The IRS recently released updated tax brackets and deduction thresholds for the 2027 tax year, which will affect taxpayers next year.
Each year, the IRS adjusts the thresholds used for tax brackets and the various deductions available to taxpayers to account for inflation. The changes will apply to what taxpayers owe on income earned during the 2027 tax year, which Americans will file returns for in 2028.
“American individuals and businesses will see increased tax benefits next tax year ranging from an increase in the standard deduction and the Child Tax Credit for families, and a boost to the amount that can be expensed by businesses,” said IRS CEO Frank Bisignano.
The standard deduction, claimed by the majority of taxpayers who don’t itemize their returns, is set to increase to $16,600 for single taxpayers in 2027; $33,200 for married couples filing jointly and $24,925 for heads of households.
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Adjustments were also made to the IRS tax brackets in terms of the income thresholds that apply to a given tax rate.
Here’s a look at the tax brackets and rates that will apply in 2027:
- 37% for incomes over $661,375 for individuals or $793,650 for married couples filing jointly;
- 35% for incomes over $264,550 for individuals or $529,100 for married couples filing jointly;
- 32% for incomes over $208,325 for individuals or $416,650 for married couples filing jointly;
- 24% for incomes over $109,125 for individuals or $218,250 for married couples filing jointly;
- 22% for incomes over $52,025 for individuals or $104,050 for married couples filing jointly;
- 12% for incomes over $12,800 for individuals or $25,600 for married couples filing jointly;
- 10% for incomes of $12,800 or less for individuals or $25,600 or less for married couples filing jointly.
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The IRS also increased the maximum amount of the child tax credit to $2,300 in 2027, an increase of $100 from a year ago. The amount of the credit that is refundable also increased by $100 to $1,800.
The annual exclusion for taxes on gifts will rise to $20,000 in 2027, up from $19,000 in the 2026 calendar year. For gifts to a spouse who is not a U.S. citizen, the limit increases to $201,000 in 2027 from $194,000 a year ago.
The estate tax exclusion for the estates of decedents who die in 2027 is a basic exclusion of $15,480,000, which is up from a total of $15 million in 2026.
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Qualifying taxpayers who have three or more qualifying children and can claim the Earned Income Tax Credit (EITC) will see the maximum credit rise to $8,496 in 2027 – up from $8,231 a year ago.
Credits for qualified adoption expenses are rising to $18,250 in 2027 from $17,670 last year. The amount of the credit that may be refundable in 2027 is $5,280.
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