IRS releases new tax brackets, raises standard deductions — see what your 2027 tax rate will be
The Internal Revenue Service has released new tax brackets for 2027, raising income thresholds for each level due to inflation.
Also, for tax year 2027, the standard deduction — the part of income that is untaxed — will go up to $16,600 for individuals and reach $33,200 for married couples filing jointly.
That marks a $500 increase in the deduction for singletons and a $1,000 hike in the one for married couples filing together.
Meanwhile, the income threshold for each tax bracket went up about by around 3.22% to 3.25%, to account for inflation.
Brackets determine how much income tax workers owe, rising from a 10% rate for the lowest level to 37% for the richest.
While tax rates for each bracket went unchanged, someone whose income remains the same from this year to 2027 could hypothetically save $500 on their bill — or $1,000 for married couples filing jointly — thanks to the higher deductions. Most taxpayers take the standard deduction instead of itemizing.
The child tax credit, which lets filers with kids reduce their tax liability, is going up $100, to $2,300.
The state and local tax (SALT) deduction cap — a perennial point of contention in Washington — goes unaffected by the inflation adjustment, Mark Luscombe, principal analyst with Wolters Kluwer Tax & Accounting, told the Wall Street Journal.
There will, however, be a special 1% annual adjustment for the SALT deduction, to $40,804 for 2027, he said.
Inflation adjustments will affect estate-tax exclusions. The amount that could be excluded from estate taxes was $15 million for deaths this year. The figure is going up to $15.48 million for 2027.
For those lucky enough to receive gifts of cold, hard cash, the limit on tax-free presents is going up $1,000 per recipient, to $20,000.