Key Takeaways
- The IRS has released inflation-adjusted increases for more than 60 tax provisions for Tax Year 2026 (returns filed in 2027).
- The standard deduction for married filing jointly rises to $32,200, and other filing statuses also get meaningful increases.
- Top marginal tax rate stays at 37%, but bracket thresholds shift upward.
- Other key changes: larger AMT exemptions, boosted estate exclusion, higher credits (e.g., adoption, childcare), and increased limits on salary reductions, gifts, and foreign income exclusion.
Each fall, the IRS updates dozens of tax thresholds to reflect inflation, helping preserve taxpayers’ purchasing power and prevent “bracket creep.” See IRS’s Inflation-Adjusted Tax Items by Tax Year. Here’s what you need to know.
Standard Deductions
- Married Filing Jointly: $32,200
- Single / Married Filing Separately: $16,100
- Head of Household: $24,150
For context, under the One Big Beautiful Bill Act, the 2025 standard deduction levels are: $31,500 for married filing jointly, $15,750 for single and married filing separately, and $23,625 for head of household.
Tax Brackets & Rates
The top individual rate remains 37%. The adjusted income thresholds (single/married filing jointly) are:
- 37%: > $640,600 / $768,700
- 35%: > $256,225 / $512,450
- 32%: > $201,775 / $403,550
- 24%: > $105,700 / $211,400
- 22%: > $50,400 / $100,800
- 12%: > $12,400 / $24,800
- 10%: up to $12,400 / $24,800
Other Adjustments Worth Noting
- AMT Exemptions: $90,100 (unmarried) with phase-out starting at $500,000; $140,200 (married) with phase-out beginning at $1,000,000
- Estate & Gift Exclusion: Up to $15 million for 2026 estates
- Adoption Credit: Maximum increased to $17,670, refundable up to $5,120
- Employer Child Care Credit: Increased maximum to $500,000 (or $600,000 for eligible small businesses)
- Earned Income Tax Credit (EITC): For those with three or more qualifying children: $8,231
- Qualified Transportation & Parking Benefits: monthly limit rises to $340
- Health FSA Contributions / Carryover: $3,400 limit (carryover up to $680)
- Medical Savings Accounts (MSAs): Increased deductibles and out-of-pocket limits
- Foreign Earned Income Exclusion: $132,900
- Gift Exclusion to Non-Citizen Spouse: $194,000 (up $4,000)
What It Means for Connecticut Business Owners & Professionals
- Reassess Your Tax Planning Strategy: With deductions, credits, and thresholds shifting, what was once tax-efficient may shift. It’s a good moment to revisit your tax strategy for 2026, especially if you’re near a bracket boundary, planning large gifts, or considering major purchases.
- Check Phase-Outs & AMT Risk: Higher limits alleviate some pressure, but for higher earners, the phase-out ranges matter, especially with AMT, child credits, and other income-sensitive benefits.
- Prepare for Increased Credits (When Eligible): Opportunities like expanded childcare credit or adoption credit may benefit qualifying employers and families, but only if you’re aware and positioned to use them.
- Coordinate with Business Structure & Growth Plans: For entrepreneurs and small- to mid-sized businesses, these changes affect entity selection, retirement planning, fringe benefits, and compensation design.
What You Should Do Now
- Run a tax projection under these new 2026 thresholds to identify potential surprises
- Review retirement and benefit elections to maximize tax-efficient contributions
- Explore eligibility for credits like childcare, adoption, or EITC if changes make you eligible
- Talk to us about strategic moves that align with your goals under these new rules
If you’d like help analyzing how these changes affect your business or personal finances, so we can adjust your plan accordingly, we’re ready to assist.