The Internal Revenue Service (IRS) annually adjusts tax brackets to reflect changes in the cost of living. These adjustments help prevent taxpayers from being pushed into higher tax brackets due to inflation without real income growth.
Additional updates across the tax code have been made since the One Big Beautiful Bill Act (OBBBA) was signed into law on July 4, 2025, affecting returns to be filed from 2026 onward.
That said, the US maintains a progressive tax system, meaning different portions of your taxable income are taxed at different rates. Below is a breakdown of the 2026 tax brackets, along with other key updates.
2026 Federal Income Tax Brackets and Rates
The 2026 tax year uses the seven federal tax brackets established under the Tax Cuts and Jobs Act (TCJA), which became permanent in 2025. Many TCJA provisions were further solidified with the signing of the OBBBA, including an additional inflation adjustment for the first two brackets (10% and 12%).
Keep in mind that these adjustments generally apply to tax returns filed in 2027.
| Tax Rate | Single Filers | Married Filing Jointly | Married Filing Separately | Heads of Household |
|---|---|---|---|---|
| 10% | $0 to $12,400 | $0 to $24,800 | $0 to $12,400 | $0 to $17,000 |
| 12% | $12,401 to $50,400 | $24,801 to $100,800 | $12,401 to $50,400 | $17,701 to $67,450 |
| 22% | $50,401 to $105,700 | $100,801 to $211,400 | $50,401 to $105,700 | $67,451 to $105,700 |
| 24% | $105,701 to $201,775 | $211,401 to $403,550 | $105,701 to $201,775 | $105,701 to $201,775 |
| 32% | $201,776 to $256,225 | $403,551 to $512,450 | $201,776 to $256,225 | $201,776 to $256,200 |
| 35% | $256,226 to $640,600 | $512,451 to $768,700 | $256,226 to $384,350 | $256,201 to $640,600 |
| 37% | $640,601 and up | $768,701 and up | $384,351 and up | $640,601 and up |
These US tax brackets represent the marginal tax rate applied to income that falls within a specific range, not your entire income.
2026 Standard Deductions, Bonus Deductions, and Personal Exemptions
The standard deduction is the portion of income you can exclude before applying the above tax rates to your taxable income.
In 2026, standard deductions will increase by $350 for single filers and by $700 for married individuals filing jointly.
| Tax Year | Single Filers | Married Filing Jointly | Heads of Household |
|---|---|---|---|
| 2025 | $15,750 | $31,500 | $23,625 |
| 2026 | $16,100 | $32,200 | $24,150 |
Additional Standard Deductions
| Single Filers | Married Filing Jointly | Heads of Household |
|---|---|---|
| $2,050 | $1,650 | $2,050 |
From 2025 through 2028, taxpayers aged 65 and older can claim a bonus deduction of $6,000 (single) or $12,000 (joint) on top of the standard deduction. The benefit phases down for those with a Modified Adjusted Gross Income (MAGI) of over $75,000 (single) and $150,000 (joint).
Meanwhile, the personal exemption remains $0, as made permanent by the OBBBA.
2026 Capital Gains Tax Brackets and Rates
Investments held for a year or less are typically taxed at ordinary income tax rates. Assets held longer are considered long-term and are taxed at rates of up to 20%, still depending on taxable income and filing status.
| Tax Rate | Single Filers | Married Filing Jointly | Married Filing Separately | Heads of Household |
|---|---|---|---|---|
| 0% | $0 to $49,450 | $0 to $98,900 | $0 to $49,450 | $0 to $66,200 |
| 15% | $49,450 to $545,500 | $98,900 to $613,700 | $49,450 to $306,850 | $66,200 to $579,600 |
| 20% | Over $545,500 | Over $613,700 | Over $306,850 | Over $579,600 |
Other Tax Inflation Adjustments for Tax Year 2026
Below are other adjustments applicable to tax returns that will be filed in April 2027.
