IRS releases new tax brackets and increases standard deductions – find out what your tax rate will be for 2027

The Internal Revenue Service has released new tax brackets for 2027, increasing the income thresholds for each level due to inflation.

Additionally, for tax year 2027, the standard deduction – the portion of income not taxed – will increase to $16,600 for individuals and $33,200 for married couples filing jointly.

This represents a $500 increase in the deduction for singles and a $1,000 increase in the deduction for married couples filing jointly.

At the same time, the income threshold for each tax bracket increased from approximately 3.22% to 3.25%, to account for inflation.

The brackets determine how much income tax workers owe, rising from a rate of 10% for the lowest tier to 37% for the richest.

While the tax rates for each bracket have remained unchanged, a person 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 allows filers with children to reduce their tax liability, will increase by $100 to $2,300.

The state and local tax (SALT) deduction cap — a perennial point of contention in Washington — is not affected by the inflation adjustment, Mark Luscombe, senior analyst at 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. This figure increases to $15.48 million for 2027.

For those lucky enough to receive gifts in hard cash, the tax-free gift limit increases by $1,000 per recipient, to $20,000.