IRS updates 2027 tax brackets: What North Carolina taxpayers should know

The Internal Revenue Service says all seven federal income tax brackets will rise in 2027 to reflect inflation.

This annual IRS adjustment applies only to taxable income, which is the amount used to determine your tax rate after accounting for items such as traditional IRA or 401(k) contributions, student loan interest, and health savings account contributions, as well as deductions. Those deductions are generally either the standard deduction, which the IRS sets each year, or itemized deductions.

The standard deduction, used by about nine in 10 taxpayers, is also increasing in 2027, according to the IRS. Married couples filing jointly will be able to claim $33,200, up from $32,200 in 2026. Single filers will be able to claim $16,600, up from $16,100.

For single filers, only the income that falls within the 22% bracket is taxed at that rate, from $52,025 up to the next bracket at $109,125. Income below $52,025 is taxed at the lower 10% and 12% rates.

Here is a look at what the changes mean in North Carolina, including the income thresholds for next year.

What are the updated 2027 IRS tax brackets?

The income thresholds for each federal tax rate in 2027 are as follows:

• 37%: income over $661,375 ($793,650 for married couples filing jointly)

• 35%: income over $264,550 ($529,100 for married couples filing jointly)

• 32%: income over $208,325 ($416,650 for married couples filing jointly)

• 24%: income over $109,125 ($218,250 for married couples filing jointly)

• 22%: income over $52,025 ($104,050 for married couples filing jointly)

• 12%: income over $12,800 ($25,600 for married couples filing jointly)

• 10%: income of $12,800 or less ($25,600 for married couples filing jointly)

Why were the tax brackets adjusted?

Federal income tax rates themselves remain unchanged, but the income ranges tied to each bracket are updated each year by the IRS to account for inflation and the cost of living.

How tax brackets work

Taxes are applied in tiers, or brackets, so you pay a percentage of your income based on which part of your earnings falls into each range. As income rises, the rate applied to the next portion of income becomes higher. If your income moves into a higher bracket, only the amount in that new bracket is taxed at the higher rate.

What is the average tax bracket in North Carolina?

According to U.S. Census data, North Carolina's median household income was $77,638, which places many households within the 22% bracket under the 2027 thresholds.