Alternative Minimum Tax
The individual alternative minimum tax (AMT) requires high-income taxpayers to calculate their liability twice: once under the regular income tax system and again under AMT rules. Then they’ll have to pay whichever amount is higher.
| Filing Status | Exemption Amount | Threshold Phaseout Amount |
|---|---|---|
| Unmarried Individuals | $90,100 | $500,000 |
| Married Individuals Filing Jointly | $140,200 | $1,000,000 |
AMT exemptions phase out at 50 cents for every dollar above the threshold. The OBBBA has reset both exemption and phaseout amounts to their 2018 levels.
Earned Income Tax Credit
| Filing Status | Parameter | Number of Qualifying Children | |||
|---|---|---|---|---|---|
| None | One | Two | Three or more | ||
| Single or Head of Household | Income at Max Credit | $8,680 | $13,020 | $18,290 | |
| Maximum Credit Amount | $664 | $4,427 | $7,316 | $8,231 | |
| Phaseout Begins | $10,860 | $23,890 | |||
| Phaseout Ends | $19,540 | $51,593 | $58,629 | $62,974 | |
| Married Individuals Filing Jointly | Income at Max Credit | $8,680 | $13,020 | $18,290 | |
| Maximum Credit Amount | $664 | $4,427 | $7,316 | $8,231 | |
| Phaseout Begins | $18,140 | $31,160 | |||
| Phaseout Ends | $26,820 | $58,863 | $65,899 | $70,224 | |
Child Tax Credit
As with 2025, the maximum child tax credit for 2026 is $2,200 per qualifying child—a slight increase from $2,000. The refundable portion remains at $1,700, which may contribute to a larger tax refund for those eligible.
Employer-Provided Childcare Tax Credit
The OBBBA has increased the maximum amount of employer-provided childcare tax credit from $150,000 to $500,000. For eligible small businesses, it’s $600,000.
SALT Deduction
The limit on deducting state and local taxes (SALT) for married couples filing jointly is capped at $40,000 (previously $10,000). However, if your MAGI exceeds $500,000, the cap is reduced by 30% per dollar until it returns to $10,000.
The cap increases by 1% each year through 2029. After that, the SALT deduction permanently reverts to $10,000 ($5,000 for married couples filing separately).
Gift Tax Exclusion
You can give up to $19,000 of gifts to any person without paying federal gift tax. It’s the same limit as in 2025. If your spouse isn’t a US citizen, you can give gifts of up to $194,000 tax-free.
4 Ways to Optimize Your 2026 Returns
Knowing how the 2026 tax brackets work is only one part of tax planning. Here are four tips to help you manage your taxable income and potentially increase your tax refunds come filing time.
Change filing status
Your tax filing status determines your tax liability. For example, a head of household filer has a wider bracket structure and a larger standard deduction than a single filer.
So, if you qualify for a more favorable status but don’t claim it, you’re effectively volunteering to pay a higher rate on a portion of your income that could have been taxed less.
Take advantage of tax credits and deductions
Tax deductions lower your taxable income, so their value is always relative to your bracket. Credits, on the other hand, directly reduce your actual tax bill at full dollar value. For example, a $2,200 child tax credit reduces what you owe by the full $2,200.
Maximize IRA contributions
Contributing to a Traditional IRA reduces taxable income now, which can lower your bracket and overall federal income tax liability. With a Roth IRA, you pay taxes upfront, but every dollar you withdraw in retirement is tax-free.
Higher contributions also allow more time for compounding growth. For 2026, the contribution limit for both is $7,500, or $8,600 if you’re 50 or older.
Harvest tax losses to offset capital gains
If you have investments sitting at a loss, selling them before year-end can offset capital gains elsewhere in your portfolio. Doing so reduces your overall tax liability without disrupting your long-term investment strategy.
Navigate Tax Changes with TOA Global
Staying on top of new tax brackets in 2026 while running a firm is a lot to manage, to say the least. And you don’t always have the time and resources to dedicate yourself to it.
TOA Global connects you with US-trained offshore accountants who can support your operations so your team can focus on guiding clients toward smarter financial decisions.
Don’t let tax season slow you down. Talk to us today.
