IRS Announces FY2026 Tax Brackets and Higher Standard Deductions; How New Rates Could Impact US Tax Filing

The U.S. Internal Revenue Service (IRS) has released the updated federal income tax brackets and standard deduction amounts for the 2026 tax year, which taxpayers will file in 2027. These annual adjustments, typically made in October or November are designed to counteract "bracket creep", a phenomenon where inflation pushes taxpayers into higher tax brackets even if their real purchasing power has not increased.

IRS Announces Income Tax Brackets For FY2026: Check Latest Revisions in Tax Rates

For 2026, the top federal income tax rate of 37% will apply to individuals with taxable income exceeding $640,600, and married couples filing jointly with incomes over $768,700. In addition to bracket changes, the IRS has raised the income thresholds for long-term capital gains, estate and gift tax exemptions, and eligibility for the earned income tax credit, offering some tax relief to many Americans as per CNBC report.

The United States employs a progressive income tax system, where tax rates increase with income levels. There are seven tax brackets: 10%, 12%, 22%, 24%, 32%, 35% and 37%. To illustrate the impact of the new brackets and deductions, consider a married couple earning $150,000 annually.

After subtracting the 2026 standard deduction of $32,200, their taxable income is $117,800. This places them primarily in the 22% marginal tax bracket, but their income is taxed at varying rates across different portions.

IRS 2026 Tax Update: Higher Standard Deductions for Married, Single Filers & Taxpayers Over 65

The standard deduction amounts for 2026 have increased across all filing categories. Married couples filing jointly will see their deduction rise to $32,200, up from $31,500 in 2025. Single filers will be able to claim a deduction of $16,100, compared to $15,750 last year, while heads of households will receive a deduction of $24,150, according to CBS News.

Seniors aged 65 and above may also benefit from a temporary tax break introduced under the One Big Beautiful Bill Act. This provision allows an additional deduction of up to $6,000 for individuals earning $75,000 or less, or couples earning $150,000 or less, and is effective through the end of 2028.

IRS Operations Impacted by US Government Shutdown

The IRS has warned taxpayers that due to the ongoing government shutdown and resulting lapse in federal funding, an agency-wide furlough will begin in October. Despite these operational challenges, the IRS urges taxpayers with an October 15 extension deadline to continue filing their tax returns as usual.

An IRS spokesperson told CBS News, "Taxpayers should continue to file, deposit, and pay federal income taxes as they normally would; the lapse in appropriations does not change Federal Income Tax responsibilities."

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