IRS sets inflation-adjusted standard deduction and other 2027 tax changes

The Internal Revenue Service has released a series of inflation-driven updates for the 2027 tax year, affecting a wide range of tax rules, including the standard deduction and the maximum amount that can be set aside in flexible spending accounts.

Those adjustments, which the IRS announced in early November, could help keep many people’s 2027 tax bills lower or at least limit how much they rise when returns are filed in the following year.

With inflation running higher, taxpayers should expect notable shifts in the annual indexing of tax brackets and several tax breaks for 2027.

For married couples filing jointly, the standard deduction will rise to $33,200 in 2027, an increase of $1,000 from 2026.

About 90% of taxpayers currently take the standard deduction rather than itemizing expenses such as mortgage interest and other write-offs.

Single filers and married individuals filing separately will see the standard deduction increase by $500 to $16,600 for 2027. For heads of household, it will climb to $24,925, which is $775 above the 2026 level of $24,150.

These changes apply to 2027 tax returns, not the 2026 returns filed the year before. The IRS also adjusted the marginal tax brackets for 2027. Some of the most closely watched changes include the following:

The agency said the maximum carryover amount for cafeteria plans that allow unused funds to roll over into the next year will be $700 in 2027, up $20 from 2026.

Because the tax brackets are indexed, more of a person’s 2027 income may be taxed at lower rates. The rates themselves are unchanged, but the income thresholds tied to each bracket will rise with inflation.

For tax year 2027, the IRS said the top rate of 37% will apply to single filers with incomes above $661,375, or above $793,650 for married couples filing jointly. The other brackets are:

• 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).