The Internal Revenue Service (IRS) recently announced significant adjustments to federal income tax brackets, estate and gift tax exemptions, and the earned income tax credit. These modifications will start in 2026. These changes work to reinstate the tax code’s relationship with inflation and ensure that taxpayers of all incomes receive tax relief.
Starting in 2026, federal income tax brackets will be adjusted so that taxpayers can keep more of their money in higher brackets. This new development is especially welcome as families and workers deal with increasing costs of living. Last week, the IRS announced a historic increase in the estate and gift tax exemption. This modification will make it even less expensive for people who are making advanced financial plans.
The eligibility criteria for the earned income tax credit will undergo a significant expansion, giving more help to low- to moderate-income workers. This credit is so important to the majority of these households that it can make an enormous difference in tax liability, therefore promoting participation in the workforce.
The most visible amendment is the new long-term capital gains tax rates. In 2026, the IRS will start to apply a 0% long-term capital gains rate to single filers at incomes over $0. This is true for anybody with a taxable income of $49,450 or less. Married couples filing jointly can take advantage of this same rate if their taxable income is $98,900 or less. This important tweak is a clear signal that the IRS remains focused on protecting taxpayers from unfair tax treatment with changes in their income.
On top of all these changes, the standard deduction will roughly double. Come 2026, single filers will enjoy a standard deduction that increases all the way up to $16,100. At the same time, married couples filing jointly will benefit from an increase to $32,200. This simplification change is meant to save Americans time and taxpayer dollars with a cleaner return.
Overall, these changes reflect a concerted effort by the IRS to modernize the tax system in response to economic conditions. The IRS is raising tax brackets and exemptions. To roll out smarter credits, they’re going beyond the borders of the nation’s capital to strengthen the financial soundness and equity of American taxpayers.