The Internal Revenue Service announced higher federal tax brackets for the 2027 tax year, along with increases to the standard deduction and child tax credit.
The changes will be reflected in tax returns filed in 2028.
The IRS adjusts tax brackets every year for inflation. This way, a household that reports nominally higher income — but not an increase in buying power — doesn’t tip over into a higher bracket.
The new federal income tax brackets come as Americans continue to wrestle with affordability issues amid the rising cost of housing, groceries, gas and other expenses.
There are also adjustments to the long-term capital gains brackets, estate tax exemption and more. Here’s a breakdown of all the changes.
Federal income tax brackets for 2027
Taxable income determines what rate you pay. This includes income from employment and other sources, minus retirement account contributions, healthcare account contributions, student loan interest and other deductions.
37% for incomes over $661,375 ($793,650 for married couples filing jointly) 35% for incomes over $264,550 ($529,100 for married couples filing jointly) 32% for incomes over $208,325 ($416,650 for married couples filing jointly) 24% for incomes over $109,125 ($218,250 for married couples filing jointly) 22% for incomes over $52,025 ($104,050 for married couples filing jointly) 12% for incomes over $12,800 ($25,600 for married couples filing jointly)Standard deductions for 2027
The IRS has also increased the standard deduction, or the amount a household can write off if they choose not to itemize their deductions.
Standard deductions for the 2027 tax year will be $33,200 for married couples filing jointly, an increase of $1,000 from 2026. Single filers can claim $16,600, an increase of $500 from this year, and for heads of households, the standard deduction will be $24,925.
Child tax credit and earned income tax credit for 2027
The child tax credit will also increase by $100. For 2027, the maximum credit will be $2,300 per qualifying child under the age of 17 with a valid Social Security number. The maximum refundable portion of the credit will be $1,800, also an increase of $100 from the previous year.
The Earned Income Tax Credit is increasing to a maximum of $8,496 for qualifying taxpayers who have three or more children, up from $8,231in 2026.
Lifetime gift, estate exemption and other changes for 2027
The IRS has also given the lifetime gift and estate tax exemption a boost. Wealthy Americans will be able to give their heirs up to $15.48 million in 2027 tax-free. The exemption applies to tax-free transfers during life and at death.
The IRS also increased the exclusion amount for annual gifts. The first $20,000 of gifts to any person are not included in the total amount of taxable gifts made during the year – up from $19,000 in 2026. Meanwhile, personal exemptions will remain at zero, as they did in 2026.
The maximum allowable credit for adoption expenses will rise to $18,250, of which up to $5,280 may be refundable.
The IRS also made changes to benefits: the health flexible spending account contributions will increase to $3,500 and the amount of unused funds that can be carried over will be $700.
See details on all of the changes to deductions and credits here.
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