Key Takeaways
Powered by lumidawealth.com
- Income tax brackets for 2026 are increasing, with a 4% inflation adjustment for the lowest two brackets and 2.3% for higher brackets.
- The top federal income tax rate of 37% will apply to income above $768,700 for married couples and $640,600 for individuals.
- The standard deduction rises to $16,100 for individuals and $32,200 for married couples filing jointly.
- Capital gains tax thresholds are also adjusted, allowing some taxpayers to benefit from a 0% capital gains rate at higher income levels.
- The federal estate-tax exclusion increases to $15 million for 2026, up from $13.99 million in 2025.
- Some tax parameters, like the SALT deduction cap and child tax credit, have special or no inflation adjustments.
What happened?
The IRS announced inflation-adjusted tax brackets and deductions for 2026, reflecting a 2.7% overall adjustment. These changes mean taxpayers will generally owe slightly less tax on the same income compared to 2025, providing modest relief amid ongoing inflation.
Why it matters
Adjusting tax brackets and deductions for inflation helps prevent “bracket creep,” where taxpayers pay higher rates due to nominal income increases. The higher estate-tax exclusion also offers significant tax savings for high-net-worth individuals.
What’s next?
Taxpayers should review the new brackets and deductions when planning income, investments, and estate strategies for 2026. Monitoring IRS announcements on retirement account limits later this fall will also be important.