IRS Announces Updated Tax Brackets, Deductions and Credits for the 2027 Tax Year

The Internal Revenue Service (IRS) has released updated tax brackets, deductions and credits for the 2027 tax year.

The revisions, announced on Thursday, affect nearly 70 provisions of the federal tax code. Among the most notable changes are a $1,000 increase in the standard deduction for couples and a $100 increase in the Child Tax Credit, along with higher income thresholds across all seven tax brackets.

Each year, the IRS adjusts tax rules for inflation and wage growth in an effort to keep Americans from paying more tax simply because their incomes rise with living costs. This is sometimes called bracket creep, when workers get raises that match inflation but end up with more of their income taxed at higher rates even though their buying power has not improved.

“Hardworking American taxpayers will continue to benefit from the Working Families Tax Cuts (WFTC) and will see WFTC credits and deductions increase with this adjustment,” said IRS chief executive officer Frank J. Bisignano. “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.”

The changes stem from new tax laws required by the July 2025 One Big Beautiful Bill (OBBBA) and will apply to income earned in 2027 and payable in 2028.

Updated Federal Income Tax Brackets

The seven income tax brackets themselves remain in place, but taxpayers will be able to earn more before moving into a higher bracket.

The brackets apply to taxable income after deductions rather than total earnings. Higher rates apply only to the portion of income that falls within each bracket, not to a taxpayer’s entire income.

Higher Standard Deduction

The standard deduction, which reduces the amount of income subject to federal tax without requiring itemization, is increasing for 2027.

The new amounts are:

• $16,600 for single taxpayers and married individuals filing separately, up from $16,100.
• $33,200 for married couples filing jointly, up from $32,200.
• $24,925 for heads of household, up from $24,150.

Child Tax Credit and Family-Related Benefits

Families with eligible children will also see the maximum Child Tax Credit rise to $2,300 per qualifying child, up from $2,200 in 2026. The refundable portion will increase from $1,700 to $1,800.

The Earned Income Tax Credit, which supports low-income workers, will also go up. For qualifying taxpayers with three or more eligible children, the maximum credit will reach $8,496, compared with $8,231.

The Adoption Tax Credit will increase from $17,670 to $18,250, with up to $5,280 potentially refundable.

Actual tax savings will depend on factors such as income and the number of qualifying children.

Additional Adjustments

Beyond income taxes, the IRS also announced several other changes affecting savings, estates and workplace benefits.

• The federal estate tax exclusion will rise to $15.48 million, up from $15 million, allowing more of an estate to pass to heirs free of federal tax.
• The annual gift tax exclusion will increase from $19,000 to $20,000 per recipient.
• Workers contributing to Health Flexible Spending Cafeteria Plans, an employer-sponsored benefit that allows pretax salary contributions for medical and other healthcare expenses, will see their annual contribution limit rise to $3,500, an increase of $100.

What Will Stay the Same

Some tax rules will not change. Personal exemptions will remain at zero, and the income thresholds used to phase out the Lifetime Learning Credit, which helps taxpayers cover undergraduate, graduate and professional degree courses, will stay unchanged at $80,000 to $90,000 for individuals and $160,000 to $180,000 for joint filers.

For a complete breakdown of the tax changes, see the IRS website.