The tax plan for 2026 reflects a mix of federal updates, inflation adjustments, and policy changes designed to balance tax relief with cost-of-living safeguards for American taxpayers. These changes affect tax brackets, deductions, credits, and related provisions that will apply to income earned in 2026 and reported on returns filed in 2027.
Federal Tax Bracket Adjustments
In 2026, the Internal Revenue Service (IRS) will adjust federal income tax brackets for inflation. These updates slightly increase the income thresholds for each tax rate, from 10% up to 37%, helping prevent “bracket creep” where inflation pushes taxpayers into higher tax brackets even without real income growth.
For example:
- The 12% bracket ends at higher income limits than in 2025.
- The top rate (37%) applies to income above roughly $640,600 for singles and $768,700 for married couples filing jointly.
These adjustments aim to keep more income in lower brackets and reduce unexpected tax increases due to inflation.
Standard Deduction and Key Deductions
The standard deduction, the portion of income shielded from tax, will increase in 2026: single filers can claim about $16,100, while married couples filing jointly can claim about $32,200. This expansion lowers taxable income for many taxpayers and reflects cost-of-living adjustments.
Taxpayers 65 or older may qualify for additional deductions, and the Earned Income Tax Credit (EITC) will offer slightly higher maximum benefits to low- and moderate-income families.
Capital Gains and Business Provisions
For many taxpayers, long-term capital gains will continue to be taxed at 0%, 15%, or 20% rates, depending on taxable income. The 2026 brackets for these rates adjust upward, helping investors manage tax liability on investment income more effectively.
The qualified business income deduction (Section 199A) remains available for pass-through businesses, allowing up to a 20% deduction for qualifying income, though phase-outs apply at higher income levels.
Estate and Gift Tax Rules
Estate planning also sees impact in 2026: the estate and gift tax exemption is projected to rise to about $15 million per individual, offering significant relief and planning certainty for high-net-worth families.
Need help navigating the 2026 tax plan? Dimov Tax provides expert guidance to help individuals and businesses stay compliant, reduce tax liability, and plan ahead with confidence. Schedule a consultation today.