The scariest time of year grows ever closer, conjuring up dread for some and outright terror for others. For many, it means giving up what they have until much or all of it is gone. For others, it’s a time to receive something that’s most welcome. While the experience may leave some as pale as a ghost, it means smiles and full bellies for others.
Oh, and Halloween is coming up as well. Did you think that’s what we were talking about?
There are fewer than three months until the end of the tax year, and with it comes the annual reckoning for taxpayers known as filing taxes. For those who don’t just hand a box filled with financial documents to their accountant or a seasonal tax preparer, there are a number of changes to be aware of over the next two years as indexings are made for inflation. Staying on the good side of the Internal Revenue Service (IRS) is a wise approach, and being well-informed on federal income tax brackets and tax rates can go a long way toward making that a reality. Let’s take a look at what tax changes to expect, and what’s staying the same.
If You Take a Walk, I’ll Tax Your Feet
Each year, the IRS releases updates regarding changes to the following year’s tax rates. For example, the recent annual inflation adjustments from the IRS apply to taxable income earned in 2026 and filed for in 2027. The changes are part of the 2025 budget bill. Some updated tax provisions are from 2017’s Tax Cuts and Jobs Act, with several becoming permanent.
Something that applies to everyone is the standard deductions, which are adjusted for inflation. The 2025 budget bill bumped this number up, with another increase slated for 2026’s taxes. How much your standard deduction will be depends on how you’re filing:
Single or Married Filing Separately
- Tax Year 2025: $15,750
- Tax Year 2026: $16,100
Married Filing Jointly or Surviving Spouse
- Tax Year 2025: $31,500
- Tax Year 2026: $32,200
Heads of Households
- Tax Year 2025: $23,625
- Tax Year 2026: $24,150
The income thresholds for tax brackets will remain at the current rates, with 37% being the highest for income over $768,700 (married filing jointly) or $640,600 (filing single). The lowest rate of 10% applies to income under $24,801 (married filing jointly) or $12,401 (filing single).
Estate tax credits are also scheduled to rise. The exclusion amount for an estate in Tax Year 2026 will be $15,000,000, up from $13,990,000 in Tax Year 2025. Adoption credits will also see a modest bump for adoption expenses from $17,280 in 2025 to $17,670 in 2026, with a maximum credit refund of $5,120.
For those who own a business, Tax Year 2026 will bring a sizable increase to the maximum amount in the Employer-Provided Childcare Tax Credit, which goes from $150,000 to $500,000. For those with qualifying small businesses, the credit cap is $600,000.
The exemption amount for the Alternative Minimum Tax in Tax Year 2026 starts at $140,200 for married couples filing jointly and will begin to phase out at $1,000,000. Single filers have a base of $90,100 and a phase-out beginning at $500,000.
Small Is Better Than Nothing, Right?
Other items will see modest gains between 2025 and 2026. The Earned Income Tax Credit (EITC) for qualified taxpayers with three or more qualifying children will be $8,231 in Tax Year 2026, up $185 from the previous year. The Qualified Transportation Fringe Benefit will increase by $15 to $340. Minimum deductibles for medical savings accounts will increase by $50 for self-only coverage plans and $150 for family plans. Maximum deductibles will increase by $100 and $200, respectively.
For people with generous friends and relatives, the annual exclusion for gifts will remain capped at $19,000. In Tax Year 2026, the tax exemption for gifts to a spouse who is not a U.S. citizen will be bumped by $4,000 to $194,000.
The 2025 budget bill also made two changes from 2017 permanent. The elimination of personal exemptions and the removal of limits on itemized deductions for those not in the 37% tax bracket are no longer temporary.
Figuring out your modified adjusted gross income and filing statuses on your annual tax return can be a source of endless stress and confusion. With next year’s tax season getting ever closer, keep in mind that there are multiple sources of help available. Answers can be found on the IRS’s website, FindLaw’s Individual Income Tax Law section, or through a skilled tax attorney.
Related Resources
- IRS Layoffs May Affect the Tax Season: Tips for Getting Your Refund (FindLaw’s Law and Daily Life)
- Filing Taxes (FindLaw’s Federal Tax Law)
- Can You Go to Jail for Not Filing Taxes? (FindLaw’s Tax Problems and Audits)
