The IRS has released the annual inflation adjustments to several provisions of the tax code, which taxpayers will use when filing their 2026 federal income tax returns in 2027.
Income Tax Rates
The income ranges that apply to the seven federal income tax rates in 2026 are as follows:
- 37% for income greater than $640,600 ($768,700 for married couples filing jointly)
- 35% for income greater than $256,225 ($512,450 for married couples filing jointly)
- 32% for income greater than $201,775 ($403,550 for married couples filing jointly)
- 24% for income greater than $105,700 ($211,400 for married couples filing jointly)
- 22% for income greater than $50,400 ($100,800 for married couples filing jointly)
- 12% for income greater than $12,400 ($24,800 for married couples filing jointly)
- 10% for incomes of single individuals with incomes of $12,400 or less ($24,800 for married couples filing jointly).
The marginal income tax rates for trusts and estates also increase in 2026 to:
- 37 percent for income greater than $16,000
- 35 percent for income between $11,701 and $16,000
- 24 percent for income between $3,331 and $11,700
- 10 percent for income of $3,330 or less.
Standard Deduction
The standard deduction for individual taxpayers in 2026 increases to $16,100, up from the $15,750 introduced by the One Big Beautiful Tax Bill Act (OBBBA) in 2025. For married couples filing jointly, the standard deduction is $32,200, up from $31,500 in tax year 2025. Taxpayers may use these amounts to automatically reduce their adjusted gross income (AGI) to determine their federal income tax brackets.
With the OBBBA, an additional standard deduction of $6,000 is available for individuals ages 65 and older ($12,000 for married couples filing jointly) in tax years 2025 through 2028. The amount of the deduction decreases when a taxpayer’s income reaches $75,000 (or $150,000 for joint filers) and phases out entirely when income exceeds $175,000 (or $350,000 for married filing jointly).
Taxpayers whose allowable expenses exceed the standard deduction may itemize their deductions and further reduce their taxable income in 2026. These deductible expenses include student loan interest, qualifying medical and dental costs and up to $40,400 paid toward state and local taxes (SALT) in 2026.
SALT Deduction
Although the OBBBA quadrupled the cap on deductions for payments of state and local taxes to $40,000 in 2025 and $40,400 in 2026, it phases out the value of the deduction when taxpayers’ modified adjusted gross income (MAGI) exceeds $505,000 in 2026. For MAGI above $606,000, the deduction decreases to $10,000.
Federal Gift and Estate Taxes
Individuals who pass away in 2026 may exclude up to $15 million from federal estate tax, up from $13.99 million for estates of decedents who died in 2025. For married couples filing jointly, the 2026 federal estate tax exemption increases to $30 million from $27.98 million in 2025.
The 2026 annual gift tax exclusion remains at $19,000, unchanged from 2025. While married couples who are both U.S. citizens can gift an unlimited amount to each other tax-free, gifts to a non-U.S. citizen spouse are limited to $194,000.
Alternative Minimum Tax (AMT)
The individual AMT exemption for 2026 increases to $90,100 and begins to phase out at $500,000. For married couples filing jointly, the exemption is $140,200 and begins to phase out at $1 million.
Kiddie Tax
Minor children younger than 19 and college students younger than age 24 with 2026 unearned income of $1,350 from sources other than salary and wages will be subject to tax at the same rate as trusts and estates. This is the same amount that was in place in 2025. Parents may elect to include between $1,350 and $13,500 of an eligible child’s unearned income on their individual tax returns in 2026.
Medical Savings Accounts
Taxpayers enrolled in high-deductible Medicare plans offered by private insurers may participate in medical savings accounts (MSAs) that allow for tax-free contributions and withdrawals when used for qualifying medical expenses. To qualify as a high-deductible plan in 2026, the annual deductible for self-only coverage must be at least $2,900 and not more than $4,400, with a maximum out-of-pocket expense of $5,850. For family coverage, the annual deductible must be between $5,850 and $8,750, with a maximum out-of-pocket expense limit of $10,700.
Foreign Earned Income Exclusion
For 2026, the foreign-earned income exclusion increases to $132,900, up from $130,000 in 2025.
Qualified Business Income (QBI) Deduction
The Section 199A deduction for qualified business income (QBI), made permanent under the OBBBA, enables domestic pass-through entities, such as S corporations, LLCs, partnerships and sole proprietorships, to receive a potential tax deduction of as much as 20 percent of their U.S.-source QBI that passes from their businesses to their personal income tax returns. For 2026, the deduction is reduced when taxable income exceeds $201,750 for single filers, or $403,500 for married couples filing jointly. The deduction is phased out entirely when individual income reaches $276,750, or $553,500 for married couples filing jointly.
The OBBBA also introduces an inflation-adjusted minimum QBI deduction of $400 for taxpayers who have at least $1,000 of QBI from one or more active trade or businesses in which they materially participate.
About the Author: Brendan T. Hayes is a financial planner with Provenance Wealth Advisors (PWA), an Independent SEC-Registered Investment advisor affiliated with Berkowitz Pollack Brant Advisors + CPAs and a registered representative with PWA Securities, LLC (PWAS). He can be reached in the firm’s West Palm Beach, Fla., office at (561) 361-2001 or info@provwealth.com.
Provenance Wealth Advisors, 200 E. Las Olas Blvd., Nineteenth Floor, Ft. Lauderdale, FL 33301Â (954) 712-8888.
Brendan T. Hayes is a registered representative of and offers securities through PWA Securities, LLC, Member FINRA/SIPC.
This material is being provided for information purposes only and is not a complete description or a recommendation. The information has been obtained from sources considered to be reliable, but we do not guarantee that the preceding material is accurate or complete. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.
Any opinions are those of the advisors of PWA and not necessarily those of PWA Securities, LLC. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of PWAS, we are not qualified to render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional. Prior to making any investment decision, please consult your financial advisor about your individual situation.
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Posted on November 5, 2025