IRS outlines 2027 updates to child tax credit, estate tax exemption and other benefits

Among the changes, the top earned income tax credit for eligible taxpayers with at least three children will increase from $8,231 in 2026 to $8,496 in 2027.

Several major tax benefits will shift in 2027, with updates affecting the child tax credit, the earned income tax credit, and estate and gift tax exemptions.

The maximum child tax credit will be set at $2,300 in 2027, an increase of $100 from 2026. The refundable portion will also rise by $100, reaching $1,800.

For qualifying taxpayers with three or more children, the maximum Earned Income Tax Credit will go from $8,231 in 2026 to $8,496 in 2027.

The IRS also raised the estate tax exclusion to $15.48 million for estates of people who die in 2027, up from $15 million in 2026.

In addition, the annual gift tax exclusion will climb to $20,000 per recipient in 2027, compared with $19,000 in 2026. That generally allows an individual to give up to $20,000 to another person during the year without affecting their lifetime estate and gift tax exemption.

Other changes include:

• Adoption credit: The maximum tax credit will increase to $18,250 in 2027 from $17,670 in 2026. Of that amount, as much as $5,280 may be refundable.
• Employer-provided childcare tax credit: The maximum credit for employers will rise to $515,943.67 in 2027, up from $500,000 in 2026.

• Health flexible spending plans: The contribution limit for health FSAs will increase to $3,500 in 2027, which is $100 more than the previous year. For plans that permit unused funds to roll over, the maximum carryover will rise by $20 to $700.

• Foreign earned income exclusion: The exclusion will rise to $137,300 in 2027, an increase of $4,400 from $132,900 in 2026.