan interest, tips and overtime, however, aren’t indexed for inflation, The Wall Street Journal reported.
Standard Deduction
The standard deduction will rise to $16,100 for individuals, an increase from $15,750, and to $32,200 for married couples filing jointly, a boost from $31,500. Most filers can save money by choosing the standard deduction instead of itemizing deductions such as medical expenses and charitable donations.
Capital-gains rate
For 2026, the 0% capital-gains tax rate applies to single filers with taxable income up to $49,450 and to married couples filing jointly with income up to $98,900, as income thresholds for capital-gains tax are indexed for inflation.
Estate and gift-tax thresholds
The federal estate-tax exclusion will rise to $15 million for deaths in 2026, up from $13.99 million this year, per The Wall Street Journal. This allows individuals to make lifetime gifts up to that amount without federal estate or gift taxes.
The separate annual tax-free gift limit remains at $19,000, which doesn’t count toward the $15 million lifetime maximum. Inflation adjustments also apply to retirement-account limits, which will be announced by the IRS later this fall.