November 5, 2026, 4:49 p.m. ET
All seven federal income tax brackets will increase next year to adjust for inflation, while tax rates will remain the same, the IRS said.
The IRS announces federal income tax brackets that determine the amount of tax you pay on different portions of your taxable income. Because the U.S. tax system is progressive, higher tax rates apply only to the portion of income in each tax bracket.
Knowing them can help you understand what you might owe and allow you to plan accordingly, tax professionals say. With higher income thresholds, Americans might be able to earn a little more without paying higher tax rates when they file their 2027 taxes in early 2028. They just need to know what income level they should stay at.
Here’s a breakdown of the income thresholds at each tax rate in 2027, according to the IRS:
- 37%: for income above $661,375 ($793,650 for married couples filing jointly)
- 35%: for income above $264,550 ($529,100 for married couples filing jointly)
- 32%: for income above $208,325 ($416,650 for married couples filing jointly)
- 24%: for income above $109,125 ($218,250 for married couples filing jointly)
- 22%: for income above $52,025 ($104,050 for married couples filing jointly)
- 12%: for income above $12,800 ($25,600 for married couples filing jointly)
- 10%: for income of $12,800 or less ($25,600 for married couples filing jointly)
How do tax brackets work?
Only taxable income is taken into account to determine the rate you pay. Taxable income is calculated by subtracting adjustments such as traditional IRA or 401(k) contributions, student loan interest, and health savings account contributions, then subtracting deductions. Deductions are generally the fixed standard deduction determined annually by the IRS or itemized deductions.
The standard deduction, which benefits about 9 in 10 taxpayers, will also increase in 2027, the IRS said. It will rise to $33,200 for married couples filing jointly, up from $32,200 in 2026. Singles can claim $16,600, up from $16,100.
If you’re a single filer, you’re only taxed 22% on specific dollars that fall into that bracket, between $52,025 and the start of the next higher bracket, $109,125. All income below $52,025 is taxed at the lower rates of 10% and 12%.
Exemption for lifetime gifts and inheritance also gets a boost
The IRS also applied an inflation adjustment for the lifetime gift and estate exemption.
Every wealthy American will be able to give away up to $15.48 million in 2027, up from $15 million in 2026, tax-free during their lifetime and upon death. That means a couple could reduce their estate by $30.96 million and their heirs would pay less federal estate tax upon death.
However, if your state has death taxes, these will still apply based on state rules. Some of them can add up quickly, tax experts warn.
Medora Lee is a money, markets and personal finance reporter at USA TODAY. You can reach her at mjlee@usatoday.com and subscribe to our free Daily Money newsletter for personal finance advice and business news Monday through Friday mornings.
Gn bussni
