IRS releases 2026 tax brackets and higher tax deductions for 2025, 2026 tax years

Data: IRS; Chart: Axios VisualsThe Internal Revenue Service on Thursday announced the annual inflation adjustments for more than 60 tax provisions — including income tax brackets, standard deductions and credits — for the 2026 tax year.Why it matters: The changes, which apply to 2026 tax returns filed in 2027, include several tweaks from the "big beautiful bill."The legislation signed earlier this year made key provisions from the 2017 tax overhaul permanent and added new increases to deductions and credits.New tax brackets and standard deductions will slightly boost paychecks and lower income tax for many Americans.Income tax brackets 2026The big picture: By adjusting the brackets each year, the IRS aims to prevent "bracket creep," which happens when inflation pushes taxpayers into higher tax brackets without real income gains. (See chart above.) The bill's permanent extensions mean these thresholds — first introduced in the 2017 tax law — won't expire after 2025.Tax deduction updates for 2025 tax yearState of play: Because of the big bill, the IRS announced changes to the 2025 tax year standard deductions that were originally set last October. The revised standard deductions are:$31,500 for married couples filing jointly (originally set at $30,000)$15,750 for single filers (originally set at $15,000)$23,625 for heads of household (originally was $22,500)Tax deductions for 2026 tax yearThe IRS said Thursday that the standard deduction under the bill rises to:$32,200 for married couples filing jointly$16,100 for single filers$24,150 for heads of householdBetween the lines: Normally, the IRS adjusts the standard deduction each fall to keep up with inflation, but the new law boosted the deductions early — and made those higher amounts permanent going forward.That means the 2026 increases look modest — about 2.2% — because they're building on the increased 2025 deductions.IRS increases estate tax credits, other creditsZoom in: The estate tax exclusion increases to $15 million in 2026, up from $13.99 million in 2025.Earned Income Tax Credit (EITC) increases to $8,231 for families with three or more children, up from $8,046 for tax year 2025.See more of the changes here.Senior tax deduction and Social SecurityCatch up fast: A new $6,000 federal tax deduction for Americans 65 and older goes into effect for the 2025 tax year and is a break for those who pay taxes on Social Security income.Couples where both spouses qualify can claim up to $12,000 total.The deduction phases out for taxpayers with modified adjusted gross income over $75,000 ($150,000 for joint filers), the IRS says.No tax on tipsTipped workers won't pay federal income tax on their tips under the bill starting with 2025 tax year.The change applies to both cash and electronic tips, covering millions of service industry employees and is for itemizing and non-itemizing taxpayers.The maximum annual deduction is $25,000, the IRS says.Workers must still report tips for Social Security and Medicare purposes, but the income itself is now tax-free.More from Axios:Exclusive: Walmart debuts "Auto Center of the Future"Halloween scare: Candy costs are soaringFrozen meals, fiber and fat top 2026 Whole Foods' food trends